Will ‘Proportionate Penalties’ for Greenwashing Lead to a Seismic Shift in Businesses’ Priorities?

We’ve written about greenwashing before – how retailers around the world are using vague language and ineffective initiatives to conceal the devastating effects their systems of production and waste, exploitation and consumption, have on the planet.

It is, after all, now clear to everyone that the impact the average individual has on the planet is of little import compared with the impact of a prolific retailer or producer. True, we can all do our bit – we can invest in reusable bags, opt for sustainably packaged (or unpackaged) alternatives, focus on foods grown closer to home and in season, reduce our meat intake and travel less – and, when we do, by greener alternatives to gas-guzzling cars and polluting planes. But, when corporations are greedily pursuing every last penny – exploiting the environment, vulnerable people, finite resources and dependent on fossil fuels at every step in the process, our efforts are worth very little to an ailing environment.

Greenwashing is no secret. Most of us have been aware of the term and its meaning for some time, but companies (and their marketing teams) are clever. What makes greenwashing so effective isn’t the consumers’ naivety, but the fact that, when it’s done well, we find it hard to believe that it’s being done at all.

There are so many uncontroversial, concrete ways to make businesses suitable for the future. Shorter production chains, offices and industrial spaces – even farms – powered by commercial solar rather than dependent on fossil fuels, investing into truly biodegradable packaging, a clear commitment to reducing waste and water usage, and investing more into sustainable materials. And yet, many businesses continue to look for the easy way out…

But the EU is beginning to crack down on these practices – and the promise of new penalties befitting the transgression could start to change things.

Why is greenwashing so prevalent?

Because, where it was once the case that the average consumer was sufficiently removed from the production process behind their purchases, that level of ingenuousness is now a thing of the past. Global warming has made its way to the headlines of mainstream media; natural disasters and the Covid-19 pandemic have shed a bright light on the state of the world, and no corporation – however powerful – has the ability to dim that light. The devastating problem of plastics sent to landfill and released into the ocean, the melting icecaps, the rising temperatures and the increasingly erratic weather patterns are all common knowledge – as is the reason they are happening.

As a result, consumers want to change their habits. Recent stats show that almost 80% of people want to adopt a more sustainable lifestyle, and that inevitably has a knock-on effect for the world of consumer goods. The majority of people expect the brands they shop from to be more sustainable and environmentally friendly, with waste and pollution (both water and air) representing the main causes for concern.

But revolutionising a business that is founded on, and extracting great profit from, environmentally unsound practices isn’t easy. It takes a lot of time, and a lot of money and, in many cases, the same steep profits are no longer attainable. A clothing manufacturer who has cornered the market by producing high volumes of clothing sold at too-good-to-be-true prices, with a new season released seemingly every other week, cannot just embrace change without also embracing a thinner margin. Their factories are likely located half the world away, where labour is relentlessly cheap and synthetic materials can be produced on mass away from prying eyes. Moving production closer to home and turning to sustainable alternatives would destroy a very lucrative business model.

The solution? Greenwashing. It paints a picture of progress and positive change – shows the consumer some form of initiative – while skirting the issue just enough that the business cannot be accused of lying. In the fine print, in the vague wording, or packaging’s design, the lack of definitive effort will be detected – but only if we really go looking for it.

In general, we are willing to pay more for sustainable products – a lot more. On average, we would be willing to pay 25% more for a product that we feel reflects a more eco-conscious, sustainable approach to production. That is a very tempting stat for retailers, particularly if there is a way to charge that premium without making a significant change to production practices.

What is the EU doing?

The European Commission has been observing from the wings, taking in the full scope of the problem and identifying the ways in which companies have been misleading so many consumers without breaking any actual laws. They recently found that, out of a test sample of 344, 59% featured claims that the trader couldn’t easily substantiate with clear evidence. 37% relied on vague language, such as ‘eco conscious’ and ‘sustainable’.

As a result, they have unveiled a draft of a promising new directive which will, if effective, make it significantly harder for traders to infer progress that has not been made.

This is not the first attempt at bolstering legislation around greenwashing claims, but it is by far the most specific. Ironically, existing legislature – particularly within the UK – is also vague and murky, and, evidently, allows plenty of offenders to slip through the cracks.

By contrast, this latest bill narrows the scope for businesses to mislead – and introduces potentially hefty fines, defined as ‘proportionate penalties’, for those who fail to provide the necessary evidence to substantiate their claims.

What is meant by ‘proportionate penalties’ for greenwashing?

That remains to be seen. It’s clear that greenwashing is a lucrative practice, and we can only assume that a ‘proportionate penalty’ would be sufficient to make the risk unworthy of the reward. These penalties, in order to work, will need to reflect the premium brands can – and frequently do – bring in thanks to their deception.

This isn’t the only detail that remains vague at this early stage. Some have already expressed concerns over the lack of clarity afforded to the accepted methods for carbon removal. We recently wrote about the fact that the use of carbon credits represents one of the most troubling false solutions to the climate crisis. It is a particularly tempting prospect for large enterprises, including fossil fuel giant Shell, since it offers an easy alternative to taking active, decisive measures toward reducing the company’s carbon footprint.

If carbon credits are not explicitly ruled out of the EU’s new legislation, then the laws will only be serving the planet – and consumers – halfway. Now is the time to take definitive action on the many grey areas of climate action, and to acknowledge that there will always be more faux solutions than there are solutions, so long as profit remains a primary concern.

When will the changes come into action?

The directive will be unveiled in March of 2023. Once in effect, producers and retailers will have to be quick to respond, or risk being among the first to pay a penalty for deception.

This isn’t just a financial risk. Businesses that are caught out as intentionally deceptive risk a seismic collapse to their reputations – one that will prove more impactful than ever before, as an increasing number of consumers make sustainability and environmental consciousness a top priority when it comes to deciding what to invest their money and loyalty into.

Provided the laws are enforced from the off, we can expect to see some considerable changes taking place across the EU – and, hopefully, some elicit practices brought to light and stamped out definitively.

This is a step in the right direction, and it proves that the issue of greenwashing won’t be allowed to slip through the cracks as it has done for the past decade or so. But, at the same time, we need to be realistic. No climate concern is resolved with a single change to legislation or a shift in consumer habits; this is a building block – and a vital one at that – but it will require further effort and action before greenwashing can be considered a problem of the past.