Greenwashing Part 2: Regulations

Greenwashing Part 2: Regulations

Welcome to part two of our blog series on greenwashing. In the last blog, we touched on the basics of what greenwashing is and why it’s a problem. But understanding greenwashing is only the first step towards stopping it, so let’s take a look into what governments are doing to help stop greenwashing.

Government policies

Coined in the 1980’s, the term ‘greenwashing’ has been around for decades, but in recent years it’s become more common, and strong regulations are needed to address this In Australia, most of our greenwashing regulations come from the Australian Consumer Law (ACL), which prohibits businesses from misleading or deceiving consumers in any way. This is enforced by the Australian Competition and Consumer Commission (ACCC).

While the ACL certainly helps prevent greenwashing to an extent, the Australian Government has faced criticism for essentially sponsoring greenwashing by turning a blind eye or even endorsing dubious commitments by corporations.

Such vague laws and government inaction aren’t unique to Australia, with other countries like China and Singapore also relying on broad-based consumer laws to reduce greenwashing. And, even in countries with more specific regulations like the Green Claims Code in the UK, breaches often don’t face financial consequences unless they’re taken to court by a third-party.

One country with more explicit regulations, however, is France, where the Climate and Resilience Law has clear provisions to combat greenwashing, including strict guidelines around claims like carbon neutrality and eco-friendliness. While this is still rightfully criticised as falling short of what’s necessary, it’s well-ahead of most countries.

Recent action in Australia

While Australia has been criticised in the past for supporting greenwashing, the Australian Securities and Investments Commission (ASIC) and the ACCC have been prioritising greenwashing in recent months. An internet sweep, which found that 57% of the 247 businesses surveyed were making dubious claims regarding their environmental impacts, has led to further investigations from the ACCC. On top of this, ASIC has launched legal proceedings against a superannuation fund for making misleading statements about investment options and has issued nearly $150,000 in fines to four companies for greenwashing since October 2022.

The future of greenwashing regulations

Currently, it seems no country has sufficient greenwashing regulations, but there is hope that things will improve. In Australia, a new sustainable finance strategy is being developed which will include new sustainable investment standards and initiatives to reduce greenwashing and strengthen environmental, social and governance (ESG) labelling. In the European Union, a Draft Green Claims Directive has been proposed that, among other things, will set a minimum criteria that companies must meet before they can make claims about the environmental benefits and performance of their products. Hopefully these will encourage even more regulations to be implemented worldwide.

Greenwashing is a major problem, and encouraging companies and governments to take appropriate action will take a lot of social pressure. Keep an eye out for next week’s blog where we finish this series by covering what you, as a consumer, can do to help reduce greenwashing.