2024 Update: Fewer Companies Greenwashing But Severe Offenses On The Rise
RepRisk released their analysis of greenwashing in public and private companies. RepRisk captures greenwashing through the intersection of two ESG issue groups: any environmental issue and Misleading communication. This approach captures straightforward greenwashing cases such as deceptive labeling and more complex situations like political misalignment.
We’ve discussed the myths surrounding ESG and the opportunities for moving the needle on eliminating greenwashing.
The good news is that there was a 12% decrease in the overall number of companies associated with greenwashing risk for the first time since 2019.
The bad news is that the number of severe risks has increased by almost a third.
Greenwashing incidents with high severity ratings usually display purposeful and systematic actions to conceal ESG violations resulting in material consequences for the environment, such as heavy pollution, and/or for the company, such as fines.
Over the past year, 1,841 incidents of Misleading communication were recorded, of which 1,038 (56%) were also linked to environmental issues – which constitutes greenwashing when both issues are present. Of the 3,868 companies connected to Misleading communication, 2,213 (57%) were linked to environmental issues as well.
Private companies represent a significant portion of greenwashing cases: 70% of the companies associated with greenwashing were private, compared to 30% that were public.
Greenwashing Severity 2023 to 2024 (RepRisk)
Which Countries Are Greenwashing?
Greenwashing incidents continue to be highest in Europe and North America, followed by Asia and Latin America and the Caribbean.
In Europe, the Netherlands experienced the largest reduction, with cases falling by 48%, followed by Italy at 39% and Spain at 28%.
Germany, on the other hand, saw a below-average decline of just over 15%.
France diverged from this trend, seeing an increase in greenwashing cases of nearly 11%. This rise is partially linked to the 2024 Paris Olympics, which drew attention from environmental activists, particularly regarding greenhouse gas emissions and air travel associated with the event.
Number of companies in each country at risk of greenwashing (RepRisk)
What Types of Companies Greenwash the Most?
Oil and Gas sector accounted for the largest share of greenwashing cases, followed by Food and Beverage, and Banking and Financial Services. But some of these showed a decrease - the Banking and Financial Services sector saw the largest decline, with a drop of almost 27%, followed closely by Retail, Personal, and Household Goods, which decreased by over 25%.
Oil and Gas
As expected the oil and gas industry, often the target of ESG, is struggling to create a message of positivity. As we noted previously, the industry and their partners who utilize plastic (made from oil products) have a long history of greenwashing through misleading advertisements. The industry is trying to turn the tides by adding carbon capture and storage to their services.
In South Africa, the Advertising Regulatory Board (ARB) determined that French oil company TotalEnergies's claims of being "committed to sustainable development and environmental protection" were misleading.
In April 2024, meanwhile, German prosecutors launched an investigation into Wintershall Dea GmbH for misrepresenting its 2022 sustainability reporting.
In June 2024, the California Attorney General filed an amended complaint in an ongoing lawsuit against Exxon Mobil, Shell, Chevron, ConocoPhillips, BP and the American Petroleum Institute. The amended complaint presents new evidence of false advertising and greenwashing, and aims to compel the companies to forfeit profits gained from these alleged practices.
Banking and Financial Services
The Banking and Financial Services sector continues to be vulnerable to greenwashing allegations and fines due to its role in financing industries with significant environmental impacts. This is not surprising, as most developers and manufacturers require access to capital. The problem is when these financial institutions are not true to their word.
In 2023, Deutsche Bank-backed investment firm DWS agreed to pay a $25 million settlement to the US Securities and Exchange Commission (SEC) over allegations of greenwashing.
In September 2024, Australia’s federal court imposed a landmark fine of AUD 12.9 million against Vanguard Investment Australia, a subsidiary of US-based Vanguard Group, for greenwashing practices.
While the sector experienced a 70% increase in climate-related greenwashing from 2022 to 2023 – a trend also reflected in a report from the European Banking Authority published this summer – new RepRisk data reveals a 20% decrease in incidents globally across the sector in 2024. Impacts on landscapes, ecosystems and biodiversity was the second most-cited RepRisk Issue linked to greenwashing in the Banking and Financial Services sector, though this category also experienced a significant 42% decline compared to 2023.
Banking Sector Greenwashing in the Environmental Sector (RepRisk)
Food and Beverage
The packaging industry has a long history of misleading the public on environmental claims, while also being a large source of controversy around pollution and environmental health. Sadly most plastic does not get recycled, and most compostable packaging simply does not decompose in a reasonable time or is not accepted by local waste companies. The packaging industry also continues to be faced with environmental health risks from emerging chemicals including BPA and PFAS.
In August 2024, the District of Columbia Court of Appeals ruled that Coca-Cola must face a lawsuit brought by the environmental nonprofit Earth Island Institute, which alleges the company misrepresented its sustainability efforts in violation of the Consumer Protection Procedures Act. The central claim is that Coca-Cola markets its plastic bottles as "100% recyclable," while a significant portion of these bottles allegedly end up in landfills or incinerators due to inadequate recycling systems.
Airlines
The risk of greenwashing has increased in the European airline sector, driven in part by the introduction of new regulations. These rules require companies to not only report on their environmental impacts and commitments but also ensure that such claims are accurate, scientifically substantiated, regularly updated, and clearly communicated to both consumers and investors.
Worldwide, aviation accounts for 2.5% of all carbon dioxide (CO2) emissions and 12% of all CO2 emissions from transportation. Sadly we are struggling to find quick fixes for sustainable air travel - the carbon costs of airline fuels are not decreasing, the number of flights are increasing, and sustainable fuels often have large environmental impacts.
September 2023, an Austrian court prohibited Austrian Airlines from advertising carbon-neutral flights after an NGO successfully sued the company for misleading environmental statements.13
In March 2024, the Amsterdam District Court found that KLM misled consumers with several environmental claims, ruling that 15 out of 19 statements assessed were misleading. The court concluded that KLM's advertising, including claims about moving toward a "more sustainable" future and the benefits of sustainable aviation fuels and carbon offsetting, presented an overly positive view of the airline's environmental impact.
In May 2024, the EU launched investigations into 20 airlines, including Lufthansa, Air France-KLM and Brussels Airlines, requiring them to provide robust scientific evidence supporting their carbon reduction claims.
Leveraging Greenwashing Policies
Regulation is likely to have played a significant role in driving this downward trend. We wrote about the increasing number of greenwashing regulations globally - with more on the way.
The 20% decline in incidents in the EU coincided with the introduction of a large number of new regulations over the past 12 months that have propelled the regulatory movement forward.
The EU’s new Green Claims Directive requires companies to back up broad environmental claims, such as “carbon neutral” or “made from recycled materials,” with credible evidence and reliable methodologies. Non-compliance can lead to legal consequences and financial penalties of up to 4% of a company's turnover.
The EU’s Empowering Consumers Directive, effective March 2024, bars vague environmental claims unless supported by clear evidence. It also limits sustainability labels to those issued by public authorities or based on approved certification schemes. Additionally, claims of climate neutrality or benefits from carbon offsetting are strictly banned.
In the UK, a newly introduced anti-greenwashing rule demands that firms be able to demonstrate that their products and services genuinely deliver on their environmental promises. In-scope companies must ensure their sustainability and environmental claims are accurate and reflect their products' environmental impact across the full life cycle.
In the US, the Green Guides, issued by the Federal Trade Commission (FTC) since 1992, also include guidelines to prevent false or misleading environmental claims. In March 2021, the US Securities and Exchange Commission launched an ESG task force targeting investment advisers for making misleading ESG claims, and issuers for deceiving investors about climate risks and green tech.
