The Number of Greenwashing Cases Has Declined, Says Study

• Greenwashing declined for the first time in many years.
• Strict Regulations have impacted this shift, but more needs to be done.

Cases of greenwashing across all sectors during the year ending in June 2024 have declined, but their severity has increased, notes a new study published by RepRisk, an ESG data specialist.

The risk of companies misleading stakeholders about their environmental and sustainability efforts, also known as greenwashing, has decreased by 12% globally between June 2023 and June 2024, the first such decrease in six years.

The report attributes the decline to stricter regulations and companies' concerns about losing consumers and investors. Even though greenwashing cases have plummeted, the number of severe incidents has increased by 30%, signalling that more needs to be done.

“Stakeholders are more aware of greenwashing risk than ever before,” said Dr. Philipp Aeby, CEO and Co-Founder of RepRisk. “While regulators have successfully pushed forward legislation to deter greenwashing, the risk will keep evolving as new forms emerge, leaving companies open to reputational damage which impacts their bottom line. Greenwashing is often driven by corporate narratives. To uncover it, investors and companies should rely on what external sources reveal about these claims.”

Companies are recognising the seriousness of greenwashing and are taking necessary steps to avoid it. This will have a positive impact, especially as more regulations are on the way.

The companies (30%) that were linked to greenwashing in 2023 were also flagged this year, indicating that regulations should be tightened to curb the issue.

The banking and financial sector also shows similar patterns. Between 2022 and 2023, the number of cases rose by 70%, but they have dropped by 20% from 2023 to 2024. Around 36% of financial institutions involved in greenwashing last year were also flagged this year.

Stringent regulations seem to have influenced, particularly in the EU, where new laws demand companies substantiate their claims.

Meanwhile, the US is seeing an on-and-off trend: cases spiked in 2022, declined in 2023, and again saw an increase in 2024. The growing political discourse around ESG could be the reason behind this trend, making businesses more cautious about promoting their ESG efforts.

For a detailed view of the study, click here.

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Source: RepRisk