Greenwashing Cases Fall for First Time in Six Years as Regulatory Scrutiny Builds: RepRisk

The number of companies linked to greenwashing, or misleading claims about the environmental impact of their operations and products, fell for the first time in six years as regulatory and stakeholder pressure builds, according to a new report by ESG data science company RepRisk, although the study also found that severe greenwashing cases continue to increase, and that progress is uneven by region.

The study, RepRisk’s annual greenwashing report, relied on RepRisk research, which utilizes big data to screen over 150,000 public sources daily including print media, online media, social media, blogs, government bodies, regulators, think tanks, newsletters, and other online sources, with the platform capturing greenwashing risk based on criteria of misleading communication and environmental issues such as impacts on ecosystems, biodiversity and pollution.

The report found a 12% decrease in the number of companies associated with greenwashing risk in the year ending in June 2024, signalling a significant shift in corporate behavior, according to RepRisk, with the number declining for the first time since 2019.

While the overall number of greenwashing cases fell, however, the report also signalled a shift towards higher-risk incidents, with findings of a 30% increase in high-severity cases over the past year. The report determined severity based on the consequences of the incident, the extent of its impact, and the degree to which it is intentional and systematic.

According to RepRisk, the regional variation in greenwashing incidents indicates the extent to which factors such as regulatory developments and stakeholder pressures may be driving the changes. The report found a sharp 20% decline in cases in the EU, where a series of regulations advanced over the past year, such as the Green Claims Directive and the Empowering Consumers Directive targeted corporate greenwashing behaviors with new rules such as banning vague environmental claims and requiring the use of only approved sustainability labels.

Jessica Quiazon, ESG Research Lead at RepRisk, said:

“Implementing laws and regulations against greenwashing can standardize the language companies use about their environmental efforts and thus boost their accountability. As environmental impacts become more material, companies face greater pressure to align their statements with real action.”

Alternatively, greenwashing cases increased slightly in the U.S., but declined by more than 10% last year, in an environment of increased ESG politicization, with RepRisk suggesting that the decline was driven by companies becoming more cautious “responding to pressure from investors, state attorneys general, and other state-level political figures opposed to considering ESG criteria in investments.”

The report also examined greenwashing incidents by industry, finding that the Oil and Gas sector accounted for the largest share of cases, followed by the Food and Beverage, and Banking and Financial Services. The Banking and Financial Services sector saw the biggest decline in cases, down 27% over the past year, followed by the Retail, Personal, and Household Goods and the Mining sectors, each down 25%, and Utilities, down 12%.

Dr. Philipp Aeby, CEO and Co-Founder of RepRisk, said:

“Stakeholders are more aware of greenwashing risk than ever before. While regulators have successfully pushed forward legislation to deter greenwashing, the risk will keep evolving as new forms emerge, leaving companies open to reputational damage which impacts their bottom line. Greenwashing is often driven by corporate narratives. To uncover it, investors and companies should rely on what external sources reveal about these claims.”

Click here to access the report.