The Legality of Greenwashing

The Legality of Greenwashing

Greenwashing, the deceptive practice of exaggerating or falsifying environmental claims, is not legal, and many countries and jurisdictions are enacting laws specifically to prohibit it.

While previously, instances of greenwashing were primarily seen as public relations challenges rather than legal issues, recent developments have shifted the landscape. Studies, such as the Greenwashing Study and Consumers’ Behavioral Intentions, have shown that consumers tend not to trust products or brands once they’re perceived to be greenwashing.

As environmental performance becomes increasingly intertwined with economic performance, regulators are recognizing the importance of accurate environmental data to stakeholders and investors. This has led to a rise in legal action against companies engaging in greenwashing practices.

Recent landmark cases, such as the one involving Dutch airline KLM, highlight the shift of greenwashing from the realm of public relations to the legal arena. Environmental groups are filing lawsuits against high-emission green washers, emphasizing the legal consequences of misleading environmental claims.

Furthermore, many nations have implemented strict laws to regulate public-facing statements, particularly in the financial services sector. For example, the U.S. Department of Justice investigated Deutsche Bank’s asset-management arm, DWS Group, for misleading investors regarding sustainability claims.

In addition to individual cases, regulators worldwide are enacting laws and initiatives to combat greenwashing. The Security and Exchange Commission's recent climate disclosure proposals and the European Union's Sustainable Finance Disclosure Regulation (SFDR) are notable examples aimed at ensuring accurate environmental reporting.

Moreover, various government-created resources and initiatives, such as the EU’s Initiative on Green Claims and France’s Climate and Resilience Law, are tackling greenwashing by standardizing methodologies and prohibiting misleading environmental claims.

The Origin of the Term “Greenwashing”

Although the concept of greenwashing has existed since the 1960s, it wasn't formally labelled as such until 1986. The term originated from an essay by college student Jay Westerveld, who described an experience he had while visiting Fiji and staying at a hotel.

In his essay, Westerveld noticed a contradiction in the hotel's environmental stance. Despite encouraging guests to reuse towels to "help the environment" and protect corals, the hotel was involved in environmentally damaging construction projects to expand its size.

Westerveld coined "greenwash" in response to observing hypocrisy in a hotel's environmental actions. The term gained popularity after being featured in a local magazine, eventually becoming widely recognized as a label for deceptive environmental practices.