Greenwashing cases fall for the first time in six years

Data from Zurich-based ESG firm RepRisk has found that for the first time in six years the level of greenwashing risk has fallen[i]. The number of greenwashing cases has been found to have dropped from 2,503 in 2023, to 2,212 this year, representing a 12% year-on-year decline. The researchers identified instances of greenwashing via intersection of two ESG criteria: any environmental issue, and misleading communication. They state that this approach captures both straightforward greenwashing cases, such as deceptive labelling, alongside more complex situations such as political misalignment.

Whilst this year’s report found that low and medium risk cases had declined when compared with 2023, high risk cases were up considerably: 30% versus last year. RepRisk say severity is determined based on three dimensions: the consequences of the risk incident; the extent of its impact; and the degree to which the incident was intentional and systematic. Greenwashing cases deemed high risk “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.”[ii]

The researchers argue that whilst public perception is having an impact on the overall downward trend in greenwashing cases, more regulation and data transparency is required to tackle the growing number of severe incidents. This is reflected in the notable practice of repeat offences, where 30% of companies linked to greenwashing in 2023 were also flagged in 2024.

"Stakeholders are more aware of greenwashing risk than ever before," said Dr. Philipp Aeby, CEO and Co-Founder of RepRisk, "While regulators have successfully pushed forward legislation to deter greenwashing, the risk will keep evolving as new forms emerge, leaving companies open to reputational damage which impacts their bottom line. Greenwashing is often driven by corporate narratives. To uncover it, investors and companies should rely on what external sources reveal about these claims."[iii]

Regional variation suggests legislation could be having an impact

Analysing the data on a regional basis, it appears that regulation could be impacting greenwashing prevalence, with both Europe (down by 20%) and the UK (down by 4%) showing decline in the number of cases versus last year. Both regions are introducing regulation which hopes to quash instances of greenwashing, for example the EU's Green Claims Directive which mandates that companies substantiate their environmental claims with robust evidence, as well as the UK’s Green Claims Code introduced by the Competition and Markets Authority’s (CMA). The CMA itself estimates that 53% of claims in marketing today are misleading or potentially guilty of greenwashing.

However, regulation alone is unlikely to be driving this change. In the US & Canada for example, previous data from RepRisk suggested that cases peaked in 2022, with numbers falling by 10% into 2023. However, data for 2024 shows that greenwashing in the region is on the rise again with companies here also more likely to reoffend - 42% compared with a global average of 30%. RepRisk suggest the change could be down to politicisation of ESG, with the 2022/2023 decline linked to “companies and funds becoming more cautious about promoting their green credentials, responding to pressure from investors, state attorneys general, and other state-level political figures opposed to considering ESG criteria in investments”[iv].

References

[i] RepRisk | A turning tide in greenwashing? Exploring the first decline in six years

[ii] Ibid

[iii] RepRisk data shows decrease in greenwashing for first time in six years, but severity of incidents is on the rise (prnewswire.co.uk)

[iv] Ibid

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