Key takeaways: Greenwashing risk - current trends and horizon scanning

Greenwashing in the context of the climate crisis

The evening kicked off with Dr Simon H. Lee from the University of St Andrews, sharing some key climate insights and warning that the 1.5°C Paris Agreement limit may be breached within a decade. On a more positive note, the UK has significantly reduced its fossil fuel dependence in the last 15 years, a motivating achievement. The key takeaway from Simon's presentation was: "the later we reach net zero, the warmer the world we must live with and the worse the extremes we will have to adapt to."

ASA's key role in the fight against greenwashing

Next, Christophe Boucherie, a regulatory partner at Stephenson Harwood, introduced Guy Parker, Chief Executive of the Advertising Standard Authority (ASA). They explained how the increasing public sustainability awareness, evidenced through a shift in consumer values and behaviour, and the rapid development of green finance have also led to increased scrutiny and new regulations from regulatory bodies like the FCA, the CMA, and the ASA. Guy emphasised that all advertising claims, including green ones, need solid evidence, citing the ASA's rulings against a number of financial institutions and airlines. He highlighted the strong collaboration between the ASA and the other regulatory authorities in tackling greenwashing claims.

The ASA has also been rapidly adapting to the surge in online marketing by rolling out AI tools to monitor and detect misleading ads, aiming to scan 50 million online ads a year by 2025, which sends a clear message to businesses trying to dodge scrutiny. However, Guy also cautioned against “greenhushing,” urging businesses not to shy away from climate conversations. His advice was to keep the consumer in mind, be clear and specific, and trust that people know more about climate issues than you might think.

How to avoid the trap of fake environmental claims

Anwar Darkazally and Adam Culy, corporate and commercial litigation partner at Stephenson Harwood, spoke about the prevalence of fake environmental claims in a world where being "green" has become a selling point for businesses. Adam spoke about the various causes of action that may be available in response to greenwashing – for example, misrepresentation claims, where the claimant was induced to enter into a contract with false sustainability metrics. There are also risks to auditors and other professional advisors who fail to detect greenwashing misstatements or are complicit in them.

Anwar spoke about how an intelligence firm can assist with due diligence in the greenwashing space so that companies are not caught out by fake green claims by potential counterparties. A good example of this is the carbon credit market which is still relatively unregulated so companies may wish to exercise caution before becoming involved with counterparties marketing these products. Anwar also exposed some of the myths around reliance on open-source data and the value of on the ground real time data that field agents can provide.

Greenwashing and brand management

Anthony Simon and Galina Usorova, managing associate in Stephenson Harwood's fraud and asset recovery team, spoke about the key dilemmas facing clients in the greenwashing context, including competitive pressure v. tightening regulation, litigation risk v. greenhushing, investor pressure v. authentic sustainability.

Anthony brought these dilemmas to life with case studies of Patagonia, Google and Keurig Coffee, illustrating how their communications strategies resulted in positive or negative outcomes for their reputation, credibility and balance sheet. Galina referred to a number of greenwashing cases going through the courts in various jurisdictions, saying that an innovative judicial approach will be required before we start seeing more greenwashing litigation.