Greenwashing to greenhushing - key takeaways

As part of the Net Zero Lawyer’s Alliance's (NZLA) programme for London Climate Action Week, Macfarlanes held a panel session titled “From greenwashing to greenhushing: the state of play”. Chaired by Wendy Miles KC, the panel consisted of Tiffany Cox and Praveen Gopalan of Macfarlanes, Anthony Kenny of GSK and Debbie Howard of Teneo.

Greenwashing is commonly used to describe misleading statements, actions or communications by an organisation so as to present an inflated environmentally or socially responsible public image, while greenhushing refers to situations when an organisation deliberately under reports their sustainable practices. Finally, a newer term, green bleaching refers to the deliberate underplaying of the sustainability of investments to avoid the risk of additional scrutiny.

The panel considered the key elements of greenwashing and associated phenomena on both the legal and communications side. Our key takeaways are set out below:

New rules and guidance

• The UK is eagerly anticipating the Sustainability Disclosure Requirements (SDR) policy statement and its associated anti-greenwashing rule in Q4 2023. The anti-greenwashing rule will affect all Financial Conduct Authority (FCA) regulated firms and some anticipate a swathe of resulting FCA enforcement actions, including fines, public censure, and as a last resort, removal of FCA permissions.
• The European Supervisory Authorities (ESAs) have each recently published a report on greenwashing in practice. We previously reported on this: "Greenwashing: now defined, and upcoming regulatory enhancements". Greenwashing can be inadvertent and unintentional; it does not need to cause harm. It is therefore critical to perform due diligence in relation to counterparties to avoid greenwashing claims associated with such counterparties.
• The Law Society recently published additional guidance on climate change for solicitors. The guidance includes two main components, law firms and their presentation as environmentally sustainable, and climate change awareness amongst solicitors and the potential implications to the duty of care of solicitors in client advice.
• It is expected that the standards of the IFRS’ International Sustainability Standards Board (ISSB) may start to harmonise supply chain sustainability reporting. Law firms should be prepared to answer increasingly frequent and detailed client questions on environmental credentials, much like questions currently asked in relation to diversity and inclusion.

Can greenwashing be unintentional? 

• Greenwashing may not be deliberate. Inadvertent greenwashing can occur in various forms and can result from:
  • often ambiguous and ever evolving terminology;
  • varying levels of knowledge of employees involved in creating and communicating sustainability strategies;
  • the highly complex nature of sustainability reporting; and
  • the often complex and multijurisdictional nature of businesses with varying degrees of mandatory sustainability reporting across jurisdictions.

Mitigating the likelihood of greenwashing claims in respect of Net Zero

• Communicating transition plans is key for businesses with public net zero targets. It is important to be transparent about the barriers to addressing large systemic issues in relation to climate transition.

The NZLA is a cross-industry group committed to supporting the goal of Net Zero greenhouse gas emissions by 2050 or sooner. It also commits to amplify Race to Zero law firm membership including law firms in developing states and to support aligning commercial clients’ legal contracts and terms, and their enforcement, with Net Zero. Macfarlanes is an early and active member of the NZLA.