Compliance & Regulation » Risks And Regulations With Greenwashing

Risks And Regulations With Greenwashing

Risks And Regulations With Greenwashing

May 30, 2024

Risks And Regulations With Greenwashing

As companies increasingly tout their eco-friendly credentials, navigating the landscape of risks and regulations with greenwashing requires a keen understanding, according to an article by Bracewell. In recent years, greenwashing, the deceptive use of environmental claims to enhance a business or product’s eco-friendly image, has faced increased scrutiny as regulatory bodies like the Advertising Standards Authority and the UK’s Competition and Markets Authority (CMA) have taken action.

These actions, coupled with legislative changes such as the Economic Crime and Corporate Transparency Act 2023 in the UK, and existing regulatory frameworks, highlight the real risks associated with misleading green claims.

In July 2022, the CMA expressed concerns about the marketing practices of fashion companies ASOS, BooHoo, and Asda, regarding their use of terms like “responsible,” “sustainable,” and “eco-friendly.” Following an investigation, the companies agreed to stringent voluntary undertakings, including ensuring accuracy in green claims, establishing objective criteria for eco-friendly products, and providing transparent environmental strategies to consumers.

Though these cases involve fashion, the article suggests the implications extend to the energy sector, where claims of achieving net-zero emissions or promoting green products like sustainable fuels face similar scrutiny. Energy companies must proactively manage these risks, considering not only UK regulations but also global enforcement, especially in the US, where authorities are vigilant against corporate dishonesty affecting consumers.

Moreover, energy firms face potential civil actions from various stakeholders, underscoring the need for a comprehensive risk management approach. This involves implementing controls to mitigate the risk of regulatory investigation or litigation across diverse scenarios. Despite the compliance burden, neglecting these issues could expose companies to significant harm during regulatory or legal proceedings.

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