ThoughtLeaders4 Disputes Magazine • ISSUE 13
| ESG |
FIFTY SHADES OF GREEN ?
ESG PRESSURES VS THE RISK OF GREENWASHING
Authored by : Belén Satorre ( Associate Director ) - S-RM , Rob Meade ( Partner ) - Bracewell , and Mark Hunting ( Partner ) - Bracewell
The current pressure on companies to be “ green ” is unprecedented . It is the natural result of the world becoming more focused on the risk of climate change and the need for a successful transition to cleaner energy . This pressure has led to many companies making public statements about their green credentials , often to allay the concerns of consumers or investors . However , increased regulation has introduced new risks and compliance burdens , all designed to ensure that such statements are not misleading .
It has never been more important for companies to practice what they preach and to avoid painting a rosier – or greener – picture of their organisation ’ s activities .
What Is Greenwashing ?
Greenwashing refers to a practice by which a company makes inaccurate or misleading claims about its business or products in order to improve their environmental or social credentials . Such claims are traditionally made in advertising or marketing promotions . However , they are increasingly appearing in annual reports , investor documents and contractual agreements .
What Are The Regulatory and Legal Risks of Greenwashing ?
Those operating in the UK need to be aware of the UK legal and regulatory regime which could catch and penalise greenwashing .
Thus far , the main targets have been misleading advertising and marketing ( with enforcement action being taken by the Advertising Standards Authority and the Competition and Markets Authority ). However , new UK legislation arguably creates strict or near-strict liability for companies and directors of companies that engage in greenwashing activities . This includes statutes targeting fraud and false accounting . In addition , the new strict liability offence for failing to prevent fraud introduced by the Economic Crime and Corporate Transparency Act 2023 paves the way for corporate liability for greenwashing , much as the Bribery Act 2010 did for bribery . It creates an offence for corporates who fail to prevent fraud by their employees , agents and other associated persons .
For offences not within the fraud category , such as unfair commercial practices , new provisions around corporate liability for the conduct of senior managers create similar risks .
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