The rise of greenwashing amid growing ESG pressures5 August 2025

Greenwashing is not a single act but a spectrum of misleading behaviours. The most common types include:

• Greencrowding – hiding behind group initiatives or alliances to avoid individual accountability;
• Greenlighting – spotlighting a small green feature to distract from broader unsustainable practices;
• Greenshifting – blaming consumers for environmental issues rather than addressing corporate responsibility;
• Greenlabelling – using eco-friendly language or imagery without substantiation;
• Greenrinsing – frequently changing sustainability targets before they are achieved; and
• Greenhushing – deliberately underreporting sustainability efforts to avoid scrutiny or accountability.

These tactics can mislead stakeholders and regulators alike and are increasingly being called out by watchdogs and civil society.

CSRD and the Temptation to Overstate Sustainability

The EU’s Corporate Sustainability Reporting Directive (“CSRD”) may be the long-awaited turning point. It will either improve transparency and provide the previously missing set of harmonised standards for companies to adhere to when measuring their ESG performance against set benchmarks, or it will influence, perhaps unwittingly, further greenwashing. The CSRD mandates detailed ESG disclosures using standardised European Sustainability Reporting Standards.

Companies must report on:

• environmental impacts and climate risks;
• due diligence processes;
• taxonomy alignment; and
• substantiation of sustainability claims.

The granularity of CSRD reporting, covering everything from emissions data to supply chain practices, raises the bar for transparency. However, it also creates a temptation for companies to inflate their sustainability performance to meet stakeholder expectations or avoid reputational damage. The CSRD is complemented by other frameworks such as the Sustainable Finance Disclosure Regulation (“SFDR”), the EU Taxonomy (“EUT”) and the Empowering Consumers for the Green Transition Directive (“ECD”) all of which aim to combat greenwashing by enforcing verifiable, science-based disclosures. The ECD will apply from September 2026 and introduces significant changes to environmental advertising including a prohibition on vague environmental claims which cannot be substantiated, a prohibition on using or creating unreliable sustainability labels and a prohibition on false claims about the sustainability of an asset. ECD bans the use of generic environmental advertising claims such as “natural”, “environmentally friendly” or “biodegradable” without adequate substantiation. It also restricts the use of sustainability labels to those based on official certification schemes or established by public authorities, bans distinct types of environmental claims reliant on carbon offsets and introduces harmonised labels and requirements around durability and repairability of products. Increased enforcement against greenwashing claims across EU member states will continue to evolve even without the Green Claims Directive pursuant to ECD and pursuant to the Unfair Commercial Practices Directive (“UCPD”) which is undergoing implementation across the EU.

The ECD will amend the UCPD. This contains Annex I which will be expanded to include a new set of blacklisted practices specifically targeting greenwashing. These include the use of vague environmental claims such as “eco-friendly” or “climate neutral” without robust substantiation, the use of sustainability labels not based on official certification schemes or public authorities, and the omission of information about product durability or reparability. Also prohibited are claims about future environmental performance that lack clear, verifiable commitments and independent monitoring. These additions aim to harmonise enforcement across the EU and provide greater legal certainty for both consumers and businesses.

In the UK, the CMA’s GCC provides a non-binding but influential framework for businesses to ensure their environmental messaging is accurate and not misleading. Whilst the GCC itself is not legally binding, the CMA has made clear that it will use it as a benchmark for enforcement under consumer protection law. Businesses should therefore treat the GCC as de facto regulation and ensure their marketing practices are fully aligned.

Implications for Banks: Reputational Risk and Regulatory Pressure

Conclusion: From Claims to Credibility

As sustainability becomes a central pillar of corporate strategy, the risk of greenwashing grows in parallel. Regulatory frameworks like the CMA’s GCC are increasingly vital in guiding businesses toward transparent and trustworthy environmental communication. To avoid misleading consumers, companies must steer clear of vague descriptors such as “eco-friendly” or “sustainable” unless these are backed by clear, verifiable evidence. Substantiation can include references to recognised certification bodies or detailed disclosures about supply chains and industry standards.

Technical jargon and acronyms should be avoided unless clearly explained and environmental claims must be specific; such as clarifying whether a product is biodegradable under all conditions or recyclable only through certain processes. Where comparisons are made, they should be quantified and contextualised, for example by stating the percentage reduction in emissions relative to a defined baseline year. Ultimately, credibility in sustainability communications hinges not just on ambition, but on clarity, evidence and accountability.

Trainee Solicitor Elias Votta also contributed to this article.