Committee on Internal Market and Consumer Protections I (IMCO I)
Not every shade of green is as green: As the consumer demand for a more sustainable industry is on the rise, companies are playing into the market and wrongly advertising certain products as sustainable, a term coined as ‘greenwashing.’ Greenwashing brings a false sense of progress and security and misleads consumers trying to buy sustainable products. With the fashion industry being the second biggest polluter worldwide, how can the EU ensure truthful advertising and valuable change being made in the industry?
Key terms: greenwashing, sustainability, fashion industry, false advertisements, consumers, intentions
By Heleen Vanagt (NL/BE)
Background and relevance
With the increasing awareness of climate change, the topic of sustainability has started to hold a prominent position in society. Most consumers are trying to contribute with their part by buying products that appear to contribute to the preservation of the environment. As producers notice this change in the market, they are producing more sustainable products and use language associated with sustainability in order to have their product appeal to the public. However, companies are often using a green narrative without actually being as sustainable as they claim to be. The phenomenon of using false, misleading, or exaggerated language surrounding sustainability in advertising has been coined as ‘green washing’.
The European Commission has become aware of the problem at hand and conducted a study in November 2020 with the aim to grasp the severity of the issue. In the study, the Commission came to the conclusion that in 42% of the cases examined, the claim of sustainability by the producers was false or deceptive. In 59% of the cases, the producer did not provide enough information for the consumer to assess the accuracy of the claim. Lastly, in 37% of the cases, the producer is subject to using vague terms without substantiating them. The results provide a first grasp of the severity of the problem surrounding false advertisements.
As greenwashing has become a popular advertising technique, companies increasingly utilise it for exaggerating their environmental credentials and mislead their consumers. The fashion industry is the second biggest polluter on earth and in order to clear their name, most fast fashion brands are launching ‘sustainable’ campaigns, full of greenwashing rhetoric. From not substantiating how sustainable their new lines actually are to using false and deceptive advertising without the necessary information for consumers to assess the situation, the fashion industry is guilty of misleading consumers. Other industries using false advertisements are for example the cosmetic industry, the household equipment sector, the oil industry, and the food industry. Overall, companies from numerous sectors use misleading advertisements for making exaggerated green statements and bringing a false sense of progress, in terms of more sustainable products, to the consumer and to the world.
The topic of climate change is prominent to young people, since young people are the ones who have to live in a future world that either succeeds at reversing climate change or lives with the consequences of it. Therefore, clear differentiation between companies producing sustainable products and producers incorporating greenwashing practices is essential for young people to enable a transition to a sustainable fashion industry that will not further damage the earth.
2. Key Stakeholders
The European Commission is proposing and monitoring the implementation of policies, and supervising the execution of EU regulations. The subpart of the European Commission, the Directorate-General on Justice and Consumers (DG JUST) oversees the policies on consumer rights. Their objectives include making sustainable products available to consumers as well as making information easily accessible in order for consumers to make informed decisions.
European Securities and Markets Authority (ESMA) is an independent European authority in charge of improving investor protection and promoting stable financial markets. Within the ESMA, all national financial authorities are seated to generate a coherent approach to market issues. When market problems arise, the European Commission is reliant on the ESMA to motivate the national financial authorities to undertake action.
Furthermore, the European Union has its own Consumer Protection Cooperation (CPC) network. The CPC prioritises consumer’s rights by cooperating with stakeholders and tackling issues violating EU-law. It mainly concerns itself with fraud and scams in order to have more clear communication between companies and consumers. By undertaking sweeps, they improve the rate at which websites comply with EU consumer law.
Another important stakeholder is the consumer, and closely tied in with that, the producers/companies. When companies sensed that there was a call for more sustainable products, they wanted to play into that narrative. With that, the practice of greenwashing came into being and since then, the consumer has played a major role in the issue. When the consumer buys a product, it counts as a vote for the producer for success. Therefore, every product bought by someone, with green packaging or empty promises of sustainability, makes producers more keen to use green rhetoric more.
Click here to view this Stakeholder Map on Miro.
3. Challenges and Measures in Place
Intentions of companies
When the environmental impact of the fashion industry became more mainstream knowledge within the population, a call for more sustainable fashion became apparent. Many entrepreneurs started rethinking the footprint of their clothes and made solid attempts to utilise more sustainable practices. These companies want to make their efforts known to the public by advertising the environmental concerns they take into account. However, some companies do not have the same perspective, but rather see sustainable rhetoric as a marketing opportunity for advertising their products as more sustainable ones. The problem companies often face is the dilemma between being fully sustainable, which is costly for the firm, and having the need to make profit. Therefore, attempts at sustainable products are often greenwashed to seem more sustainable in order for the company to try to find the balance between sustainability and profit.
Greenwashing comes in many shapes and colours, as every advertisement or example will use a different form. Some advertise products with the shades of green associated with the climate movement, others use vague, unquantifiable terms, or manipulate the truth in their advertising. Due to varying company sizes and different ways of using greenwashing, it is difficult for legislative bodies to develop a holistic, all-covering approach that would eliminate the issue of greenwashing in the fashion industry altogether.
The EU has already made attempts to tackle the issue of misleading advertising. The first one is the Unfair Commercial Practices Directive (UCPD) which outlines unfair commercial practices including untruthful information or aggressive marketing techniques. The Directive addresses several issues, most importantly the illegality of falsely advertising products and making environmental claims for marketing purposes. Although the directive does not include the issue of greenwashing yet, the European Commission has pointed out in their research that in 42% of the cases, the greenwashing was unfair under EU law and thus under the UCPD. Under the current legislation, less than half of all the greenwashing cases can be sanctioned under the EU law, with all other cases having no direct repercussions.
The consumer is the target of all the claims made by the companies and the advertisements used to sell products. The majority of the consumers usually do not investigate whether claims made by a company are truthful, but strive to purchase products as fast as possible for a fair price. As a result the consumer is easily persuaded by sustainable rhetoric in buying the so-called sustainable product.
Currently the lack of EU-wide labels or raters makes it harder for consumers to spot fair advertisements as well as for the ESMA to prevent companies from violating the EU law. Furthermore, the French and Dutch financial regulators have called upon the Commission to implement Environment, Social and Governance (ESG) raters regulated by ESMA in order to enforce transparency on the underlying methodologies used by companies and avoid conflicts of interest.
The European Commission has also committed to the New Consumer Agenda aiming to empower consumers to make a difference in the sustainable and digital transition. On the sustainability front, it aims at providing consumers with more information to make informed decisions regarding sustainable products and better understanding for fighting greenwashing practices. Furthermore, the commission also wants to work without economic operators, because they believe change cannot be made without companies.
4. Further Questions
How can the New Consumer Agenda be put into practice effectively?
What labels or regulations, if any, could be provided that differentiate between greenwashing and real initiatives?
What is the most effective way to bring about change in the market? Regulating companies and advertising or changing the consumers’ mindset or something different all together?
What can the role of ESG raters be in tackling greenwashing?
5. Faces of Sustainability
As the EU aims to reduce its carbon emission by 55% in 2030 in comparison to 1990, it has a long way to go in the next nine years to achieve this goal. With the fashion industry being the second biggest polluter in the world, textile dyeing the second largest polluter of clean water globally, and the industry releasing 2.1 million tons of carbon dioxide annually (10% of all carbon pollution), action needs to be taken fast and effectively. One clothing item on average only gets worn seven or eight times before it ends up being donated or in a landfill. Greenwashing only makes the situation worse. Achievement of certain goals is postponed by launching campaigns that seem to fulfill some climate promises without making significant change. However, if greenwashing decreased and every promise of sustainability was true, conscious consumers would make better purchase decisions and the market would be better off.
6. Material For Further Research
Read this article by Forbes about the dangers of greenwashing.
Read this article on greenwashing in the Fashion Industry by London Runway, with examples of two brands.
Read this report by the European Parliament on the environmental impact of the fashion industry.
Watch this video on corporate greenwashing.