What is greenwashing? A guide for businesses

August 18, 2023

If you're a business owner, you need to be careful about the environmental claims you make.

We get it: It's tempting to use environmental themes and claims in your marketing. This is especially true when you can charge a premium for green products and services.

But recently, regulators across the world have been cracking down on misleading environmental claims, otherwise known as greenwashing. The scope of what is considered greenwashing is much broader than most businesses understand — and, as we'll discuss below, the penalties can be steep.

Let's dive in!

W‍hat is greenwashing?

Greenwashing occurs when businesses make false claims about the sustainability of their product or service. For example, it would be greenwashing to state that you are a net zero business when you haven’t taken steps to understand your footprint.

Greenwashing can also occur when a business uses green marketing techniques to suggest sustainability — such as the all-too-common images from nature — without adopting sustainable business practices.

While the term greenwashing was invented in 1986 by Jay Westerveld, the practice has been around for as long as consumers have cared about environmental issues.\

How common is greenwashing?

The practice of greenwashing has grown alongside consumer demand for eco-friendly products.

It's common to associate greenwashing with large polluters, such as oil companies. But instances of greenwashing are also common with smaller businesses — sometimes inadvertently.

In 2022, the Australian Competition and Consumer Commission found that 57% of Australian businesses made potentially misleading environmental claims.

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Why is greenwashing a problem?

Greenwashing is a problem because it undermines consumer trust and confidence in businesses' sustainability claims. When companies engage in greenwashing, they deceive consumers who are seeking environmentally friendly products or companies.

This can lead to disillusionment and scepticism among consumers, making it harder for businesses that are genuinely committed to sustainability to differentiate themselves.

Greenwashing can also be bad for the environment. When companies mislead consumers with false claims of environmental friendliness, it can divert attention and resources away from truly sustainable practices. This can hinder progress toward a more sustainable future and contribute to the perpetuation of environmentally harmful practices.

Types of greenwashing

Greenwashing can be done to both products and businesses as a whole. For example, a manufacturer might claim that a soap was made from entirely organic materials. The manufacturer might also claim that their entire business model is based on environmentally sound practices.

These two examples of greenwashing are known as 'claim greenwashing.'

But there is another kind of greenwashing where no specific claims are made, but where an impression of sustainability is still created through marketing and communications. For example, a bottle of shampoo might use images of whales or dolphins. A business might also use images from nature in their marketing.

This is known as 'executional greenwashing.'

This gives us four forms of greenwashing, originally outlined in this academic paper by Sebastião Vieira de Freitas Netto et al. The language here is a little technical, so let's go over this in a bit more detail.

  • Firm-level executional greenwashing: These are the tactics companies use to create an illusion of environmental friendliness through their marketing. This can include using imagery or language that evokes nature or sustainability without providing any concrete evidence of their environmental efforts.

  • Firm-level claim greenwashing: This involves companies making unsubstantiated or exaggerated claims about their environmental performance or initiatives. This can include stating that a company is "carbon-neutral" without providing any evidence of carbon offsets.

  • Product-level executional greenwashing: This occurs when when companies use misleading packaging, imagery, or language to convey the impression that their products are environmentally friendly. This can include using images of nature or natural elements on packaging, even when the product itself may not be environmentally friendly

  • Product-level claim greenwashing: This involves companies making false or exaggerated claims about the environmental benefits of their products. This can include stating that a product is "100% recyclable" when only a small portion of the product can be recycled.

How to avoid greenwashing

Don't make inaccurate claims

It's all-too-easy when marketing a product or service to exaggerate the benefits. While it's OK to put your best foot forward, you should never make claims that are inaccurate.
If you're tempted, just remember: Consumer watchdogs — and consumers themselves — are increasingly taking a close look at green claims. The risks simply aren't worth the reward.

Have evidence for your claims

It's OK to make environmental claims in your marketing. But when you do, make sure you have evidence to back them up.

The nature of this evidence will depend on the claims you make. As a rule, you should consider documenting any relevant business practices. You can also use third-party services, certifications, and tools to provide data.

Tools like CarbonTrail have the additional benefit of being useful for providing data to stakeholders and customers, who are increasing asking for data so they can calculate their supply chain emissions.

Make your claims easily understood

Environmentalism is, at heart, rooted in science. This comes with a lot of technical terms and jargon that ordinary consumers don't understand.

It's OK to use technical language if you need to, but you must also make sure that the average consumer understands what you're trying to say.  

Remember: technical language shouldn't make consumers think your business is more sustainable or environmentally friendly than it really is. If it does, it's likely to be seen as greenwashing.

Don't hide the truth in the fine print

Perhaps the sneakiest greenwashing tactic is to tell the truth — but only in text that most consumers will never read. This allows businesses to make deceptive claims, but then walk them back in the fine print.

Even though the truth is technically present, this is greenwashing because most consumers will have a misleading impression about your green credentials.

Explain all qualifications to your claims

Avoid making environmental marketing claims if there are major qualifications or hidden trade-offs that aren't explained to the consumer.

For example, you can't claim to be made from 100% recycled content if this is only true for a small component of your product.

Be careful with comparative claims

It's common in marketing to compare your product with a competitors in favourable terms. But you should always make sure you are comparing products that are actually comparable in the eyes of consumers.

By way of example, let's say a soft drink manufacturer produced a 400ml bottle of lemonade and claimed to use less plastic than its competitors. If its competitors only produced lemonade in larger 600ml bottles, then this would likely be greenwashing.

Don't use misleading images

Some of the most effective greenwashing doesn't use words at all. Many green advertising campaigns use images from nature, such as trees, oceans, and animals.

It's fine to use these images, but only if they don't mislead consumers about your green credentials.

Don't predict the future without evidence

Some businesses bolster their sustainability credentials by making claims about how green they will be in the future. It has become common practice for countries to do this, too.

For example, you might promise to create entirely sustainable products by 2030, or be net zero by 2035. This might offer you a competitive advantage — but if there's no evidence to suggest you are concretely making progress on these claims, then it is greenwashing.

Avoid vague claims

Green marketing is, like all marketing, ripe with vague promises and cliches. Most of these cliches don't actually mean anything.

Terms like 'eco-friendly', 'good for the planet,' or 'better for the environment' sound great, but are effectively meaningless. And if you don't have any evidence to support them, then it may be greenwashing to use them.

Greenwashing and the law

Greenwashing is increasingly risky for businesses. Not only are consumers now wary of green claims, but so too are regulators. round the world, regulators have started to prioritise greenwashing claims — and the penalties are becoming very stiff.

Here's a quick rundown of regulators around the world, their guidance, and penalties you could face for greenwashing. Note: We’re not lawyers, and this is not legal advice.

The United Kingdom

The regulator

In the United Kingdom, the Competition and Markets Authority (CMA) has the authority to take legal action against companies that engage in misleading or deceptive environmental claims.

The CMA has published guidelines that provide businesses with advice on how to ensure their environmental claims are accurate and clear. Failure to comply with these guidelines can result in enforcement action and financial penalties.

The guidance

The UK haver published guidance here: Making environmental claims on goods and services.

The CMA have also produced a nice video summarising their guidance


If a business does not comply with consumer protection law, the CMA and other bodies, such as Trading Standards Services, can bring court proceedings. In some cases, businesses may be required to pay redress to any consumers harmed by the breach of consumer protection law."

- The Competition and Markets Authority

New Zealand

The regulator

In New Zealand, the Fair Trading Act prohibits false or misleading representations about goods and services, including environmental claims. The New Zealand Commerce Commission is responsible for enforcing these laws and can take legal action against companies that engage in greenwashing.

The guidance

The Commerce Commission have published guidelines here: Environmental claims guidelines.


"There are serious penalties for breaching the Fair Trading Act – companies can be fined up to $600,000 and individuals up to $200,000 per breach. A penalty can also damage your business’ reputation."

- The New Zealand Commerce Commission


The regulator

In Australia, the Australian Competition and Consumer Commission (ACCC) has the authority to take action against businesses that engage in misleading or deceptive conduct, including false or exaggerated environmental claims. The ACCC has published guidelines to help businesses understand their obligations and comply with the law.

The guidance

The ACCC has published draft guidelines here: Environmental and sustainability claims - Draft guidance for business.


"False and misleading representations are more serious than general misleading and deceptive conduct and, where criminal proceedings are taken, can carry serious penalties under the ACL (Australian Consumer Law) —including fines of up to $1.1 million."

— The Australian Competition and Consumer Commission

The United States

The regulator

In the United States, the Federal Trade Commission (FTC) is responsible for enforcing laws related to false or misleading advertising, including environmental claims and greenwashing practices.

The FTC has issued guidelines known as the Green Guides, which provide businesses with guidance on how to make accurate and truthful environmental claims. Violations of these guidelines can result in enforcement actions and financial penalties.

The guidance

The FTC has published a series of guidelines known as Green Guides here: FTC’s Green Guides


Under new draft guidelines, the FTC will be able to seek $50,120 "per violation" of a formal rule.

The European Union

The regulator

In the European Union, the European Commission holds the authority to initiate actions against businesses involved in misleading or deceptive practices, which encompass false or exaggerated environmental assertions.

The guidelines

The EU has proposed a new law to address greenwashing, which you can read here.


The proposed law says:

"The maximum amount of fines should be dissuasive and set at least at the level of 4% of the trader’s total annual turnover in the Member State or Member States concerned in case of widespread infringements."

— Directorate-General for the Environment, European Union

How to spot greenwashing as a consumer

As a consumer, it is important to be able to identify greenwashing and make informed purchasing decisions. Here are some tips to help you spot greenwashing:

  • Look beyond the packaging: Don't rely solely on the packaging or marketing materials. Look for specific information about the environmental benefits of the product or the company's sustainability practices.

  • Check for environmental certifications: Look for recognised third-party certifications that validate a company's environmental credentials. These certifications can provide assurance that the product or company has met specific environmental standards.

  • Research the company: Take the time to research the company's sustainability practices and initiatives. Look for transparency and evidence of meaningful environmental efforts.

  • Be sceptical of vague claims: Be cautious of claims that use vague or undefined terms like "green" or "natural." Look for specific details about what makes the product environmentally friendly.

  • Compare with competitors: Compare the product's sustainability claims with similar products from other brands. If a product's claims seem too good to be true or significantly better than competitors, it may be a red flag for greenwashing.

  • Look for evidence of tradeoffs: Consider whether the company acknowledges any tradeoffs or negative environmental impacts associated with their products or operations. A truly sustainable company will be transparent about areas where they are still working towards improvement.

  • Trust your instincts: If something seems too good to be true or feels misleading, trust your instincts. Take the time to dig deeper and ask questions to ensure that you are making an informed decision.

By being aware of the tactics used in greenwashing and taking a critical approach to environmental claims, consumers can make more informed choices and support companies that are genuinely committed to sustainability.


What is the difference between green marketing and greenwashing?

Green marketing involves promoting the environmental benefits of a product or company in a truthful and transparent manner. It aims to educate and inform consumers about the sustainability attributes of a product or company. Greenwashing, on the other hand, involves making false or misleading environmental claims to deceive consumers into believing that a product or company is more environmentally friendly than it actually is.

Is greenwashing illegal?

In many countries, including the United States, the United Kingdom, Australia, and New Zealand, greenwashing is considered deceptive or misleading advertising and is subject to legal action. Regulatory bodies, such as the FTC in the United States, have guidelines and regulations in place to prevent false or misleading environmental claims.

Why is it called greenwashing?

The term "greenwashing" is derived from the term "whitewashing," which means using false information to conceal wrongdoing or make something seem less bad than it is. "Greenwashing" is used to describe the practice of using false or misleading environmental claims to make a product or company appear more environmentally friendly or sustainable than it actually is.

What is bluewashing?

Bluewashing is a term used to describe the practice of companies portraying themselves as environmentally friendly or sustainable by focusing on their water conservation efforts. It is similar to greenwashing but specifically refers to companies that make exaggerated or false claims about their water conservation practices to create a positive image.

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