New research from ESG data technology company RepRisk shows a 12% decrease in greenwashing risk globally across all sectors during the year ending in June 2024. This is the first such decrease in six years.
RepRisk’s third annual greenwashing report finds this is likely the result of increased regulatory measures and companies engaging in greenhushing out of fear of pushback from stakeholders, especially consumers, investors, and regulators.
It is clear that regulation has had an impact on the overall downward trend. The UK saw a relatively modest reduction in incidents of 4%, whereas there was a 20% decline in the EU, which led the regulation wave based on the sheer volume of legislation that went into effect in the past 12 months. For example, the EU’s Green Claims Directive mandates that companies substantiate their environmental claims with robust evidence, contributing to a reduction in incidents across the continent.
Meanwhile, in the U.S. which has less regulation, greenwashing peaked in 2022, with 503 incidents – a 35% year-over-year increase from 2021. This was followed by a 10% decline in 2023 and a 6% rise in 2024. One possible explanation for the divergence in the US is the increasing politicization of ESG. The earlier decline may be linked to companies and funds becoming more cautious about promoting their green credentials, responding to pressure from investors, state attorneys general, and other state-level political figures opposed to considering ESG criteria in investments.
“Stakeholders are more aware of greenwashing risk than ever before,” said Dr. Philipp Aeby, CEO and Co-Founder of RepRisk. “While regulators have successfully pushed forward legislation to deter greenwashing, the risk will keep evolving as new forms emerge, leaving companies open to reputational damage which impacts their bottom line. Greenwashing is often driven by corporate narratives. To uncover it, investors and companies should rely on what external sources reveal about these claims.”
But, while the prevalence of incidents has fallen, the number of severe greenwashing cases has increased by 30%. Severity is measured by the consequences of the incident–environmental repercussions relative to green claims; the extent of the impact; and whether the risk incident was caused by accident, negligence, or intent.
The report also signals a significant shift in the greenwashing landscape of banking and financial services. While the sector experienced a 70% increase in climate-related greenwashing from 2022 to 2023 – a trend also reflected in a report from the European Banking Authority published this summer – new RepRisk data reveals a 20% decrease in incidents globally across the sector from 2023 to 2024. Just over a third (36%) of financial companies linked to greenwashing last year were also linked to greenwashing in 2024, slightly above the 30% average across all sectors.
