Regulatory change in the war against greenwashing

The EU has announced that from 2026, businesses will no longer be able to state that they are ‘carbon’ neutral’ or have a ‘positive’ impact on the environment if the reason for doing so is because they purchased carbon offsets. They will also be banned from using such terms as 'environmentally friendly', 'climate neutral', and 'eco' if they cannot substantiate their claims.

Against a backdrop of rising incidences of greenwashing – the process of exaggerating or falsifying a business’s environmental and sustainable credentials in order to win favour with customers – the new regulation will be a game-changer in the way that businesses market themselves to both their current and prospective customers.

Indeed, there is a plethora of research from the last three years that universally proves how consumer/customer purchasing decisions are increasingly being influenced by a business’s perceived commitment to operating along more sustainable lines.

But a significant consequence of the zeitgeist has been a rise in the number of opportunistic businesses prepared to put their reputation at risk for the sake of duping customers into believing they are more ethical than they really are. And the reason? Simple: to bolster their revenues.

It has become a huge problem and, frankly, customers are sick of it. So, it is good that the EU has taken a stance to stamp out the practice of deliberately misleading customers.

However, there is a potential problem that need careful consideration.

Whilst we certainly welcome and applaud the EU for tackling the issue of head on, we must also be mindful of the need to ensure that businesses fully understand how they can demonstrate their environmental and wider ESG credentials. That is often easier said than done and it is a challenge that we have faced ourselves in recent months.

Monahans has been committed to minimising its impact for some time, and the organisation is currently pending the outcome of its B Corp certification application. We are optimistic for a positive decision, but the process we went through to get to this stage was a testing one.

It demanded a rethink of how we currently communicate our environmental (and social) initiatives so that every claim we made and every action that we took, could be measured and its impact clearly reported upon. When the EU’s directive comes into force in 2026, all businesses will need to follow a similar process to what we have done when it comes to communicating on their ESG policy.

We have seen a significant rise in the number of businesses in the South West who market themselves as being ‘environmentally friendly’ or ‘carbon neutral’, and this new regulation will mean a rethink in the way they position themselves to customers.

It won’t be easy for everyone. In fact, it will be challenging. But we believe it is incumbent on the wider South West business community to use this as an opportunity to deliver new environmental standards, and that can only be a good thing. For everyone.

It will be interesting to see how this plays out.

What are your thoughts on the EU’s proposal, how do you see this panning out in your business?

If you would like further information or have any questions on Monahans’ ESG policies, please contact one of our HR team today.

Sophie Austin