As consumers become more aware of how their purchases are impacting the planet, businesses are under increasing pressure to implement more sustainable practices. A recent CleanHub survey of Americans found that 78% want more authentic brand action to become sustainable, and 49% stated that they’re willing to pay more for low-impact, recyclable products.
Being more sustainable can be good for business, but as environmentalism grows, so does greenwashing. Regulators are handing out more fines to companies that greenwash, a signal consumers can use to make better decisions about which brands to trust.
CleanHub, a start-up based in Berlin, tackling plastic pollution, has highlighted the benefits sustainable practices can have for businesses, too. We released new research that identified the biggest fines handed out to companies guilty of greenwashing.
What is greenwashing — and why is it bad?
Greenwashing describes when companies exaggerate, mislead, or outright lie about their credentials to attract customers.
Although some might see this as harmless, its consequences can be far-reaching. It deceives consumers who genuinely want to make environmentally responsible choices. When they purchase products or services based on false claims, they’re not only being misled but are also contributing to the continuation of unsustainable practices.
Greenwashing also undermines the efforts of genuinely eco-conscious businesses. Companies that invest time, money, and resources into implementing sustainable practices deserve recognition for their efforts. Greenwashers dilute the value of legitimate initiatives and erodes consumer trust in businesses as a whole.
And most importantly, greenwashing has detrimental effects on the environment. If consumers are misled into believing they’re supporting eco-friendly practices, they may continue to support companies that engage in environmentally harmful activities, from polluting waterways and destroying forests to using toxins and producing megatons of waste that goes to landfills.
For example, the energy company Eni advertised its biofuel as ‘green’, despite it mostly being made from fossil fuels. In this instance, consumers wanting to reduce their impact on the planet bought the product, unknowingly supporting fossil fuels, which contribute to roughly 75% of greenhouse gas emissions.
Greenwashing perpetuates a cycle of unsustainable consumption and hampers progress toward genuine environmental sustainability.
The biggest greenwashing fines to date
Companies have been accused of greenwashing for decades, but fines for this practice are a relatively new concept. In fact, they’ve only become common in the past few years.
As countries around the world implement anti-greenwashing legislation, we’re beginning to see more companies being punished for misleading consumers. Here’s a summary of the biggest greenwashing fines seen to date:
- Volkswagen: The car company said that its diesel scandal cost $34.69 billion in fines and settlements. Volkswagen misled customers by using software in its cars that recorded lower greenhouse gas emissions. In reality, the vehicles reportedly produced 40 times the amount of nitrogen oxide pollution permitted by US law. Despite fines, Volkswagen pledged to reform its corporate culture.
- Toyota: Another car company guilty of greenwashing, Toyota received a $180 million penalty from the US Justice Department for failing to report defects in emissions and recall progress. The company delayed sharing 78 emissions reports, some filed 8 years later than expected. The delay allowed Toyota to profit from vehicle sales without disclosing emissions issues.
- DWS: This asset management company was charged $25 million by the Securities and Exchange Commission over allegations of misstating its ESG investment policies, promising to improve its ESG practices.
- Eni: Multinational energy company Eni was fined $5.6 million by Italy’s Competition and Market Authority for falsely advertising its biofuel diesel as “green”. Eni used 15% hydrotreated palm oil and 85% fossil fuels to make this fuel. Despite paying the fee, the company still has ongoing legal challenges from various NGOs, including Greenpeace, over arguments that Eni knew decades ago that its fossil fuel production would lead to climate change.
- Kohl’s and Walmart: Together, these companies paid a total of $5.5 million after an investigation carried out by the US Federal Trade Commission (FTC) found them guilty of marketing some products as bamboo, when they were made from other materials including rayon (a semi-synthetic material with a negative environmental impact).
- Goldman Sachs: The bank agreed to a $4 million settlement with the Securities and Exchange Commission for publishing misleading ESG statements and pledging to ensure accurate ESG assessments. From April 2017 to February 2020, the company had several policies and procedures failures, involving the ESG research its investment teams used to select and monitor securities. It also failed to have any written policies and procedures for ESG research in one product between 2017 and 2018.
- Keurig: After publishing misleading claims about the recyclability of its coffee pods on its marketing materials, Keurig was fined $2.2 million by Canada’s Competition Bureau, while also agreeing to donate $800,000 to a Canadian charitable organization focused on environmental causes.
- BNY Mellon: This American bank was fined $1.5 million by the Securities and Exchange Commission for overstating ESG values in investments. From July 2018 to September 2021, the company represented or implied in various statements that all investments in the funds had undergone an ESG quality review — even though that was not always the case.
- H&M and Decathlon: After an investigation by the Netherlands Authority for Consumers and Markets (ACM), H&M and Decathlon donated €400,000 and €500,000 to sustainable causes in 2022 as compensation for making unclear sustainability claims.
These fines highlight the increasing scrutiny and legal action against greenwashing, driven by consumer awareness and regulatory efforts. They also suggests that companies must take genuine steps to address environmental concerns to avoid fines and maintain trust with consumers.
Legislation against greenwashing
To combat the deceptive practice of greenwashing, governments around the world have implemented legislation aimed at holding businesses accountable for their environmental claims.
These laws require companies to provide evidence to substantiate any “eco-friendly” assertions they make in their marketing materials. For example, the EU’s new greenwashing legislation set to come into force in 2026 will ban misleading environmental claims, holding companies to account for their labeling.
The U.S. Federal Trade Commission has confirmed that it will update its Green Guides, which govern environmental marketing, for the first time in over a decade. The agency will cpnsider new requirements for environmental claims about material recyclability and biodegradability, as well as recycled content information.
How businesses can avoid greenwashing
Here are some tips on how to stay on the right side of environmental integrity:
- Be transparent: Honesty is the best policy. Businesses should be transparent about their environmental practices, clearly communicating what they’re doing to reduce their ecological footprint.
- Back up claims with evidence: Any eco-friendly claims should be backed up by verifiable evidence. Whether it’s certifications, data, or third-party assessments, evidence lends credibility to environmental assertions.
- Avoid exaggeration: It’s tempting to embellish environmental efforts to attract customers, but exaggeration can quickly lead to accusations of greenwashing. Stick to factual statements and avoid making sweeping claims that can’t be substantiated.
- Focus on continuous improvement: Genuine commitment to sustainability involves ongoing efforts to improve environmental performance. Businesses should prioritize tangible actions over superficial marketing tactics.
- Educate employees: Ensuring that employees understand the company’s environmental policies and practices is crucial. They are frontline ambassadors who can help uphold the integrity of the company’s environmental messaging.
By adhering to these principles, businesses can demonstrate their commitment to environmental responsibility authentically and avoid the pitfalls of greenwashing.
Useful Markers On The Path To Sustainability
It’s a tricky time to be an environmentally conscious consumer, and it can be disheartening to see one of your favorite brands lie about its environmental credentials. But there are a few things you can do as a consumer to spot greenwashing.
The easiest ways to have an impact include looking out for claims that aren’t backed up by facts or verification. For example, if a label says that it’s “good for the planet” or “eco-friendly” without explaining how, that’s a red flag. If this claim is backed up by a fact — let’s say, a statistic about the percentage of emissions reduced or how much plastic packaging has been eliminated — then you can feel more confident in your purchasing decision.
Still worried you might be buying a product from a company that isn’t being 100% truthful about its impact on the planet? It’s always worth checking any suspicions online by looking for their sustainability policies.
About the Author
Beth Howell is a writer for CleanHub. Her work has covered a range of topics, including the world’s most polluting industries, packaging legislation, and greenwashing, and has been featured in publications such as The BBC, Forbes, The Express, Greenpeace, and in academic journals.