Greenwashing: When Companies Aren’t as Sustainable as They Claim | WSJ

Over 60% of consumers are willing to pay more for products with sustainable packaging, driving a significant increase in sales of eco-friendly consumer goods. In North America, these sales surged by over 30%, reaching approximately $268.9 billion in 2022. However, some companies may mislead customers about their sustainability efforts—a practice known as greenwashing—where they exaggerate or falsely claim environmental benefits. A notable case involves H&M's Conscious Choice collection facing allegations that it does not meet its advertised sustainability standards; the lawsuit is ongoing and highlights issues like lack of transparency and weak environmental goals.

Greenwashing refers to the deceptive practice where companies falsely promote themselves as environmentally friendly through misleading advertising. The rise of sustainable ESG funds, which focus on environmental, social, and corporate governance factors, has surged past $350 billion in net assets by 2021. This trend highlights a growing profitability for businesses that project an eco-friendly image due to increasing consumer demand for sustainable products and investor interest in responsible investments.

Greenwashing misleads consumers by promoting superficial sustainability efforts while encouraging harmful practices. Companies often tout carbon offsets as a solution to their emissions, but these can be controversial and lack transparency regarding their actual environmental impact. Critics argue that many offset projects generate excessive credits without effectively reducing greenhouse gases, leaving companies with vague commitments and long timelines for achieving real change. The urgency of climate action is emphasized by the UN's call for significant emission reductions by 2030, highlighting the need for accountability in corporate claims about sustainability.

Governments are intensifying efforts to combat greenwashing, where companies falsely promote their products as environmentally friendly. The European Union has proposed regulations requiring scientific backing and independent verification for environmental claims made by businesses. This initiative aims to empower consumers in making sustainable choices among the EU's 450 million population, potentially influencing global standards due to multinational corporations' preference for uniformity in regulations. In parallel, the U.S. Federal Trade Commission is considering rules against misleading environmental marketing language and imposing penalties on deceptive practices related to ESG funds.