In 2023, there was notable progress in the fight against greenwashing—particularly in the realm of offsetting, as stakeholders increasingly demanded genuine sustainability efforts from companies. Despite this advancement, uncertainty persists around what constitutes true sustainability, leading to challenges for companies in navigating their climate strategies.

What is greenwashing?

Greenwashing refers to making vague, misleading, or unsubstantiated claims regarding environmental progress. Some forms are more obvious than others and can occur in a number of ways such as:

• Claiming environmental progress without concrete action plans
• Being purposefully vague or using generic labels such as “green” or “eco friendly”
• Emphasising a single environmental impact while ignoring other harmful environmental impacts
• Implying that a minor improvement has a major impact on environmental performance

Avoiding greenwashing is one of the greatest perceived barriers to companies looking to meaningfully engage in a climate strategy. This threat often leads to hesitation or even "green-hushing" – the suppression of sustainability efforts due to fear of being accused of greenwashing. This in turn hampers the progress that sustainable leadership can achieve.

However, increased scrutiny of environmental claims is ultimately beneficial. Stricter standards for such claims can encourage wider adoption of environmentally responsible behaviours. It's clear that unsubstantiated claims of positive impact not only hinder climate mitigation efforts but also lead to overestimation. Furthermore, enhanced transparency and the delivery of high-quality action, data, and communication are essential pillars for a more sustainable future.

What does greenwashing have to do with offsetting?

Past offsetting practices allowed too many companies to make large claims to be made on the backs of less credible investments, leading to a loss of trust, major reputation damage, and sometimes even million-dollar lawsuits. These examples, highlighted in Bloomberg and The Guardian, primarily involved avoidance-based offsetting, where companies claimed carbon neutrality despite minimal to no actual environmental impact from the projects. This lack of return is not only detrimental to our common climate goals, but also damages trust in carbon markets, underscoring the importance of transparency and trust in the future of carbon removal markets.

Regulatory bodies continue to work to boost the credibility of environmental claims by combating greenwashing, particularly when it comes to offsetting.

There has been an increase in anti-greenwashing regulatory changes across Europe, such as the EU Green Claims Directive, the Corporate Sustainability Reporting Directive (CSRD), and the UK’s reflective Green Claims Code. The US Federal Trade Commission and Security and Exchange Council has also adopted environmental reporting and claims directives that mention carbon removal. These are a clear indication of the direction the international climate claims landscape is heading.

Rather than viewing these directives as a mere disclosure and reporting activity, they have the potential to showcase a company’s commitment to climate transition planning, thereby incentivising action in deep decarbonisation and investment in carbon removal.

Challenge into opportunity: Green Claims Directive

The EU has made significant progress towards eradicating greenwashing. Most recently, by passing an act to ban misleading advertising practices and require verification and substantiation of environmental claims. Regulations like these can be invaluable assets, providing a clear blueprint and methodology for how to best communicate environmental claims.

The Green Claims directive provides helpful guardrails around making green claims based on offsetting. This is an important move towards ensuring the reliable use of offsets, for two key reasons:

• Claims like carbon neutral, climate neutral, or climate positive lack consistent definitions and methodologies, bringing their validity and accuracy into question
• Ambitious emission reductions alongside removals are the only way to reach a true net zero future

Best practices to avoid greenwashing in your climate strategy

While the regulatory landscape continues to develop, recognised supra-national bodies offer advice on best practices for sustainability communication. These include target-setting bodies, accounting standards, and even climate achievement certifications or ratings.

The bottom line: companies are not alone in navigating how to make a legitimate green claim. By aligning with best practice standards like the Oxford Offsetting Principles or Science Based Targets Initiative, companies can stay ahead of the regulatory curve and share their climate strategies with clarity and transparency. These standards also form the basis of strategy at Klimate.

Moreover, to avoid greenwashing, companies should shift focus from grand claims to providing clear and transparent information about their activities. It's crucial to honestly communicate both the positive and negative climate impacts of investments, as well as acknowledge the road ahead towards taking full environmental responsibility.

Wondering where to start? Not all companies are yet affected by one of the major regulatory directives, working with a target-setting organisation, or have a clearly defined strategy.

• Create a claims framework with specific goals and KPIs, and set clear dos and don’ts.
• Externally verify claims: not sure what something means, or what best practice calls for? Ask an expert and have your claims audited.
• If all else fails, prioritise clarity and transparency.

Greenwashing to green progress

Avoiding greenwashing is crucial for maintaining brand trust and reputation. Being recognised as a leader in climate action will benefit your relationships with stakeholders, including employees, consumers, and investors, over the long term.

This relies on taking quality action and communicating with transparency—essential elements to transform this challenge into an opportunity for climate leadership. Ultimately, the recent increase in scrutiny—and corresponding opportunity to build brand trust—will enable more progress towards our common climate goals to secure a more sustainable future.

Further reading

Deloitte (24 April 2023): Understanding the proposed EU Green Claims Directive