The cost of greenwashing is set to rise dramatically next year. In 2025, the Competition and Markets Authority (CMA) will gain enforcement powers to fine a company up to a 10th of its annual global turnover if it is found to be greenwashing, warned Lisa Wright (pictured, second from right), a partner in the competition and regulatory team at law firm Slaughter and May, in a session at the recent ACT ESG conference.
While Wright cautioned the CMA fines, introduced under the Digital Markets, Competition and Consumers Act 2024, were very unlikely to be as big as the possible amount, they could still be financially very damaging. She added that there has been growing enforcement activity in the UK and mainland Europe in the last 18 months, citing recent commitments for change demanded by the CMA from a number of companies in the fashion retail sector.
“If you look at the enforcement that’s happened in recent years, it’s really clear that the bar for compliance is being set extremely high. [These examples] set up very high standards for not only what should go into a green claim, but also how a green claim should be presented so that it isn’t misleading… The stakes for getting it wrong are getting higher and higher,” she warned.
It’s important to remember that greenwashing is not just about the outright lies that the companies tell, it is about levels of truth
For treasurers and other industry professionals in the audience unsure of what greenwashing covers, Joanna Bonnett (pictured, far right), the ACT’s immediate past president who facilitated the session, was on hand to explain.
“Misleading the public to believe that a company is doing more to protect the environment than it is, greenwashing promotes false solutions to the climate crisis, that distract or delay concrete and credible action,” she said.
Bonnett, who is group head of treasury at Swiss dental equipment giant Straumann Group, added that the scope of greenwashing included “claiming to meet or to be on track to meet their net zero targets, being vague about operations and materials, and then applying misleading labels as green or eco-friendly that are not aligned or defined by standard definitions or could be easily misinterpreted”.
Jupe Hulkko (pictured, second from left), senior account manager, RepRisk, an ESG technology group that uses external data to assess a company’s green claims for interested parties such as banks, asset managers and credit rating agencies, referenced its latest sustainability report to highlight the challenges.
Hulkko said although RepRisk’s October report revealed a 12% reduction in net cases of greenwashing, it revealed a 30% in increase in the most severe cases likely to result in big fines, along the lines of the $25m fine meted out to a German asset manager.
If you are in treasury or finance, look out for your ESG teams
Craig Gosnell (pictured, far left), senior director of ESG and sustainable finance at Fitch Ratings, said that in the context of moving from voluntary to mandatory reporting on ESG, quality of data will need to be improved.
He recommended efforts to ensure non-financial information is aligned with financial information in an integrated report, that will help in dialogue with bodies such as rating agencies. “Speaking with anyone, you enrich your understanding of what a company is doing, the limitations, the risks, and then you take a view,” he said.
Gosnell also suggested a joined-up approach within organisations, to ensure a truthful position on ESG reporting. “If you are in treasury or finance, look out for your ESG teams,” he said.
That point was underlined by Wright, who said: “It’s important to remember that greenwashing is not just about the outright lies that the companies tell, it is about levels of truth. It could be highlighting one thing to conceal another thing in your reporting, or hiding key facts in footnotes on page 249 of your sustainability report,” she added.
Lawrie Holmes is a freelance business and finance journalist
