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The ESG Review: Brussels accused of softening stance on greenwashing

New rules announced by the European Commission this week aimed at turning the screw on greenwashing have been on their own rinse cycle, according to detractors.

The long-awaited proposals are intended to prevent companies from making unsubstantiated environmental claims around their products, and could see them being hit with fines amounting to at least four per cent of revenue or exclusions of up to a year from public procurement processes or subsidies if they do so.

But environmental groups wanting to see a tougher stance on corporate greenwashing largely denounced the stipulations that the commission has put forward, pointing to concerns that lobbyists have sought to dilute them to give large businesses more ‘breathing room’ around stating the ESG benefits their products offer.

The Financial Times led with the story, but Politico raised the incisive question of whether the wording represented double standards in Brussels.

“If the Commission started applying the same rules to its own bombastic claims, it would definitely be in trouble. Just think of the “circular economy” Brussels wants to build (with loads of new mines and raw material extraction for batteries and electric vehicles), or of the “green taxonomy” (which includes natural gas and nuclear power) or of the “sustainable blue economy” for oceans (based on overfishing backed by France, Spain and others),” it said. In a style that only Politico can.

Meanwhile, Bloomberg outlined the businesses it felt would be most at risk of being caught in the headlights of the new legislation with its piece on the “greenwashing fight” facing clothing, drink and travel companies. Separately, it covered a report into “rampant” greenwashing in the food sector.

And Fox News - not cited here often - played it with a straight bat in summarising the developments, adding that “Businesses based outside the EU making environmental claims that are directed at the bloc's consumers also would have to respect the requirements”. Well, it was a straight-paste from Associated Press.

What the European Commission unveiled this week, to much anticipation but also criticism over the application of the new conditions, will set much of the tune for not only product marketing but corporate reporting. Expect ESG reports to be hastily edited in the coming months rather than risking being the poster children for the wrong reasons.

We may even see it change the way that companies compile those ESG reports and certain disclosures, with communications teams being more central - even if ultimate ownership remains as mixed as the reaction to the announcement of the rules.

The ESG News Review is written by Steve Earl, a Partner at BOLDT.

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