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In the first article of the series, which explored What greenwashing risks mean for the legal profession, we outlined the key principles that legal and risk management professionals are to follow to mitigate such risks. These include:
1. Making accurate and truthful claims
2. Explaining conditions or qualifications
3. Using clear and understandable language
4. Ensuring accountability in the value chain
In this article, we take it a step further, delving into the best practices and reviewing real-life case studies for two of the principles: (1) making accurate and truthful claims, and (2) explaining conditions and qualifications to sustainability-related assertions. We also highlight how adopting globally recognised reporting frameworks, such as the GRI Standards, can help businesses to enhance transparency, reduce the risk of greenwashing, and improve stakeholder trust.
When making any environmental claims, businesses should ensure that:
1. The claim constitutes a verifiable environmental statement;
2. It is backed by scientific evidence; and
3. Consumers can assess and examine the claim against competitors.
It is imperative that marketing materials and ESG disclosures provide or direct consumers to the evidence that backs up the claims made, especially for any comparative statements — like ’greater energy savings’ or similar. Here, clear and transparent communication plays a key role, helping to prevent consumer misinterpretation.
Case study: UK Advertising Standards Authority (“ASA”) ruling on Wizz Air
Allegations: By stating that it is ’one of the greenest choices in air travel’, Wizz Air, a Hungarian airline, has violated UK advertising rules.
Basis for ruling: Although the airline provided evidence for the claim made, the advertisement itself did not include sufficient information for consumers to analyse it or compare the claim with those made by competitors.
Wizz Air’s defense: For their defense of the statement, Wizz Air submitted documentation proving that the airline:
Counter-arguments: The ASA acknowledged that the claim was based on the type of aircraft used, and the carbon emissions per passenger measured in carbon emissions per number of seat kilometers flown by paying passengers. However, the issue was that the company did not include that same information in the advertisement itself, and the evidence was only produced in response to the investigation.
Outcome: In the end, the advertisement was prohibited, and Wizz Air was warned to ensure that any environmental claims made in the future are transparent, include verifiable evidence and provide sufficient information for consumers.
Explaining conditions or qualifications to sustainability-related assertions
To minimise the risk of making any misleading or ambiguous claims, companies should:
1. Disclose any caveats or limitations prominently; and
2. Ensure that sustainability-related goals are both credible and verifiable.
Both of these considerations should be integrated into due diligence and compliance processes in order to prevent misstatements.
Allegations: By overstating the ESG screening process for its Ethically Conscious Fund, Vanguard has allegedly misled investors and violated Australia’s financial services law.
Vanguard’s representations to the public: Vanguard made the following statements to potential investors that were deemed to be false or misleading:
Findings: In broad terms, Vanguard’s representations were viewed by ASIC to be false or misleading because:
Outcome: Vanguard was penalised A$12.9 million. Mitigating factors, including self-reporting and corrective actions, reduced the original penalty of A$21.6 million initially sought by ASIC.
A key takeaway from this example is that any aggravating and mitigating factors must be included in the company’s internal compliance systems, ensuring that appropriate measures are in place for disclosures to accurately reflect the ESG characteristics of products and services. That way, issues can be identified and addressed quickly.
Read also: Rising threat of AI in creating child abuse material
The fact that Vanguard received a 25% discount on the penalty because the company self-identified and self-reported the issue, as well as cooperated promptly and constructively with the ASIC investigation and court proceedings, demonstrates the value of ensuring that authorities are promptly alerted should an incident occur. The organisation also needs to be able to demonstrate its remedial efforts effectively.
As illustrated, both case studies highlight the importance of transparency, accountability, and verifiability of ESG claims. Sustainability reporting — especially when aligned with globally recognised reporting standards such as GRI’s — provides a structured approach to achieving these goals.
How international standards, such as the GRI Standards, add value:
By embracing internationally recognised standards, such as the GRI Standards, businesses can also build credibility, avoid pitfalls, and contribute to a more sustainable and transparent marketplace. As the regulatory landscape around greenwashing continues to tighten, organisations that prioritise credible and evidence-based sustainability reporting will be better positioned for long-term success.
Elsa Chen is Co-Head of Allen & Gledhill’s ESG & Public Policy Practice and Regional Co-Head of its Competition & Foreign Investment Review Practice. Elsa’s ESG and public policy experience ranges from assisting clients to map out ESG trends and implications, policy drafting, advocacy, and assisting on legislative changes. She also assists clients in navigating greenwashing and ESG due diligence risks, and the antitrust aspects of ESG. Elsa regularly assists clients in complex antitrust and foreign investments review matters in Singapore and beyond, including merger control, global cartel and abuse of dominance investigations.
Allinnettes (Ally) Adigue has led the Global Reporting Initiative (GRI) in the ASEAN region since 2018. Based in Singapore, she oversees the team responsible for engagement and collaboration with Southeast Asian stakeholders and companies to create a conducive environment for sustainable business and sustainability reporting practices. Prior to GRI, Ally worked in both the public and private sectors in Australia, Philippines and Singapore. She has a PhD in Public Policy from the Crawford School of Public Policy (Australian National University). She also holds two Masters: in Development Studies (Erasmus University, The Netherlands); and Public Administration (Lee Kuan Yew School of Public Policy, Singapore).
