Following the EU ban on companies claiming their products are climate-neutral, many decarbonisation claims from a range of companies are under scrutiny. As international organisations and governments worldwide encourage all industries to decarbonise their operations, many companies have made bold claims about the practices in place used to cut carbon in their supply chains and manufacturing processes. As the trend has grown, many environmentalists have called for greater evidence to back up these claims, accusing many companies of greenwashing by exaggerating their climate action to consumers. Now, updated legislation from the EU could lead to greater restrictions on the marketing techniques used to promote companies and their goods as green.
In March 2022, the European Commission (EC) proposed a law aimed at protecting consumers from exaggerated claims of carbon neutrality from many companies across Europe. The law was passed by the EC in September this year, pending final approval from EU member states. Biljana Borzan, the Croatian EU lawmaker who spearheaded the negotiations, stated, “We have achieved an excellent deal for consumers.” The new legislation will come into place in 2026, allowing countries the time needed to adopt the changes. Legislators expect the new law to significantly reduce the number of false climate claims being made by companies across the region.
In recent years, many companies worldwide have been accused of greenwashing – using misleading claims about the environmental impact of their operations. A recent study found that the banking and financial services sectors saw a 70 percent increase in the number of climate-related greenwashing incidents in Europe and the Americas between 2018 and 2023.
Many companies have made claims of carbon neutrality, stating that their products are carbon neutral as they use renewable energy sources or carbon offset schemes to help decarbonise operations. However, Ursula Pachl, the deputy director of EU consumer advocates BEUC, stated “There is no such thing as ‘carbon-neutral’ or ‘CO2-neutral’ cheese, plastic bottles, flights or bank accounts. Carbon-neutral claims are greenwashing, plain and simple.”
Carbon offsetting, a practice increasingly used by companies wanting to claim carbon neutrality, has long been criticised for the lack of regulation in the sector, meaning that companies managing these schemes often fail to accurately monitor and report the impact of their carbon offsetting practices. Environmentalists also believe that carbon offsetting does not present a viable long-term approach to decarbonisation, as CO2 is still being released into the atmosphere. To eventually claim carbon neutrality, companies must, rather, shift away from fossil fuels to renewable alternatives and adopt clean technologies, as well as demand the same from all areas of their supply chain. Those companies relying heavily on carbon offset schemes, such as airlines, are now being accused of shirking their environmental responsibilities and misleading consumers.
While this legislation will only enforce a legal change in Europe, it is spurring greater scrutiny about climate claims from companies worldwide and could provide the blueprint for other governments to follow. Several governments around the globe have made ambitious climate pledges, which rely heavily on support from the private sector. While far-reaching climate policies, such as the Inflation Reduction Act in the U.S., are encouraging companies to invest in a movement away from fossil fuels to green alternatives, several governments are hoping companies will choose to make the shift without financial incentives. As consumers demand more, companies are increasingly focused on making their ESG practices appear far-reaching. However, using carbon offset schemes and making exaggerated claims could lead governments to ultimately fail to achieve their climate pledges. Passing a law like that of the EU could support government ambitions to incite companies across a broad range of industries to make a concerted effort to decarbonise.
Several major international companies are already feeling increasing pressure from lawmakers and consumers to stop making false claims and be more transparent about their environmental practices. In September, tech giant Apple put its “environmentally friendly” credentials at the centre of its biggest annual product launch. It said that some Apple Watch models were its “first-ever carbon neutral products” and announced the same aim for all its products by 2030. Yet Apple continues to rely heavily on carbon credits to counterbalance the 7 to 12 kg of greenhouse gas emissions behind each watch. If these types of claims are banned in Europe, many question whether major companies will still use these marketing techniques to promote their products at an international level.
The recent legislation passed by the EU will ban companies from exaggerating the carbon neutrality of their operations and products from 2026. This means companies across Europe will have to rethink their ESG claims and invest in a meaningful shift to green if they want to promote their positive environmental practices to consumers. Further, it could prompt companies to move away from greenwashing tactics at the international level to avoid scrutiny from consumers, as well as due to fears that other governments may introduce similar bans in the coming years.
By Felicity Bradstock for Oilprice.com
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