Growing environmental and social awareness among consumers, investors and employees makes sustainability (ESG) issues a key element of business strategies. However, the same awareness carries certain risks – greenwashing, i.e. the practice of portraying a company's operations as more environmentally friendly and socially responsible than they really are.

Why is Greenwashing Important from the Entrepreneur’s Perspective?

First and foremost, greenwashing seriously undermines trust in a company. Customers, feeling deceived by false claims, may turn away from the brand, leading to a decline in sales and profits. An unhappy customer shares their experience with an average of 10 other people, and those with another 5, creating a negative "snowball effect".

Secondly, greenwashing negatively affects employees who, believing in the company’s values, may feel betrayed when promoting false promises. This, in turn, leads to lower engagement, increased turnover, and internal conflicts.

Thirdly, greenwashing is increasingly subject to legal regulations. The Office of Competition and Consumer Protection (UOKiK) and other authorities closely monitor corporate practices and impose severe penalties for misleading consumers, including fines, confiscation of profits, and even temporary exclusion from tenders or eligibility for grants.

The most important legal regulations related to greenwashing include:

• Amendment to the directive on unfair commercial practices, which prohibits the use of environmental labels without support in certificates or legal regulations.
• Draft Green Claims Directive, introducing an obligation to justify any environmental claims and assess their credibility.
• EU Taxonomy, defining which activities can be considered environmentally sustainable, making it harder to use vague or false claims.
• ESMA (European Securities and Markets Authority) Guidelines on the names of investment funds, setting thresholds for ESG-related terms to prevent misleading investors.
• CSRD Directive, introducing the obligation for large enterprises to report on sustainability.
• SFDR Regulation, helping classify investments as sustainable.

Types of Greenwashing – Learning from the Mistakes of Others

It is worth knowing the most common forms of greenwashing to avoid them:

1. General and vague statements: Using words like "eco-friendly", "natural", or "sustainable" without concrete data. Example: A product described as "natural" containing only a small percentage of natural ingredients.
2. Emphasizing one aspect while ignoring others: Focusing on one eco-friendly feature of a product or activity while ignoring other negative aspects. Example: A company boasts about biodegradable packaging but omits the energy-intensive production process.
3. False certificates: Displaying environmental labels that are not based on recognized certification systems. Example: A product marked with a proprietary, unknown certificate without proper methodology.
4. Greenwashing through omission: Not disclosing negative aspects of operations, creating a false impression of complete sustainability. Example: An electric car manufacturer omits information about the use of child labor in battery production.
5. Misleading composition claims: Misrepresenting the content of a product. Example: A product described as "made from recycled materials", containing only a small percentage of recycled content.

Examples of companies accused of greenwashing include H&M (the "Conscious Collection" initiative), KLM ("Fly Responsibly" campaign), and the Polish company SYNERGIO SA (so-called "Eco-pea coal"). In the case of "Eco-pea coal", the company had to withdraw the name and change packaging suggesting the environmental friendliness of coal after a lawsuit by the ClientEarth Foundation.

How to Avoid Greenwashing and Build an Authentic Image?

Building a credible brand in the area of sustainability requires transparency, integrity, and concrete actions.

Here are some key tips:

• Be transparent: Provide specific data and information about your products and production processes.
• Verify your claims: Make sure all environmental statements are supported by solid evidence.
• Use independent certifications: Choose industry-recognized certificates that meet rigorous standards (e.g., FSC, GOTS, Fairtrade).
• Work with experts: Use the help of specialists in sustainable development.
• Clearly define your ESG goals and strategy: Determine what you want to achieve and how you plan to do it.
• Inform clients honestly: Share reliable information about the positive impact of your products and services.
• Substantiate your claims: Provide concrete data and use credible information sources.
• Set realistic goals: Your goals should be ambitious yet achievable, and you should regularly monitor progress.
• Build ESG competencies: Create a dedicated team and invest in employee training.
• Engage stakeholders: Maintain open dialogue with customers, employees, investors, and local communities.
• Monitor and verify: Regularly assess progress and make adjustments, and create a mechanism for reporting irregularities.
• Conduct a value chain analysis: Understand your impacts, opportunities, and risks throughout the supply chain.
• Don’t be afraid to admit mistakes: Acknowledge errors and learn from them.

Avoiding greenwashing is not just about complying with the law, but above all about building a strong and credible brand. Companies genuinely committed to sustainability gain a competitive advantage, attract customers, investors, and talented employees. Let’s remember that building an authentic ESG image is a long-term process that requires commitment, consistency, and continuous improvement.

Need support in building your strategy and communication based on ESG pillars? Get in touch — we’ll be happy to help your company build a competitive advantage through reliable communication.

Author: Agnieszka Orłowska (Managing Director at ESG Institute)

ESG Institute Sp. z o. o.

info@esginstitute.eu

Rondo ONZ 1,
00-124 Warszawa

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