Board Priorities 2024: Greenwashing
11 January 2024
The focus on sustainable business means that companies have been alive to "greenwashing risk" for a while. But what was previously seen primarily as a reputational issue is increasingly being looked at through a legal lens. There has been high profile regulatory enforcement and litigation in jurisdictions like the United States and Australia. The EU and UK are strengthening consumer protection legislation in a way which will make it easier to hold greenwashing companies to account.
Different companies are exposed to different forms of greenwashing litigation. Public companies face the prospect of securities claims arising from untrue or misleading statements to investors. Directors of these companies will also be mindful of challenges to them alleging breach of directors' duties. Consumer-facing companies will note the firm stance taken by consumer protection and advertising regulators on greenwashing in a number of jurisdictions.
What should boards do to mitigate the risks?
First, prepare a risk assessment: what forms of greenwashing risk are most prominent for your particular company? Second, keep up to date with developments in this space, both in terms of new regulation, but also litigation and enforcement. Third, ensure that the company's processes when making sustainability statements are robust, and consistent.