Greenwashing: green deceptions and their consequences

What is greenwashing?

Sustainability has become an important criterion in purchasing decisions in recent years. More and more people attach importance to the fact that the products and services they consume have been produced in an environmentally friendly and socially responsible manner. Companies are responding to this trend by highlighting their sustainability efforts and developing green marketing strategies. However, not all efforts are as authentic as they seem: sometimes behind the green promises - the so-called "green claims " - lie false statements that are deliberately intended to deceive consumers.  

This practice is known as greenwashing: Through misleading information and measures, companies deliberately present themselves as more environmentally friendly and sustainable than they really are in order to improve the image of the company or that of individual products and to appeal to environmentally conscious target groups, among other things.

What types of greenwashing are there?

Greenwashing does not always have to be a large-scale deception - it can also be a claim that is exaggerated or misleading. Companies use various tools to present themselves as environmentally friendly and deceive consumers:  

• Misleading claims: Companies make false or exaggerated claims about their environmental friendliness.  

• Concealment: Positive environmental statements are emphasized, while negative aspects are concealed.  

• Unclear terms: Use of vague terms such as "environmentally friendly" or "green" without concrete evidence or certificates. Such terms are often not clearly defined and can easily be misunderstood.

• Lack of meaning: Emphasizing a correct but completely irrelevant property (example: vegan mineral water).

• False labels: Use of self-created or unreliable environmental certificates. A company could develop its own label suggesting that the product is environmentally friendly, even though it has not undergone independent testing.  

• Influential images: Photos or graphics that suggest a positive effect on the environment, although this is not true.

Greenwashing in the financial sector

For a long time, greenwashing was a phenomenon that mainly affected manufacturing companies in the real economy. However, with growing awareness and interest in sustainability in the financial sector, greenwashing is also becoming increasingly relevant here: Sustainable finance describes the consideration of environmental, social and governance aspects - the so-called ESG criteria - when making investment decisions. The aim is for financial flows to flow into sustainable projects - and for the financial sector to contribute to a sustainable global economy.  

Financial institutions are now trying to use greenwashing to gain access to these funds, which were actually intended for sustainable purposes and investments. Products are often offered as "green" or "sustainable" without providing concrete proof of this. The EU wants to take action against this with the Sustainable Finance Disclosure Regulation (SFDR) : The directive sets out specific requirements for the disclosure of the sustainability information with which they are advertised.  

Laws and guidelines: How greenwashing should be prevented

Both the EU and the German government are endeavoring to regulate corporate sustainability communication and make it more transparent. The EU Commission's "Green Claims Directive" is the first specific directive to deal with environmental product claims. The directive defines clear criteria that a product or service must fulfill in order to be advertised as environmentally friendly. These include, for example

• The environmental benefits of the product or service must be clear and demonstrable;

• The information must be based on independent, scientific findings;

• The information must be comprehensible and precise;

• No false or misleading statements may be made.

In addition to the Green Claims Directive, the Corporate Sustainability Reporting Directive (CSRD) is obliging more and more companies to produce detailed reports on their sustainability practices. The international ISO 14021 standard also defines terms and concepts that companies must use when preparing environmental disclosures - thus ensuring that these disclosures are truthful and verifiable.