Is greenwashing really in decline?

Cases of exaggerated or false sustainability claims fell for the first time in six years in 2024, according to a 13-country study published in October by RepRisk, a consultancy. 

Hefty fines imposed on Deutsche Bank-owned investment firm DWS in the United States and Vanguard Investments in Australia for making misleading statements over the environmental, social and governance (ESG) credentials of investments and funds may explain why the financial sector saw the biggest drop in cases of suspect green claims of any sector in 2024, with incidences of greenwashing down 20 per cent.

Europe, where the European Union’s Green Claims Directive is set to outlaw the use of terms such as “carbon neutral”, “eco-friendly” or “green” without evidence by next year, saw an 18.8 per cent drop in cases of greenwashing. However, Asia, where regulators have been slower to clamp down on dubious green claims, witnessed an even sharper decline, of 19.2 per cent, albeit from a much smaller sample size of cases.

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I would rather see more competence greenwashing than less… because that means sustainability still has importance in the public space. But now sustainability credentials are being removed for the wrong reasons.

Kim Schumacher, associate professor, Kyushu University

While incidents of greenwashing have seen a general decline globally, more serious cases have increased. The number of times companies used green marketing to conceal environmental, social or governance (ESG) violations such as heavy pollution, which resulted in legal repercussions, surged by 30 per cent in 2024.

According to Eco-Business’s own reporting, greenwashing cases declined in 2024, but a number of brands – mostly airlines – were hit with heavy fines for claiming that air travel could be climate-friendly by using carbon offsets or sustainable aviation fuel.

Meanwhile, the use of ESG-related words by companies has dwindled, according to a scan of corporate filings from 2017 to 2024. 

Kim Schumacher, associate professor in sustainable finance and ESG at Kyushu University in Japan, tells the Eco-Business podcast that  the world “hasn’t reached the tip of the iceberg” when it comes to greenwashing. The problem is getting more pronounced, in his view, albeit taking on a different form.

Greenhushing is still a form of greenwashing, as it involves companies withholding material information from investors, he said, echoing new research that found that the use of ESG-related terms has decreased in recent years. 

“No commitment is apparently now better than even a soft commitment,” said Schumacher, pointing to the withdrawal of numerous US and Japanese finance groups from the Net Zero Banking Alliance, which he said required banks to reach a “low bar” to join.

Firms see the avoidance or omission of anything ESG-related as “preferable to even the most generic statement possible,” he said. While this dynamic applies mostly to American companies, it has spread eastwards as Asian companies have followed the lead of what is still by far the world’s largest financial market.

” Some institutions in Asia have significant holdings or operations in the United States, or they want to appeal to United States-based investors,” he said. ” You do not want to get on the wrong side – or the perceived wrong side – of those who are currently in charge.”

Schumacher said he believes that sustainability is here to stay, because the issues that companies must contend with – climate change, human rights abuses, and biodiversity loss – won’t go away.

“What we now see is … the end of sustainability only used for marketing purposes,” he said. 

Schumacher coined the term “competence greenwashing”, which is when people or companies embellish their sustainability skills to land a contract or get a more lucrative job. The anti-ESG backlash has prompted business people to market their credentials differently.

“If you’re in the United States right now, you [might] want to get all that [ESG] stuff off your LinkedIn,” said Schumacher, who added that there was a risk of sustainability-related language being weaponised – even in jurisdictions outside of the US.

“Everything that even remotely resembles sustainability is being put together with woke or climate – all the ‘bad’ words,” he said.

” I would rather see more competence greenwashing than less, because that means sustainability still has importance in the public space,” he said. “But now sustainability credentials are being removed for the wrong reasons.”

Tune in as we discuss: 

• Is greenwashing really in decline?
• Why has greenhushing spread to Asia?
• The vulnerability of the EU Greens Claims Directive
• Why has the finance sector been the fastest to respond to greenwashing risk?
• Is greenwashing awareness growing?
• Is competence greenwashing declining?
• Changing use of the term “ESG”

The edited transcript:

Are we seeing the beginning of the end of greenwashing?

 I think we haven’t even reached the tip of the iceberg of greenwashing.

What we’re seeing now is a lot of investors leaving international initiatives such as the Net Zero Banking Alliance or the Glasgow Financial Alliance for Net Zero (GFANZ).

Investors are leaving because they see it as a liability.

This is because you need to make, I would argue, very soft commitments.

This provides validation to the anti-ESG trend that is emanating primarily from the United States.

The new government is rallying against everything they see as “woke”.

And with that, a lot of stakeholders, especially in the financial sector, see the mere avoidance or omission of anything that relates to ESG, sustainability, diversity, equity and inclusion (DEI) as preferable to even the most narrow, generic statement possible.

It’s called “greenhushing” – but it’s still greenwashing because you present yourself as something that you are not, and withhold material information from investors.

I do not think that there’s been a decline – I think greenwashing has increased.

In terms of liability – which we also see with the government of the United States – it’s now simply a case of either deny or simply do not talk about it. 

So we are going into a new era, unfortunately, of zero liability and that is where DEI, sustainability or ESG are a hindrance to some companies, so they choose not to talk about it.

Why has greenhushing spread eastwards from the United States to Asia? Why is it that Asian companies are looking to the US for cues on how to communicate sustainability?

Some commentators say we already live in a bipolar world where Asia, especially China, has already assumed a global role. But when it comes to the financial sector, the simple reality is that the United States or North America is the largest market.

That is where most of the world’s capital still is concentrated. With that in mind, you cannot really decouple yourself from that market.

And we see it now with the very aggressive stance [on sustainability] that certain stakeholders have been taking.

We’ve even seen law firms come under attack in the US [from the Trump administration] for having served Democratic Party interests.

Some institutions in Asia have significant holdings or operations in the United States, or they want to appeal to United States-based investors.

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As soon as it [regulation to clamp down on greenwashing] costs too much, or as soon as it’s perceived as a hindrance to affordable lifestyles, politicians shift gear and go back to business as usual.

With that, you don’t really want to draw too much attention to yourself, so you try to keep a low profile.

You do not want to become the target of any policies or regulations or even social media attacks against your institution that might lead to a loss in business opportunities.

That is, I think, the simple reality.

Because we know how connected the global financial system really is.

If anything, it was during the start of the Russian invasion into Ukraine where it became apparent that one small provider in Belgium can block payments for the entire banking system.

We saw how connected everything is.

So you do not want to get on the wrong side – or the perceived wrong side – of those who are currently in charge.

Which Asian jurisdictions are taking greenwashing seriously? It seems that the only jurisdiction really taking greenwashing seriously so far has been the European Union, with the EU Green Claims Directive (GCD), which will ban terms such as “carbon neutral” or “eco-friendly” without evidence. And we are not even certain that the GCD will come into being in its fullest form, with the political shift to the right in Europe, are we?

You are right.

If the Corporate Sustainability Reporting Directive [or CSRD, which mandates companies to publish regular reports on the social and environmental risks they face] has been any indicator, now there has been a fundamental deep shift [most EU countries missed the deadline to transpose CSRD into national law, and there have been calls from rightwing political parties to delay its implementation].

They said the reason to delay its implementation was “streamlining” and the need to remain competitive [packaged in an “Omnibus”, the EU has proposed to dramatically reduce the scope and reporting required under the CSRD]

What it ultimately means is the dilution of standards that were agreed upon through an arduous process over many years.

Suddenly, it became a corporate lobbying wishlist of things that they wanted to reduce in the name of “competitiveness”.

It was literally the validation of short-termism.

As we have seen in the EU, as soon as it [regulation] costs too much, or as soon as it’s perceived as a hindrance to affordable lifestyles, politicians quickly shift gear and go back to business as usual.

Ironically, what it leads to is the dilution of standards on one hand that would make a strong greenwashing framework even more necessary.

Because now what companies say and the claims they make is are even more important.

The RepRisk report showed that the financial services sector has seen the most rapid decline in greenwashing cases, while aviation seems to be a persistent offender. What are your thoughts on different industries and how they are responding to greenwashing risk?

Airlines come under scrutiny often, because it is fairly easy to monitor the emissions and the impact of airlines.

The energy sector is also now highly reliant on carbon offsets [which is a greenwashing risk].

I’ve seen a downturn in terms of companies advertising their ESG products. But those still very present are carbon companies – carbon credit marketplaces, carbon credit project developers, and so on. 

That means there’s still a significant amount of capital that is flowing into that market, because companies still need to buy carbon credits – because they’re probably much cheaper for the companies to buy than actually decarbonising [by reducing their own emissions].

Sectors such as energy, transportation, aviation, shipping, cement, utilities and mining [are the most vulnerable to greenwashing risk] as they still rely the most on positive signals in their marketing and don’t want to look like the bad actors. 

That is where carbon credits offer a simple and quick remedy that can be used in the short term to say “we acknowledge it, but we are doing something, we’re buying all these credits [to offset our climate pollution].”

Tourism is particularly greenwashing-prone too. After Covid, it seemed that every other hospitality brand, hotel chain or destination was claiming to be “eco”. There was a land-grab for the “conscious” traveller. To what extent do you think the ordinary consumer is now more aware of greenwashing and the messages foisted upon them?

That is a question that I have been pondering forever. Also in my research, I ask if more transparency and more information help to change people’s minds.

Let’s take two examples.

If you buy a dozen eggs for US$2, you probably know those chickens don’t live in the best conditions.

If you buy a t-shirt from your fast-fashion retailer for $2, you probably know that that t-shirt was not made by hand from a well-paid factory worker.

In the back of our minds, we are well aware of this unfair transaction – especially in this day and age where people who are affected in those professions often voice their dismay in social media.

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Greenwashing is the desire to have it all… I can have no reduction in my lifestyle, and I can have it in the knowledge that someone else already figured out [the sustainability problem].

Now let’s talk about the tourism sector, which probably has one of the most informed clienteles, because people want to check thoroughly before they decide where and how to travel.

They are aware that, for example, having a private plunge pool in the middle of the desert is probably not the most sustainable option.

Or if you are in an area that gets very little rain, but you have extremely lush gardens.

I personally experienced that when I went to South Africa for a sustainability conference. It was in 2018 in Cape Town, which was experiencing a very severe drought where everyday people’s water consumption had to be limited.

We stayed at this very well known hotel brand. It was apparently not subject to water restrictions. The hotel was spraying water as if there was like no drought whatsoever.

It was kind of surreal. Because the event organisers were probably the most informed people in the world [on sustainability]. Even those people did not say, “okay, yeah, maybe let’s not do this.”

If we think about Asia, for example, elephant rides or tiger photo sessions. I think a lot of people in their hearts when they go there, they probably know something is not right.

So sometimes there is a lack of awareness, but I think among tourists there’s a lot of knowledge.

But this is where the YOLO [you only live once] mentality comes out – which is, if the world is already going up in flames, I might as well go enjoy the things now before they’re gone. And then I cannot really take too much consideration for sustainability issues because if I don’t go, someone else will go and then it’s gone anyway.

So in the context of greenwashing, people want to believe in the lie – they want to believe the marketing and ignore the reality?

Exactly. 

The tourism industry was one of the earliest adopters of greenwashing – before it was a big issue.

Almost every hotel that you go to, you will find a card on your bed sheet with a message that reads “please save the earth with us” [and do not ask for your sheets to be washed unless you need to]

That is such a grand statement, particularly as there’s usually a huge bathtub next to their message… how does that connect?

They say, so much water is used to wash your sheets.

The thing is, they just want to save on cost. Because if they don’t have to change sheets, they need less people to change the rooms. Because sheets take the most time [to clean].

Greenwashing is the desire that, “I can have it all. I can have no reduction in my lifestyle or personal comfort, but I can do it with the knowledge that someone else already figured it out [the sustainability problem].” 

The Volkswagen diesel scandal was literally that. 

They said, “we figured out how to make a diesel engine perfectly clean at no extra cost to the customer. But what they didn’t say is that the engineers hadn’t figured it out.”

If you have some basic science and economics knowledge, you will know that you cannot create an engine that requires a very expensive substance in high quantities to remove the pollutants, and then still offer it at the same price point as you did previously.

It just doesn’t work. So they just lied. Volkswagen told you that you can have it all.

Since we last spoke in May 2023, many people will have acquired knowledge and skills in sustainability. So is competence greenwashing less of a problem now?

Good question.

In the face of the global geopolitical landscape, there have already been shifts that reflect that [a change/decline in competence greenwashing].

For example, one particularly prominent certificate provider renamed their product from “ESG” to “sustainability” [Non-profit CFA Institute changed the term ‘Certificate in ESG Investing’ to ‘Sustainable Investment Certificate’ on 8 April. 

It remains to be seen whether professionals still want to actively promote their affiliation with sustainability.

Talking about the financial sector, it was Jamie Dimon [CEO of financial services giant JPMorgan Chase] who recently said, “we don’t need all that stuff.”

The thing is now, we are in this really weird “Schrödinger” world here it is good and not good at the same time to have it [ESG-related affiliations].

Because in Europe, there are still markets that value it – but in other places now it’s literally the opposite.

You will get targeted if you have it [affiliations with ESG]. You will be singled out and you might be out of a job if you have it.

Everything that even remotely resembles sustainability is put together with woke or climate – all the “bad” words. 

I want to limit this phenomenon to North America for the time being. But you cannot decouple a globalised economy. What happens in the United States has very far-reaching ramifications.

We recently saw two Swiss banks, including UBS, say they will not consider DEI anymore in their hiring processes. 

Even though they headquartered in Switzerland, UBS said, “we don’t want to be the target of the US regulator.”

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If you’re in the US right now, you [might] want to get all that [ESG-related] stuff off of your LinkedIn.

It comes down to who becomes a target.

Previously, the SEC [Securities and Exchange Commission, the US finance regulator] under the Biden administration was very actively fighting greenwashing.

BNY Mellon was fined for greenwashing under the Biden administration, although it was a very small fine [SEC fined the Bank of New York Mellon US$1.5 million for misstatements and omissions about its ESG considerations in 2022].

The SEC was even considering a climate rule, which is now off the table.

But now regulators in North America will much more actively look at your profile and [assess] whether you represent the trend that they want to represent – which is actively away from renewables and more towards carbon-intensive, fossil fuel-based production and services.

I would rather see more competence greenwashing than less. It’s a very weird situation where you want to see more [claims about sustainability skills in the public domain] because that means it still has a lot of importance in the public space.

Whereas now we are going in the opposite where it [ESG/sustainability] is removed for the wrong reasons.

In the United States, we are moving towards a society where your ideology gives you the license to operate.

It is not merit or skills-based anymore. 

I’m not saying that was absolutely not the case prior [to the election of Donald Trump], but now it’s being taken to new extremes.

I do think it will definitely affect how people market their sustainability skills. 

It is such an unprecedented situation.

Eco-Business ran a story recently that featured a scan of the corporate filings of 75,000 companies around the world for use of the term “ESG” since 2017. It showed an abrupt drop in the use of the term last year. What do you make of that? Is ESG dying or is the language just changing?

I think even when “ESG” was still a permitted word, many sustainability professionals felt that it was too “reductive” in scope. “Sustainability” was the preferred word.

However, I never felt that “ESG” was a “bad” word. It served a purpose. 

When I learned about ESG and came into contact with the term, I felt that it made sense.

It’s a simplified version of certain metrics and indicators that are utilised to look at impact and risks.

There was no ideology.

But in this day and age, just collecting certain data is already an ideology.

Let’s look, for example, at DEI; even collecting gender information or ethnic background in the workplace is already an act of ideology.

I do think sustainability will stay around because the issues will not go away.

But what we see now is the end of sustainability just used for marketing purposes.

Because people have realised that it [sustainability] is difficult. There are no quick fixes.

And people sometimes now go the other way. They say, “we need to do actual sustainability.” But actual sustainability also comes with a rethink of how we organise our economy.

But with that, in the short term, I think there’s just this readjustment.

We see now in Asia unprecedented fires in [South] Korea and even now in Japan the realisation that climate change will not stop. 

But what I do not know is, will people take the right lessons from it [climate disasters such as wildfires, floods and droughts]?

Will they learn that we actually need to make sustainability real because it will mitigate those [climate] risks?

Or will they go the opposite way?

Will they say, “if that is happening, then we even need to go further and rely more on fossil fuels?” 

Because then they see fossil fuels as a quick solution to maintain lifestyles, for example, by installing air conditioning to result in short-term remedies.

That is something that I do not know yet.

And the same goes in the professional sense for greenwashing.

Do professionals now realise that it is not that easy to address these complex sustainability issues?

What is happening in United States is the rejection of fake sustainability.

Because people felt that it did not bring any advantages.

That is something that I do not have the solution for now, but I think we will definitely see a realignment of the terms and the presence of ESG and sustainability.

But hopefully, ESG, if it goes away, will lead to more focus on actual sustainability.

This transcript has been edited for brevity and clarity