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The growing number of misleading or unsubstantiated claims and slogans used by companies are drawing the attention of regulators. Greenwashing practices carry a variety of risks for companies, including potential financial losses and image damage, which may significantly affect their market position and customer trust.
There are known cases of fines of up to USD 4 million imposed by the SEC (United States Securities and Exchange Commission) on American companies from the finance and banking sector. In Europe, the scale of the phenomenon is smaller, but the first cases of cases investigated by local regulatory institutions have already been reported. It is estimated that fines in this area will increase. The European Securities and Markets Authority (ESMA) is currently processing the rules for implementing a new anti-greenwashing system. The UK Financial Conduct Authority (FCA) is working to introduce new regulations that would strengthen its ability to take action on this practice.
– For the efficient functioning of the market, we need reliable information from the companies operating on it, and issues of sustainable development are no exception. The importance of reliable communication is demonstrated, among others, by the European Union's actions to ban greenwashing and to regulate the issues of environmental declarations (Green Claims). Responsible marketing should be combined with reliable reporting of sustainable development and, above all, with the adoption and implementation of ambitious, well-thought-out strategies aimed at business sustainability, including reducing the company's carbon and environmental footprint – says Justyna Wysocka-Golec, Associate Partner, Leader of the ESG, Decarbonization Team and Biodiversity in the Consulting Department at KPMG in Poland.
Effective preparation allows companies to make informed decisions and effectively minimize the risk of greenwashing. Organizations can achieve this by applying appropriate management strategies and by monitoring activities in key areas such as product and service offerings, supplier and customer relationships, diversity and inclusion, and corporate governance.
When considering your organization's ability to manage the risk of greenwashing, it is worth taking several important steps – including: identifying the scope of risk for the company, creating appropriate management structures, educating staff, using new technologies that can improve the detection and combating of unfair practices, and implementing management plans. crisis and response to unforeseen situations.
– From a legal point of view, actions planned at the EU level against the so-called greenwashing will include changes to two directives – the Unfair Commercial Practices Directive and the Consumer Rights Directive. As a consequence, many companies will have to ensure compliance and adapt the offering of their products to consumers in accordance with the new regulations. Violations in this case may constitute, first of all, violations of the prohibition of using practices violating the collective interests of consumers, regulated in Art. 24 of the Act on Competition and Consumer Protection. This, in turn, raises the risk of incurring penalties imposed by the President of the Office of Competition and Consumer Protection. Moreover, greenwashing may mean the use of unfair market practices against consumers, referred to in the Act on Counteracting Unfair Market Practices. Such actions, however, involve the risk of liability under the Act on Competition and Consumer Protection, including claims for damages from consumers – emphasizes Piotr Tomaszewicz, legal counsel, Associate Director in the Energy Sector Consulting Practice at KPMG Law.
