Greenwashing Declines for the First Time in Six Years, Report Finds – But High-Risk Cases Surge

The world of environmental, social, and governance (ESG) risks has long been under scrutiny, and one of the key issues that continues to generate concern is greenwashing – the practice of making misleading claims about the environmental benefits of a company’s products or initiatives. RepRisk’s 2024 report on greenwashing has drawn attention to a significant, yet nuanced, shift in the greenwashing landscape. For the first time in six years, there has been an overall decline in the number of greenwashing incidents, though high-risk cases have surged, underlining an evolving and more complex regulatory landscape.

In recent years, greenwashing has garnered increasing attention from regulators, investors, and the public, and the latest data from RepRisk highlights this growing concern. Building on previous years' analyses, RepRisk’s 2024 report reveals that while the overall number of greenwashing cases has dropped, the severity and complexity of those cases have significantly increased. The company’s approach to tracking greenwashing involves monitoring two ESG-related issues: environmental concerns and misleading communication. This dual focus captures straightforward deceptive practices such as false labeling and more intricate issues such as political misalignment and exaggerated claims about a company’s environmental initiatives.

The rise of regulatory measures and public awareness has created an atmosphere where companies that are caught engaging in greenwashing face greater reputational risks, legal scrutiny, and potential financial penalties. This, in part, has led to the overall decrease in reported greenwashing incidents. However, the increase in high-risk greenwashing cases indicates that while some companies may be stepping up to meet higher standards, others are still using more subtle, systematic strategies to mislead stakeholders.

A Decline in Overall Cases, but a Surge in High-Risk Incidents

RepRisk’s data reveals that, for the first time in six years, there has been a notable decline in the overall number of greenwashing incidents, particularly in Europe and North America. The report shows a 12% drop in greenwashing cases from 2023 to 2024. This reduction, however, masks a sharp increase in the severity of cases. High-risk greenwashing incidents have surged by over 30% year-over-year, signaling that while fewer companies may be engaged in greenwashing, the ones that are involved are doing so with greater intent and with more significant consequences.

In terms of sectors, the Banking and Financial Services sector remains a prominent source of greenwashing cases, reflecting its crucial role in financing industries with substantial environmental impacts. However, this sector also experienced a 20% global reduction in climate-related greenwashing incidents in 2024, further demonstrating that regulatory oversight is having a tangible effect. Despite this, high-severity cases within the sector have risen, pointing to the persistence of greenwashing among certain players.

Regional Variations: The EU’s Shift and the US’s Continued Struggles

One of the more striking trends observed in the report is the regional variation in greenwashing cases. In Europe, a significant drop in greenwashing incidents was observed, with the number of cases falling by over 20% in 2024. This decline is attributed to new regulations, particularly the European Union’s Green Claims Directive, which mandates that companies provide credible evidence to support environmental claims. As companies scramble to comply with these new rules, many have scaled back their sustainability marketing efforts, leading to fewer cases of greenwashing overall.

In contrast, the United States saw a modest uptick in greenwashing incidents in 2024, reversing the previous year’s downward trend. While the overall increase was under 6%, the rise in high-risk greenwashing cases in the US was more pronounced, with incidents increasing by 114% compared to the previous year. This increase is largely due to the growing politicization of ESG, which has led to heightened scrutiny on companies making environmental claims, particularly in the financial sector.

High-Risk Repeat Offenders and the Role of Regulation

The rise in high-risk cases and repeat offenders underscores the fact that many companies are still engaging in deceptive practices despite heightened awareness and increased regulatory oversight. Globally, nearly 30% of companies that were linked to greenwashing in 2023 have been flagged again in 2024, and in the US, the repeat offender rate is notably higher, standing at 42%.

As regulatory measures continue to tighten, companies that were once able to get away with vague or unsupported green claims are now facing the risk of legal consequences and consumer backlash. The European Union has made strides in this regard, implementing stricter rules around the accuracy of environmental claims. For example, the Green Claims Directive requires companies to provide reliable evidence for any environmental claims, and the Empowering Consumers Directive limits the use of sustainability labels to those approved by public authorities or certification schemes.

The US, meanwhile, continues to rely on its Federal Trade Commission’s Green Guides, which, while not legally binding, provide guidelines for truthfulness in environmental marketing. Additionally, the SEC has stepped up enforcement actions, sending a clear message to financial institutions and companies about the risks of making misleading ESG claims.

The Path Forward: Greenwashing’s Decline or a Changing Face?

While the data from RepRisk offers a promising sign of progress in the fight against greenwashing, it also underscores the complexity of the issue. Companies are more cautious than ever, but high-risk cases are becoming more sophisticated, leveraging new strategies to deceive stakeholders while evading regulatory scrutiny.

For businesses, the key takeaway from this report is that greenwashing is not a risk that can be easily dismissed. With heightened regulatory oversight, greater public awareness, and the increasing focus on ESG accountability, the need for transparency and honesty in environmental marketing has never been more critical.

Looking ahead, companies must adapt to the evolving regulatory environment and prioritize genuine sustainability efforts over marketing gimmicks. The coming years will likely see continued enforcement actions, both from government bodies and from the courts, as the landscape for greenwashing continues to shift.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.