Understanding Anti-Greenwashing Laws and the Rise of ‘Greenhushing’

Anti-greenwashing laws are on the rise in response to growing global concerns around environmental protections and sustainability. In recent years, legislative and regulatory bodies have introduced new laws and controls to curtail these practices.

Whether through deceptive marketing claims or other misleading information, greenwashing undermines genuine environmental, social, and governance (ESG) efforts, affecting both public and private interests alike.

Yet anti-greenwashing laws have, in some cases, had an unforeseen consequence: the trend of “greenhushing” in response to fears over how ESG reporting will be perceived by wider audiences. Both these practices harm ESG efforts and other sustainability initiatives, and expose businesses to costly enforcement action and reputational damage alike.

What is greenwashing?

Greenwashing is the practice of representing processes, practices, or products as more sustainable or environmentally friendly than they really are. The motivations for greenwashing can vary, from trying to make strong marketing claims that keep up with competitors, to attempting to meet reporting requirements without having data to back it up. Measuring environmental impacts is hard and often expensive, leading some brands to take liberties with their ESG statements so they don’t fall behind.

Depending on where they are in the world, organizations that are found to have engaged in greenwashing, either deliberately or erroneously, can face significant damage to their brand’s image—not to mention steep fines or legal action from regulatory authorities.

What are anti-greenwashing laws?

There are several notable anti-greenwashing laws and regulations that businesses may find themselves in scope of around the world.

In North America, Canada’s Bill C-59 came into force in June 2024, introducing new anti-greenwashing measures. These measures include explicit prohibitions against deceptive environmental claims, a new certification mechanism to protect environmental collaborations, and new options for private parties to bring greenwashing claims forward to the Canadian Competition Bureau. The bill also outlines the fines and enforcement options available to the Competition Bureau.

In the United States, both the Securities and Exchange Commission (SEC) and Federal Trade Commission (FTC) have introduced anti-greenwashing initiatives and controls. The SEC recently expanded on its so-called “Names Rule” in an attempt to curb greenwashing in capital markets. The rule now requires registered investment funds that include ESG factors in their names to place 80% of their assets in funds that correspond to those factors.

The FTC’s Green Guides were released in 1992 and updated in 1998 and 2012—with another update anticipated following high-profile lawsuits against several companies mislabelling materials as “sustainable.” These Green Guides are designed to help businesses avoid making deceptive marketing claims. State-level authorities have also weighed in on greenwashing cases from time to time.

The United Kingdom’s Financial Conduct Authority (FCA) recently introduced its Anti-Greenwashing Rule (AGR), which came into force on May 31, 2024. The AGR outlines “four Cs” that businesses must follow when making environmental claims. Claims must be:

• Correct and capable of substantiation.
• Clear, with terminology generally understood by the intended audience.
• Comparable with other products or services.
• Complete, considering the full lifecycle of the product or service.

Finally, the European Union’s Directive 2024/825 (commonly known as the Greenwashing Directive) was formally approved in January 2024. The Greenwashing Directive outright prohibits a wide range of claims and statements around sustainability, including generic “eco-friendly” claims and language, claims of carbon neutrality based around the purchase of carbon offsets or credits, and even environmental claims that simply reflect compliance requirements.

What is greenhushing?

On the other side of the coin is greenhushing. Public demand for goods and services that meet environmental standards is at an all-time high, but this demand comes with increased scrutiny from consumers and governments alike. As a response to this increased scrutiny, some firms choose to downplay (or in some cases hide) their ESG information. This practice is known as “greenhushing,” and it’s become increasingly common in light of this increased attention and the shifting regulatory landscape.

But it’s important to note that greenhushing is not always a deliberate attempt to mislead or deceive third parties; in some cases, businesses are removing this information to reduce the risks they face.

As an example, Bill C-59 coming into force led to numerous companies pulling their marketing claims from their websites and digital channels. This was not done because the claims were false, but rather because of concerns over ambiguity in the standards imposed by the law.

What’s more, a recent study found that 23% of sustainability-minded organizations were choosing not to publicize their sustainability milestones, instead focusing exclusively on what they are mandated to report on.

Whether this response stems from a fear of “getting it wrong” in their reporting or businesses not wanting to put in the expensive—and expansive—efforts required to prove the impact of those efforts, anti-greenwashing regulations are (in some cases) having an unintended effect of actually reducing willing disclosure of ESG initiatives and results.

Scalability in response to greenwashing legislation

New expectations on reporting from greenwashing laws have created this emerging greenhushing trend. This trend highlights the gap in scalable due diligence across the supply chain for ESG reporting.

Companies that address compliance and sustainability requirements on a case-by-case basis will continue to face these types of challenges whenever new laws are published. On the other hand, a more holistic approach to due diligence, where systems are designed to be scalable, builds resilience and agility in the supply chain and allows companies to more easily meet these types of requirements.

At the end of the day, companies invest incredible resources to improve their ESG performance, whether they do so under regulation or not. As consumers place more and more value on these types of initiatives, it is important companies are able to maximize the ROI of those investments by making their impact known.

Learn more about how you can scale your due diligence leveraging leading technologies like AI.