Greenwashing! I’m not the greatest fan of the exercise but working my way through the many volumes of predictions published by analysts et al, it is clear that a range of consistent themes appear. I was quite taken by the Forrester analysis that greenwashing is predicted to see growth again this year.
How is it possible that so many organisations simply get this wrong either by accident or by design?
Forrester themselves discuss that companies like BNY Mellon, Eni, Keurig, and Walmart have faced fines ranging from $1.5 million to $5.6 million for greenwashing, or making false or misleading claims about the environmental benefits of their products or services. In 2021, the European Commission found that 50% of green claims were unsupported by evidence. As consumers become more sceptical and watchdogs like the UK’s CMA and the US FTC increase their enforcement of consumer protection laws, regulators are cracking down on greenwashing.
But the financial consequences of greenwashing go well beyond fines. Companies risk significant market valuation loss and employee and customer disengagement. The 2022 raid on Deutsche Bank’s DWS by German police shows that the potential losses from greenwashing can be in the millions. To avoid these risks, Chief Marketing Officers must create sustainability communications messages with integrity.
But how and who might be at greatest risk here?
Greenwashing, or the act of making false or misleading claims about the environmental benefits of a product or service, has become a material risk for regulators, who are now taking action against firms found to be misleading customers, investors, and other key stakeholders.
Insurance firms are particularly at risk of greenwashing due to increased demand for ESG products, lack of a common definition and credentials for such products, inconsistent and incomplete data on ESG screening, and challenges in accessing data to innovate and underwrite new ESG products.
To mitigate these risks, insurance firms must identify, monitor, and manage greenwashing risks within their risk management frameworks. This includes being transparent about their sustainability claims, ensuring the credibility of their ESG product credentials, and using reliable and complete data in underwriting and pricing products.
It’s important for insurance firms to stay up to date with regulatory developments, such as the EU’s taxonomy regulation and the upcoming UK Green Taxonomy consultation, as they can provide guidance on what is considered acceptable in the sustainability arena. By proactively addressing greenwashing risks, insurance firms can not only protect themselves and their customers, but also contribute to the overall goal of combating climate change and promoting a more sustainable future.
Want to discuss your ESG strategy and avoid the risk of Greenwashing? Reach us here to discuss how we can help.