The European Union is in the early stages of negotiating the Green Claims Directive, a new law that aims to curb greenwashing and help consumers make greener choices. The proposal heavily regulates the environmental marketing practices of businesses, limiting what can be claimed. However, under the initial proposal, it is likely that electric vehicles, a staple of the green movement, will not be allowed to be advertised as environmentally friendly.
As global concerns rise over the impacts of climate change, there has been a significant increase in consumer interest in supporting businesses and products that are environmentally friendly. This rise in consumer interest, as well as pressures from financial investors and other parties, have pushed businesses to take climate friendly stances. However, there is a growing and reasonable concern that businesses are exaggerating their environmentally friendly actions in what is known as greenwashing.
Traditionally, greenwashing was done through marketing. When the customer base wanted environmentally friendly companies, companies benefited by making themselves appear greener. In recent years, the phrase climate washing has developed as a subset of greenwashing that directly addresses the exaggeration of claims relating to climate change and greenhouse gas emissions. For decades, greenwashing frustrated environmental activists who wanted actual change by companies. However, as environmental, social, and governance investing grew, so did the legal pitfalls of greenwashing. Shifting from just clever marketing campaigns to misleading investors and violating consumer protection laws.
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