Greenwashing: Who polices net-zero claims?

NET zero has become the buzzword for sustainability and corporate social responsibility. As global awareness and demand for sustainable products and services accelerate, businesses eager to capitalise on this trend might run the risk of making false or misleading claims about the climate impact of their products or services in what is commonly coined “greenwashing”.

Beneath the shiny surface of sweeping carbon neutrality claims lies a more sinister danger of greenwashing as such hollow pledges might direct investment and consumption away from real climate change. Greenwashing exploits consumers who are willing to pay a premium to support environmental sustainability, but who are unable to verify the accuracy of such claims and hence accept them at face value. In a 2020 European Commission study, more than 50 per cent of green claims across the EU were found to be vague, misleading or unfounded. Such data demonstrates the pressing need for corporate responsibility around environmental claims to be articulated, identified and regulated, particularly in a market beset by fragmented standards, integrity issues and credibility concerns. National regulators around the world are increasingly recognising the need for greater corporate transparency and accountability to stamp out the insidious practice of greenwashing. So where is this green line between fact and fiction and what exposure does a corporate have when it crosses it?

Where does it go wrong?

To make carbon neutrality claims, a corporate typically relies on an assessment and reduction of its emissions alongside mitigating such emissions with the purchase of carbon credits. Putting aside the over-reliance on carbon credits and the integrity issues there, the foundation block of sustainable corporate programmes lies in an accurate assessment of its carbon footprint, which is not a straightforward task. Although there are international standards such as the Greenhouse Gas Protocol and ISO 14064, which provide guidelines for corporations to measure and assess their emissions, companies still find themselves facing allegations of greenwashing. In 2021, a car manufacturer lost its appeal in Australia against a record A$125 million (S$112 million) fine imposed on it for deliberately deceiving regulators and customers about the environmental performance of its cars. In 2020, an oil company withdrew its advertising campaign after facing a complaint that certain statements relating to the scale of its transition to renewable energy away from fossil fuels, were misleading.