It's Not Easy, Claimin' to Be Green - Greenwashing Risks for Manufacturers

Consumers and other buyers through the supply chain are increasingly interested in the 'green' credentials of the products they buy.

They may be willing to pay a premium for a product that they believe is doing less harm to the planet or, at the organisational procurement level, may make certain sustainability requirements a condition for eligibility as a supplier.

And in parallel, many manufacturers are building sustainability into their processes to achieve their own Environmental, Social and Governance (ESG) objectives and align their products with one of their customer's key purchasing criteria.  

In this context, the term 'greenwashing' generally refers to the use of false or misleading statements about the steps a business is taking to minimise the environmental impacts of its activities or about the environmental benefits the business is achieving through those steps.  

For businesses in the manufacturing sector, the temptation to indulge in greenwashing and the corresponding problems caused by the practice for businesses that resist that temptation are particularly acute.  

By its nature, the sector depends on the consumption of raw materials (or manufactured components), energy and other resources, and the onward distribution of finished products has its own significant carbon footprint.

Reducing the consumption of resources can be good for business as well as for the environment but may require initial investment to move to more efficient technologies.

At the same time, retailers in sectors such as clothing and electronics, mindful of accusations regarding the harmful effects of fast fashion and the 'throw-away' culture, place demands on their manufacturing base to offer greener production methods.  

Accordingly, manufacturers have an understandable desire to burnish their green credentials.  

There may be a tendency for a manufacturing business to give less attention to how it formulates its more 'aspirational' statements about sustainability initiatives than it gives to other more 'hard-edged' elements of the technical specification of its products.

However, the reputational and regulatory risks associated with the greenwashing would argue for greater caution.

The EU's proposed 'Green Claims' directive (which is currently working its way through the EU's legislative process) is part of the wider European Green Deal agenda and represents an attempt by lawmakers to set minimum requirements for businesses making 'explicit environmental claims'.  

The directive's aims include protecting consumers and businesses from falling prey to greenwashing while at the same time allowing businesses with genuine 'green' credentials to benefit from being able to differentiate themselves from less sustainable businesses (thus incentivising businesses to make the necessary investment).  

To achieve these aims, the directive will:

• Go into more prescriptive detail than previous rules about how a business should substantiate its explicit green claims (in particular, by requiring independent verification).
• Restrict the use of 'self-certified' labelling schemes (and set rules to ensure the independence and authority of any scheme that issues such labels). 
• Seek to harmonise the 'aggregated scoring' mechanisms businesses use to measure and report on the environmental impact of products to ensure coherence and meaningful comparisons.

The implications of the directive will be relevant to manufacturers doing business in Europe (or addressing marketing claims to consumers in the EU), but the directive is also of interest to those whose business is limited to the UK insofar as it reflects a possible direction of travel for future UK regulation in this area.

Moreover, for businesses that want to showcase their genuine green credentials, the directive provides an interesting insight into the kind of steps that could be implemented to give further weight to a business's claims to be operating sustainably.