EU Greenwashing Directive Risks Doing More Harm Than Good
Josh Pitman, MD of sustainable packaging retailer Priory Direct warns that the EU’s much-needed clamp down on greenwashing risks being prohibitively severe and could damage the progress made so far
Severe penalties and lack of clarity in EU’s proposed legislation aimed at clamping down on greenwashing by companies could risk doing more harm than good, according to Josh Pitman, MD of leading UK sustainable packaging firm, Priory Direct.
The Green Claims Directive, announced in January 2024, will prevent companies from making generic and unverified claims in their marketing about the sustainability of their products, including terms such as ‘biodegradable’, ‘natural’, and ‘climate neutral’, or risk incurring heavy penalties.
Numerous companies have been caught greenwashing in recent months, including Shell, Unilever and Coca Cola, and the Competition and Markets Authority (CMA) estimated in a global review that 40 per cent of online sustainability claims promoting products or services could be misleading.
Pitman says: “The spirit of the EU’s Green Claims Directive is completely in line with the climate action needed to make a difference for our planet. Misleading claims around companies’ green initiatives have plagued marketing for too long. Consumers are struggling to differentiate the truly sustainable businesses from those doing the bare minimum.
“But in practice, there is a real risk that the lack of clarity about what counts as misleading and the harshness of the proposed penalties in the Directive may discourage businesses from engaging in discussions around climate action. Some of our key suppliers in the EU are doing amazing things for the planet, including one that is net regenerative. However, they are now worried to speak openly about their initiatives in case they are accused of greenwashing.
“This has direct consequences for Priory Direct. Our ability to talk about the true climate impact of our supply chain is severely impacted, even though we are a UK company that should be outside the remit of the Directive. This could in turn be classed as misleading our stakeholders.”
The European Parliament released more details of the penalties in a plenary session on 12 March 2024. Companies found to be breaching the rules of the Directive may be subject to penalties, such as being barred from bidding for public procurement tenders or being fined 4 per cent of their annual turnover. Businesses are also banned from making green claims based on their carbon off-setting efforts.
Pitman fears the penalties will cause business leaders to ‘greenhush’ instead and speak less about their green initiatives and climate concerns for fear of legal action.
He continues: “Whilst this legislation is a much-needed step, if its implementation discourages business leaders from speaking openly about sustainability it could damage the progress we have made so far. Being able to communicate achievements and intentions is essential for businesses to build relationships with their customers and each other.
“It’s also necessary to continue encouraging investment in sustainable initiatives, such as using AI to reduce waste, as often these are costly to the business when first implemented with few profits and benefits until further down the line. Greenhushing could slow the pace of sustainable change in the business sector and limit sustainable purchasing options for consumers as leaders become concerned about the security of their business should a claim be misconstrued or deemed unclear.
“While greenwashing certainly needs to end, the current lack of clarity and harsh penalties could harm businesses that are doing good work. Even carbon offsetting efforts are better than nothing, so long as they are marketed accurately.
“In my view, the solution is clearer guidelines, rather than just penalties, so that businesses know what does and does not count as misleading. No one yet knows where the line is with this Directive, and the consequences are prohibitively severe for businesses to take the risk. Businesses need clear guidelines so they can still progress and publicise their sustainability efforts without fear.”
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