Greenwashing explained: forms, cases, rules and how to spot it

A shampoo bottle says “eco”. A bank poster shows a forest. An airline invites you to “fly responsibly” for a few extra euros. An investment fund calls itself sustainable while holding coal miners. Each of these has ended up in front of a regulator or a court. This article explains what greenwashing is, how common it is, how the law in the UK, EU, US, Australia and India treats it, and what businesses and buyers can do. The cases give the claim, the challenge, the company’s answer and the result, because in several of them the company had a fair point and the outcome was narrower than the headlines.

What greenwashing means

Greenwashing is the practice of making a product, a service, a company or an investment look better for the environment than the evidence supports. Magali Delmas and Vanessa Burbano, in a widely cited 2011 paper in California Management Review, defined it as the misrepresentation by firms of their environmental performance or of the environmental benefits of what they sell. Regulators use similar language. India’s 2024 guidelines describe it as deceptive or misleading practice that includes hiding relevant information, exaggerating, making vague or unsubstantiated claims, or stressing green attributes while playing down harmful ones.

Two points follow from these definitions. First, a claim can be literally true and still count as greenwashing if the overall impression it leaves is wrong. A bottle made from “100% recycled plastic” whose cap and label are made from new plastic is the standard example, and it is the one European consumer groups raised against the big bottlers in 2023. Second, intent is usually irrelevant in consumer law. A firm that sincerely believes its claim but cannot prove it is in the same legal position as one that knew it was stretching the truth. What matters is what the average customer would take from the message, and whether the firm held the evidence before it made the claim.

Most cases involve something small: an unqualified word, a missing caveat, a comparison against the wrong baseline, a picture of a leaf. The European Commission’s concern is the combined effect, which is that buyers stop trusting environmental claims at all, and that hurts the firms whose claims are accurate.

Where the word came from

The term is usually credited to Jay Westerveld, an American environmentalist, who used it in a 1986 essay about hotels that placed cards in rooms asking guests to reuse towels to save the environment. His argument was that the hotels presented a cost saving (less laundry) as an environmental gesture while doing little else for the environment. Investment & Pensions Europe, the EBSCO research summary and Westerveld’s encyclopaedia entry all give 1986. Accounts often add that he had seen such a card at a resort in Fiji some years earlier, but the sources checked for this article do not confirm that detail or name the publication in which the essay appeared, so it is best treated as a well-travelled anecdote. The word entered the Oxford English Dictionary in 1999, according to the EBSCO summary.

The behaviour is older than the word. The EBSCO summary traces corporate green image-building to the mid-1960s and cites an estimate that firms were spending about a billion dollars a year on green advertising by 1970. Regulators followed later. The US Federal Trade Commission first issued its Green Guides in 1992, and in 2007 the Canadian consultancy TerraChoice published its first list of “sins of greenwashing”, which became the most quoted classification of the problem.

The main forms

TerraChoice (now part of UL) eventually settled on seven sins: the hidden trade-off, no proof, vagueness, worshipping false labels, irrelevance, the lesser of two evils, and fibbing. Regulators have since added categories that the original list did not cover, such as offset-based carbon neutrality and misleading fund labels. The forms below combine both.

Vague and generic claims

Words such as “eco”, “green”, “natural”, “conscious”, “responsible” and “sustainable” have no fixed meaning, so customers fill the gap with their own assumptions. The UK Competition and Markets Authority (CMA) singled out exactly this when it took undertakings from ASOS, Boohoo and Asda in March 2024: the retailers agreed to stop using terms like “eco”, “responsible” and “sustainable” for clothing ranges unless they explained what the words meant, and to give the percentage of recycled or organic fibre. The EU’s 2024 consumer directive goes further and bans generic environmental claims outright unless the trader can show “recognised excellent environmental performance” relevant to the claim.

Hidden trade-offs and selective focus

A product can be better on one measure and worse on others. Paper from a certified forest may still be bleached with chlorine. A firm can publicise its solar investment while most of its revenue comes from oil. The UK Advertising Standards Authority (ASA) ruled against Shell in 2023 on this basis: the adverts described the company’s renewable electricity and electric-vehicle charging but omitted the fact that low-carbon activity was a small part of a business dominated by oil and gas. The EU directive now bans environmental claims about a whole product or business when they relate to only one part of it.

Irrelevant claims and legal minimums presented as virtues

“CFC-free” is the textbook example of an irrelevant claim, because CFCs have been banned for decades. The same trap catches firms that advertise compliance with a legal requirement as if it were a distinctive virtue. The EU directive lists this as a banned practice from September 2026.

Carbon-neutral claims built on offsets

A company that buys carbon credits to balance its emissions and then calls a product “carbon neutral” or “climate neutral” is making a claim about the quality of those credits. If the credits do not represent real, additional and lasting reductions, the claim fails. This is why the 2023 investigation into rainforest credits certified by Verra, covered below, mattered to so many brands that had never heard of Verra. The EU has decided that the risk is too high: from 27 September 2026 traders may not claim that a product has a neutral, reduced or positive greenhouse gas impact on the basis of offsetting. Claims about a company’s own emission cuts remain allowed if they can be proven.

Cherry-picked targets and distant pledges

Net-zero targets for 2040 or 2050 cost little to announce. Problems arise when a firm uses the target to present itself as green today, when the target covers only some emissions (often leaving out the supply chain, known as Scope 3), or when there is no plan to reach it. HSBC’s 2021 bus-stop posters, which the ASA found misleading in 2022, mentioned up to $1 trillion of financing for clients’ transition to net zero but left out the bank’s continuing finance for high-emitting industries. The EU directive now requires future-performance claims to rest on a public, detailed and realistic implementation plan with measurable targets, checked by an independent expert.

Labels and certifications

The European Commission’s 2020 work found about 230 sustainability labels on the EU market. Some are run by independent bodies with published standards; others are designed by the company that uses them. From September 2026, EU law allows a sustainability label only if it is based on a certification scheme or set up by a public authority.

Green branding of funds and ESG labels

Financial products carry the same risk with larger sums attached. A fund name containing “ESG”, “sustainable” or “ethical” tells investors something about what the fund will and will not hold. Regulators in the US, Australia and Germany have penalised managers whose processes did not match their marketing. Definitions are part of the problem. Late in 2022 asset managers moved 307 funds holding about €170 billion out of the EU’s strictest sustainability category (Article 9) into the lighter Article 8, according to Morningstar, roughly 40 per cent of Article 9 funds in a single quarter, after regulators clarified that Article 9 meant close to 100 per cent sustainable investment. Most of that was correction rather than deception, but it showed how loose the labels had been.

Greenhushing, the reverse problem

Some firms now say less about their environmental work than they could, for fear of being accused of greenwashing. The carbon consultancy South Pole called this “greenhushing” in an October 2022 report: of more than 1,200 large companies with net-zero targets across 12 countries, about a quarter of those with science-based targets said they did not plan to publicise them. Greenhushing is not illegal and may reflect caution, but customers and investors lose information as a result.

What the research says

Measuring greenwashing depends on judgement about what a claim implies, and the best-known figures come from studies with different methods that should not be compared directly.

In 2020 the European Commission examined environmental claims made in the EU and found that 53.3 per cent were vague, misleading or unfounded, and that 40 per cent were completely unsubstantiated. The Commission used these figures to justify its 2023 proposal for a Green Claims Directive. In January 2021 the International Consumer Protection and Enforcement Network (ICPEN), in a sweep co-led by the CMA, checked almost 500 websites selling clothing, cosmetics, food and other goods, and found that about four in ten used tactics that could mislead consumers about environmental impact. Older still, TerraChoice reported in 2010 that of nearly 5,300 products making green claims in its sample, about 95 per cent committed at least one of its seven sins. That study used its own definitions, and a 2020 commentary in Packaging World argued that the method was applied so loosely that almost any claim could fail it, so the figure is better read as a sign of how common loose claims were than as a precise rate.

On consumers, an experiment by Gergely Nyilasy, Harsha Gangadharbatla and Angela Paladino, published in the Journal of Business Ethics, tested 302 people with combinations of a firm’s environmental record and its advertising. Where the firm’s environmental performance was poor, green advertising made attitudes towards the brand worse than general advertising or no advertising, although the authors note that some of the differences were not statistically significant. Their explanation was that people read green advertising from a poor performer as insincere. The same study found that, for firms with good records, both green and general corporate advertising produced less favourable attitudes than no advertising at all, which is an awkward finding for marketers.

On investors, Xingqiang Du’s 2015 study of Chinese listed companies, also in the Journal of Business Ethics, found that exposure of greenwashing was followed by lower cumulative abnormal stock returns around the exposure date, and that firms with better environmental performance suffered less. Later event studies, including work on European companies, have tested the same question with different samples and methods. The size of the effect varies between studies and should not be treated as settled.

The research has gaps. Most sweeps measure claims that could mislead, not proven deception. Few studies follow what happens to sales over years. And the evidence on greenhushing is mostly survey-based. What the research does support is that misleading green claims are common and that regulators find them without much difficulty. The evidence that exposure costs firms money is suggestive rather than conclusive.

Ten cases, claim by claim

These cases were chosen because the facts are on the public record through regulators, courts or company filings.

Volkswagen and “clean diesel”

Volkswagen marketed its diesel cars in the United States as “clean diesel”, promising low emissions, compliance with emissions standards and strong resale value. In 2015 it emerged that software in the cars detected laboratory tests and reduced emissions only during testing. The Federal Trade Commission sued in March 2016, alleging that the advertising itself was deceptive. In June 2016 the US Department of Justice announced settlements worth up to $14.7 billion covering nearly 500,000 cars with 2.0-litre engines: up to $10.03 billion for buybacks and compensation, $2.7 billion for an environmental mitigation trust, and $2 billion for zero-emission vehicle investment. The FTC chair at the time, Edith Ramirez, said the case showed “the high cost of violating our consumer protection and environmental laws”. In March 2020 Volkswagen’s finance chief, Frank Witter, put the total cost of fines and settlements at €31.3 billion. Its core was cheating on tests; the marketing became unlawful because the product was not what the company said it was.

DWS and ESG integration

DWS, the asset management arm of Deutsche Bank, told investors that environmental, social and governance factors were built into its investment process across a large share of its assets. Its former head of sustainability, Desiree Fixler, alleged in 2021 that the 2020 annual report overstated how much of its €459 billion of assets were “ESG integrated”. DWS dismissed her in March 2021, and she lost an unfair dismissal claim. German authorities searched DWS and Deutsche Bank offices in 2022, and chief executive Asoka Wöhrmann resigned the next day. In September 2023 the US Securities and Exchange Commission (SEC) fined DWS $19 million for misleading statements about its ESG controls, alongside $6 million on an unrelated anti-money-laundering matter. DWS neither admitted nor denied the findings and said the order identified no misstatements in its financial disclosures or fund prospectuses. In April 2025 the Frankfurt public prosecutor fined DWS €25 million over ESG marketing between 2020 and 2023; DWS said the fine related to “past deficiencies” in documentation, controls and marketing. Its chief executive Stefan Hoops had said in 2023 that the firm’s ESG marketing “may have been overly exuberant”.

H&M, Conscious and the Higg scorecards

H&M sold a “Conscious” range made partly from recycled or organic materials and, for a time, showed environmental scorecards on product pages based on the Higg Materials Sustainability Index. In 2019 the Norwegian Consumer Authority said H&M had not explained clearly enough how Conscious clothes were more sustainable than its other products; H&M said the question was about the precision of its information, not the products, and agreed to work with the authority. In June 2022 Quartz reported that more than half of the scorecards it checked overstated the benefit, and that in some cases the sign was reversed, so a dress that used 20 per cent more water was shown as using 20 per cent less. H&M removed the scorecards. In the United States, a New York class action filed by Chelsea Commodore in 2022 was later dropped by the plaintiffs, and a separate Missouri case (Lizama v H&M) was dismissed in May 2023 because the court found that H&M had said only that the range was more sustainable than its usual products and had explained the fabric differences. The case shows a real data error alongside a court unwilling to read more into marketing than it said.

KLM and “Fly Responsibly”

KLM’s “Fly Responsibly” campaign and related adverts told customers they could reduce their impact by paying for reforestation (through a product called CO2ZERO) or for sustainable aviation fuel. The Dutch campaign group Fossielvrij NL challenged 19 statements under Dutch unfair commercial practices law. On 20 March 2024 the Amsterdam District Court found 15 of them misleading, saying they gave an “overly rosy picture” of the effect of these measures and that reforestation and alternative fuels only marginally reduce the harm from flying. KLM had withdrawn the statements after the claim was filed in 2022 and argued there was nothing left to decide. The court disagreed but issued only a declaratory judgment, refusing to order corrective notices. Lawyers at Clyde & Co argued that the court was too strict in treating the industry-standard term “sustainable aviation fuel” as misleading. In November 2025 the European Commission announced that 21 airlines had committed, after an EU-wide consumer action, to stop claiming that passenger payments for climate projects or alternative fuels neutralise or cut the emissions of a specific flight.

Four UK advertising rulings: Shell, HSBC, Innocent and Oatly

The ASA has produced some of the clearest guidance through individual rulings. In January 2022 it upheld most of the complaints against Oatly, finding among other things that the claim that Oatly generated 73 per cent less CO2e than milk was based on one product (its barista oat drink) compared with whole milk, while the advert implied it covered the range. Oatly said it “could have been more specific”. In February 2022 it ruled against an Innocent TV advert that ended “Little drinks with big dreams for a healthier planet”, because viewers would think buying the drinks helped the environment, when the bottles contained non-recycled plastic. Innocent said it was disappointed, that the advert was about its wider goals, and warned that the ruling could discourage brands from talking about positive action. In October 2022 the ASA found two HSBC posters misleading because they omitted the bank’s continuing finance for high-emitting industries; HSBC argued that financing those sectors is part of the transition. In June 2023 it banned three Shell adverts after a complaint from Adfree Cities. Shell said it “strongly disagree[d]” and argued that people already know it sells oil and gas. The ASA has not ruled against every energy company advert since; in 2025 it cleared a later Shell TV advert that included on-screen text on the balance of its investments, which suggests the line is about context, not about who is advertising.

Keurig and recyclable coffee pods

Keurig told customers that its K-Cup pods were recyclable if they peeled off the lid and emptied the pod. In January 2022 Canada’s Competition Bureau found that the pods were widely accepted for recycling only in Quebec and British Columbia, and Keurig Canada agreed to a C$3 million penalty, an C$800,000 donation to an environmental charity and C$85,000 in costs. In September 2024 the SEC fined Keurig Dr Pepper $1.5 million, finding that its 2019 and 2020 annual reports said testing had validated that the pods “can be effectively recycled” but did not disclose that two of the largest US recycling companies had raised significant concerns and did not intend to accept them. Keurig neither admitted nor denied the SEC findings. “Recyclable” depends on what local systems accept.

Coca-Cola, Danone, Nestlé and plastic bottles

In November 2023 the European consumer organisation BEUC and members in 13 countries complained about claims on plastic bottles such as “100% recycled” and “100% recyclable”. BEUC argued that “100% recycled” ignored caps and labels and that “recyclable” depends on collection and sorting. The European Commission and national consumer authorities opened a dialogue with the companies. Coca-Cola committed in May 2025 to change “I am a bottle made from 100% recycled plastic” to wording that makes clear the claim excludes the label and cap, and to drop “Recycle me again”. The Commission’s records list commitments from Nestlé Waters dated March 2026 and from Danone dated October 2026. BEUC welcomed the changes but said small print would still leave consumers thinking plastic bottles are harmless.

Australian super funds: Mercer, Vanguard and Active Super

The Australian Securities and Investments Commission (ASIC) has won three greenwashing cases in the Federal Court. Mercer marketed seven “Sustainable Plus” options as excluding carbon-intensive fossil fuels, alcohol and gambling, but held shares in 15 fossil fuel companies, 15 alcohol producers and 19 gambling companies; Mercer admitted the conduct and was ordered in August 2024 to pay A$11.3 million. Vanguard said its Ethically Conscious Global Aggregate Bond Index Fund screened out issuers with significant fossil fuel activity, when about 74 per cent of the fund by market value had not been screened; it admitted the conduct and was ordered in September 2024 to pay A$12.9 million. Active Super, which contested the case, was found in June 2024 to have held investments its marketing said it had eliminated, including in gambling, coal and Russia, although the court rejected some of ASIC’s allegations. It was ordered in March 2025 to pay A$10.5 million.

Verra and rainforest carbon credits

In January 2023 the Guardian, Die Zeit and the non-profit newsroom SourceMaterial published a nine-month investigation into rainforest protection credits certified by Verra, the largest standard in the voluntary carbon market. Drawing on studies that compared protected areas with statistically constructed control areas, the investigation concluded that more than 90 per cent of the rainforest credits it examined were likely to be “phantom credits” that did not represent real reductions. Companies including Disney, Shell and Gucci had bought such credits. Verra rejected the findings, arguing that the “synthetic control” method compares projects with hypothetical scenarios that do not reflect conditions on the ground. A technical critique hosted by Verra later argued that the main academic paper (West and colleagues, published in Science in August 2023) used too few projects, controls that were sometimes hundreds of kilometres away and in different ecoregions, and a satellite dataset that measures tree cover rather than forest. Other scientists published a separate rebuttal. Verra’s chief executive, David Antonioli, announced in May 2023 that he would step down; Verra’s statement did not mention the investigation. The scientific dispute is unresolved, but for brands the lesson is that a carbon-neutral claim is only as good as the credits behind it.

Drax and biomass sourcing

Drax, which runs a large wood-burning power station in North Yorkshire, receives UK renewable subsidies on the basis that its biomass is sustainably sourced. After media reports alleged that some wood came from rare forests in Canada, the energy regulator Ofgem investigated and in August 2024 Drax agreed to pay £25 million to Ofgem’s redress fund. Ofgem found weak data governance and controls that led Drax to give it inaccurate data on the types of wood used, but found no evidence that the biomass was unsustainable or that subsidy certificates had been issued wrongly. The Financial Conduct Authority then opened an investigation in August 2025 into whether Drax’s annual reports for 2021 to 2023 were misleading, and closed it in June 2026, saying it “did not find evidence that justified any further action”. Critics of biomass still argue that burning wood at this scale is not low-carbon; UK rules treat it as renewable. The case is contested rather than proven greenwashing.

Exhibit 1: Selected greenwashing cases and outcomes

What the law says now

General rules against misleading advertising already covered greenwashing. What has changed since 2021 is specific guidance, specific bans and larger penalties. The position below is what could be confirmed as of October 2026.

United Kingdom

The CMA published its Green Claims Code on 20 September 2021. It sets six principles: claims must be truthful and accurate; clear and unambiguous; must not omit or hide important information; must make only fair and meaningful comparisons; must consider the full life cycle of the product or service; and must be substantiated. The code is guidance on how existing consumer law applies, and the CMA used it in its fashion investigation, which began in July 2022 and ended with undertakings from ASOS, Boohoo and Asda in March 2024 (40 commitments from ASOS and 38 each from the other two).

The change that matters most is the Digital Markets, Competition and Consumers Act 2024. From 6 April 2025 the CMA can decide for itself that consumer law has been broken and fine a business up to 10 per cent of its global turnover, without first going to court. Before that date it had to bring court proceedings. Greenwashing is one of the areas the CMA has said it will watch.

The ASA regulates advertising content under the industry’s CAP and BCAP codes. It cannot fine, but it can require adverts to be withdrawn and publishes its rulings, which creates reputational cost. For financial firms, the Financial Conduct Authority’s anti-greenwashing rule took effect on 31 May 2024. It requires any sustainability reference by an authorised firm to be fair, clear, not misleading and consistent with the product’s actual characteristics. Under the wider Sustainability Disclosure Requirements, four investment labels (Sustainability Focus, Sustainability Improvers, Sustainability Impact and Sustainability Mixed Goals) became available from 31 July 2024, each requiring at least 70 per cent of assets to be invested in line with the stated sustainability objective. Naming and marketing rules followed on 2 December 2024.

European Union

The Empowering Consumers for the Green Transition Directive (Directive (EU) 2024/825) was published in March 2024 and member states must apply it from 27 September 2026. It adds to the EU’s list of commercial practices that are banned in all circumstances: generic environmental claims without recognised excellent performance; sustainability labels not based on a certification scheme or set by a public authority; claims about a whole product or business that relate to only part of it; presenting legal requirements as a distinctive feature; and claims that a product has a neutral, reduced or positive climate impact based on offsetting. Future-performance claims, such as a net-zero target, need a detailed and realistic plan with independent monitoring. Ireland has made transposing regulations in 2026, and the Commission and national authorities agreed in June 2026 a common approach to old stock already labelled under the previous rules.

The companion Green Claims Directive, proposed in March 2023, would have required companies to have most explicit environmental claims checked by an independent verifier before use. Negotiations between the Parliament, the Council and the Commission began in January 2025. On 18 June 2025 the European People’s Party, the largest group in the Parliament, wrote that the proposal was overly complex, administratively burdensome and costly, objecting above all to verification before claims could be used. On 20 June the Commission said it intended to withdraw the proposal. The final negotiating round planned for 23 June was cancelled. The Commission later said the proposal had not been formally withdrawn, but there was no agreed text as of the latest sources checked, and its future is uncertain. The 2024 directive applies regardless.

Financial products in the EU are covered by the Sustainable Finance Disclosure Regulation, whose Article 8 and Article 9 categories functioned in practice as labels. The German DWS fine shows that national prosecutors can also act under general law.

United States

The FTC’s Green Guides, first issued in 1992 and last revised in 2012, explain how the FTC applies its general ban on deceptive practices to claims such as “recyclable”, “compostable” and “carbon offset”. They are guidance, not law, though they are referred to in some state laws. On 14 December 2022 the FTC asked for comments on updating them, including on carbon offsets, on whether “recyclable” should cover items collected but not actually recycled, and on whether to turn the guides into a binding rule. As far as could be confirmed for this article, no revised version had been published by October 2026, so the 2012 text remains the reference point.

The SEC has acted against advisers whose ESG practice did not match their statements. BNY Mellon’s adviser paid $1.5 million in May 2022 for misstating how it applied ESG reviews to some funds. Goldman Sachs Asset Management paid $4 million in November 2022 for not following its own ESG research policies between 2017 and 2020; staff sometimes completed ESG questionnaires after securities had been chosen. Neither admitted or denied the findings. In 2023 the SEC also amended its fund names rule so that funds whose names suggest an ESG focus must invest at least 80 per cent of assets accordingly.

Australia

ASIC enforces the rules for financial products and the Australian Competition and Consumer Commission covers consumer goods. ASIC’s three court wins, described above, turned on a simple test: whether the portfolio held what the marketing said it excluded. ASIC called the Vanguard penalty the highest for greenwashing to that date.

India

India’s Central Consumer Protection Authority (CCPA) issued draft guidelines in February 2024 and final Guidelines for Prevention and Regulation of Greenwashing or Misleading Environmental Claims on 15 October 2024, under the Consumer Protection Act 2019. They apply to manufacturers, service providers, traders, advertising agencies and endorsers. Generic terms such as “clean”, “green”, “eco-friendly” and “sustainable” need qualifiers, substantiation and disclosure. Specific claims such as “compostable”, “recyclable” and “net zero” need credible certification or reliable evidence. Detailed information should be made available through a QR code or web link, research-based claims must disclose unfavourable as well as favourable findings, and aspirational claims are allowed only with clear plans to achieve them. Obvious puffery, generic colour schemes and mission statements not tied to a product are excluded.

For funds, the Securities and Exchange Board of India (SEBI) issued a circular in July 2023 creating an ESG sub-category with six permitted strategies (exclusion, integration, best-in-class and positive screening, impact investing, sustainable objectives, and transition). The strategy must appear in the scheme’s name, at least 80 per cent of assets must follow it, and from 1 October 2024 at least 65 per cent of assets must be in companies that publish full Business Responsibility and Sustainability Reports with assurance on the core indicators. Existing schemes had until 30 September 2025 to comply.

Exhibit 2: Main anti-greenwashing rules by jurisdiction

How to tell a substantiated claim from an unsubstantiated one

These questions draw on the CMA’s six principles, the EU directive and the Indian guidelines, which overlap heavily.

1. Is the claim specific? “60% recycled polyester” can be checked; “eco” cannot.
2. Does the claim say what it covers? It should be clear whether it refers to the product, the packaging, the factory, the delivery or the whole company.
3. Is there evidence, and was it held before the claim was made? Regulators expect firms to have substantiation ready, not to commission it after a complaint.
4. Is the evidence independent? Third-party certification against a published standard carries more weight than an internal assessment.
5. Does the claim consider the full life cycle? A product that saves energy in use but is hard to recycle should not be presented as green overall.
6. Is anything important missing? An oil company’s renewable investment or a bank’s transition finance needs the context of the rest of the business.
7. Is any comparison fair? Compare like with like, say what the baseline is, and use current data.
8. Does a carbon-neutral or net-zero claim rely on offsets? If so, check what kind of credits, from which standard, and whether the firm is also cutting its own emissions.
9. Is a future target backed by a plan? Look for interim milestones, budget, scope (including supply chain) and independent monitoring.
10. Does the picture match the words? Leaves, forests and green colour schemes can create an impression the text does not support.
11. Is the label meaningful? Check who runs it and whether it is independently audited.
12. For funds, do the holdings match the name? Fund factsheets and full holdings lists are usually public. Mercer and Vanguard were caught by exactly this check.

The case against tougher rules

The first is greenhushing. If every environmental statement carries legal risk, firms will make fewer of them. South Pole’s survey suggests that this was already happening by 2022. Innocent made a version of this argument when it lost its ASA case, warning that the ruling could discourage brands from talking about positive environmental action. A market where firms stop publishing targets and progress may be less misleading but also less informative, and it removes some of the pressure that public commitments create.

The second is cost, especially for small firms. The European People’s Party opposed the Green Claims Directive mainly because of the cost of having claims checked by a third party before use, and the Commission’s June 2025 announcement came two days after its letter. A large company can absorb a life-cycle assessment and a verification fee. A small brand with one product may find that the cheapest legal option is to say nothing, which hands an advantage to incumbents.

The third is a chilling effect created by strict readings of ordinary language. Clyde & Co’s commentary on the KLM case argued that treating “sustainable aviation fuel” as misleading was too strict, given that the EU’s own legislation uses the term. Shell argued that the ASA’s 2023 ruling could slow the move to renewable energy by discouraging it from promoting its low-carbon products. Rules also differ between jurisdictions, which adds cost for firms selling across borders.

The fourth concerns offsets. The EU ban on offset-based neutrality claims removes one reason for companies to buy carbon credits. Supporters of high-quality offset projects argue that this will reduce finance for forest protection and carbon removal. Critics reply that the problem is the quality of many credits, as the Verra investigation and the academic studies behind it suggested, and that firms can still describe their contributions to climate projects as long as they do not claim those contributions cancel out their own emissions.

Supporters of the rules reply that most of them require evidence, not independent verification, and that the EU directive still allows specific, explained claims. Regulators have also shown restraint: the ASA cleared a later Shell advert that gave context, a US court dismissed the Lizama case against H&M, and the FCA closed its Drax inquiry. Still, greater legal risk changes behaviour, and some of that change will be towards silence.

What honest green marketing looks like

Firms that make environmental claims without trouble tend to make narrow, measurable claims and say what the number refers to, for example “outer fabric 100% recycled polyester (excluding trims)”. They publish the basis for the claim where a buyer can find it. They disclose the parts of the business that are not green before a regulator or journalist does. They put their own emission cuts ahead of offsets, and describe offset purchases as contributions rather than as cancelling anything out. They set targets with interim dates and report progress, including misses.

Coca-Cola’s revised wording, “This bottle, excluding label and cap, is made from 100% recycled plastic”, is a useful model. It is less catchy than the original, but it is accurate and a regulator accepted it.

Practical guidance for small businesses

Small firms are rarely in headline cases, but the CMA’s fining powers apply to all businesses, and the ASA and the CCPA take complaints about any advertiser.

• List every environmental claim you make, including on packaging, product pages, social media posts, email footers and investor or grant documents.
• For each claim, write down the evidence that supports it and keep a copy on file. If you cannot find evidence, remove or rewrite the claim.
• Replace general words (“eco”, “green”, “sustainable”, “planet-friendly”) with specific facts, or explain them right next to the word.
• Ask suppliers for documentation of recycled content, organic certification or material origin. Do not rely on a supplier’s own marketing.
• Avoid “carbon neutral” and “climate positive” claims based on offsets if you sell in the EU, where they have been banned since 27 September 2026. Elsewhere, explain clearly what was bought and from which standard.
• If you sell in India, plan to provide detailed claim information through a QR code or web link, as the CCPA guidelines expect.
• Review claims when a product, supplier or rule changes.

Practical guidance for consumers and investors

Treat general words as marketing, not information. Look for a number and a scope: what percentage, of what part, compared with what. Check who runs a label. Be cautious about carbon-neutral products, and look for evidence that the company is cutting its own emissions. In the UK, complaints about advertising can go to the ASA and complaints about trading practices to Trading Standards or the CMA. In India, the National Consumer Helpline accepts complaints that can be escalated to the CCPA.

Investors have better tools than they had five years ago. In the UK, look for one of the FCA’s four sustainability labels and read the consumer-facing disclosure that must accompany it. In India, an ESG fund’s name now has to state its strategy, which tells you whether it excludes certain industries or merely considers ESG factors. Everywhere, read the full holdings list and compare it with the fund’s stated exclusions; this is how ASIC’s cases began. Ask what share of assets is actually screened and what happens when a holding breaches the policy. A sustainable fund that cannot answer clearly is a warning sign.

Where this leaves things

Greenwashing has become a legal issue as well as a reputational one. The CMA can now fine directly, and in the EU a list of common green claims has been unlawful since 27 September 2026. Yet the EU’s retreat on the Green Claims Directive, the closure of the Drax inquiry and several narrow rulings show regulators weighing the costs of over-enforcement. For a business the safest course is the simplest: make fewer claims, make them specific, keep the evidence, and say what is not yet green as well as what is.

Questions people ask

What is greenwashing in simple terms?

Greenwashing is making a product, company or investment look better for the environment than the evidence supports. It can involve false statements, but more often it involves vague words, missing context or claims that cover only one part of a product.

Who coined the term greenwashing?

It is usually credited to the American environmentalist Jay Westerveld, who used it in a 1986 essay about hotels asking guests to reuse towels for environmental reasons while the main benefit was lower laundry costs.

Is it illegal to call a product eco-friendly?

Not in itself, but the claim must be clear and backed by evidence. In the EU, generic claims such as eco-friendly have been banned since 27 September 2026 unless the trader can show recognised excellent environmental performance. In the UK and India, such words need to be explained and substantiated.

Can a company still say a product is carbon neutral?

In the EU, from 27 September 2026, a trader cannot claim a product has a neutral, reduced or positive climate impact based on carbon offsetting. Elsewhere such claims are not banned outright, but regulators expect firms to explain what credits were bought and to show the claim is accurate.

What can the UK CMA do about greenwashing now?

Since 6 April 2025, under the Digital Markets, Competition and Consumers Act 2024, the CMA can decide for itself that consumer law has been broken and fine a business up to 10 per cent of its global turnover, without first going to court.

What happened to the EU Green Claims Directive?

The Commission proposed it in March 2023, but on 20 June 2025 it announced an intention to withdraw it and the final negotiating round was cancelled. The Commission later said it had not been formally withdrawn, but no text has been agreed. The separate 2024 consumer directive has applied since September 2026.

How can an investor check whether an ESG fund is greenwashing?

Compare the fund’s full holdings list with its stated exclusions, ask what share of assets is actually screened, and in the UK look for one of the FCA’s four sustainability labels. Australia’s Mercer and Vanguard cases began with exactly this kind of check.

What is greenhushing?

Greenhushing is when companies say less about their environmental targets or progress than they could, often for fear of being accused of greenwashing. A 2022 South Pole survey found about a quarter of large companies with science-based targets did not plan to publicise them.