As companies around the globe are increasingly promoting their ESG credentials in public communications, advertising and packaging, unsubstantiated or exaggerated claims of being green or sustainable can present a range of legal and reputational risks, including allegations of “greenwashing” and “ESG washing”.  Companies face liability risks resulting from misrepresentation, breach of contract, loss of business and possibly even fraud and criminal sanctions. As regulators become more aggressive in holding companies accountable for greenwashing, the risk continues to grow.

Dentons’ new snapshot report, Greenwashing, the next “big thing”?, examines the laws applicable to voluntary corporate ESG disclosures and greenwashing across 19 jurisdictions.   The report reflects the legislative environment as of September 2023.  Based on survey responses from Dentons lawyers around the world, the report categorizes surveyed jurisdictions into four groups on the basis of their current approach to regulating greenwashing. 

Key findings

• Most jurisdictions lack definitions of what constitutes greenwashing.
• The European Union’s Proposal for a Green Claims Directive is globally the first legislation of its kind. It aims to prevent greenwashing and promote sustainable consumption by setting minimum requirements on the substantiation, communication and verification of voluntary environmental claims about products or activities. This proposal is complemented by the Proposal on Empowering Consumers for the Green Transition, which would expand misleading and unfair commercial practices to include making misleading environmental claims.
• Regulators around the globe (e.g. Netherlands, Belgium, UK, US Federal, Canada, Australia and Italy) have developed soft law guidelines for companies making claims about the sustainability or environmentally friendly qualities of goods and services. Typically, these guidelines are developed in the context of consumer protection, advertising standards or environmental regulation.
• Some jurisdictions (e.g. France and California) have narrow legal provisions in force that effectively target corporate claims related to sustainability or to environmentally friendly qualities of goods and services. However, these are typically extensions of more general provisions of consumer protection, advertising standards, unfair competition or environmental law. They are not incorporated into any broader regulatory or legislative framework targeted at “greenwashing”.
• In the majority of jurisdictions surveyed, greenwashing practices might be caught by existing legal frameworks, including consumer protection law, advertising law, tort law, contract law, company law, environmental law, unfair competition law and criminal law depending on the facts of the case. Courts and public agencies are further interpreting these existing laws with respect to their precise applicability to voluntary corporate ESG communications which might amount to “greenwashing.”

Common greenwashing pitfalls

The report also highlights common situations in which ESG and/or greenwashing accusations may arise.  These include mandatory disclosures, such as slavery act disclosures, impact reports, conflict mineral disclosures, or IPO information.  Common risk areas also include misleading statements or communications related to product or service descriptions, packaging, recyclability, certifications, or supply chains.  

In-house legal teams and compliance officers should pay particular attention to ensuring that any public communications in these areas are accurate and avoid exaggeration.  Furthermore, even where specific greenwashing legislation does not currently exist, companies should be aware of other existing areas of law – particularly consumer protection law, advertising law, environmental law, or unfair competition law – which could be used to raise greenwashing claims.

Download the report

The full report is free of charge and available for download: Click here