In this write-up, we:
The term greenwashing has been often (mis)used by the media in recent months and years. But what is it, really? Greenwashing refers to the “process of conveying a false impression or misleading information about how a company’s products are environmentally sound. Greenwashing involves making an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly or have a greater positive environmental impact than they actually do.” Greenwashing thus involves a deceptive practice employed to present an environmentally responsible image while their operations or products do not actually meet the standards set by this email. In the worst cases, operations or products may even harm the environment.
In an era where environmental consciousness is on the rise, greenwashing has become increasingly prevalent as businesses seek to capitalize on consumer preferences for eco-friendly products and practices. This phenomenon involves various tactics, such as misleading advertising, exaggerated claims of sustainability, or the use of ambiguous terms that create a false impression of environmental stewardship. By leveraging greenwashing, companies aim to enhance their brand image and appeal to environmentally conscious consumers.
Greenwashing thus not only undermines consumer trust but may also pose a significant threat to genuine environmental progress by diverting attention and resources away from truly sustainable initiatives. As such, understanding and identifying greenwashing practices are essential for consumers, regulators, and environmental advocates to hold companies accountable and foster genuine sustainability efforts.
Western countries in particular have been taking action against greenwashing. Recent examples include:
Earlier in March 2024, news emerged that New York launched a greenwashing suit against the world’s largest beef Producer JBS. According to a statement announcing the lawsuit from the New York Attorney General’s office, the suit aims to stop the company from continuing to the “false and misleading marketing practices,” and to pay back the resulting “ill-gotten profits” in addition to penalties.
These are only some of the most infamous examples. Both activist groups such as Greenpeace as well as advertising regulators are carefully monitoring. Importantly, any scrutiny is under scrutiny, not only those which are traditionally “dirty” such as oil and gas. As such, in September 2023, an airline was convicted by a court for the misleading statement “fly carbon-free with us”.
For now, there is no reported case before any Malaysian court for greenwashing. However, Malaysian companies would be well-advised to not believe that this gives them a carte blanche when it comes to their public statements. The problem of greenwashing is gaining increased awareness in Malaysia, as is demonstrated by recent reports in Free Malaysia Today, The Malaysian Reserve and The Edge Malaysia.
At the end of 2023, there were also reports that the Borneo Project and Bruno Manser Fonds, two environment-focused civil society organisations, claimed that forest certification is being used to “greenwash” a timber conglomerate’s operations to “fool the international market.” Although this matter does not appear to have been pursued further, it shows that greenwashing is slowly yet steadily becoming more difficult in Malaysia.
Malaysian companies involved in international supply chains – whether as a direct supplier to a foreign company or merely acting as an indirect supplier – must also consider that their bad track record in the ESG domain could easily lead to a significant backlash abroad. When stories about environmentally damaging behaviours, forced labour, etc. become public, this will almost automatically lead to the termination of a supply agreement with the foreign purchaser. In some cases, when it results in more than “only” reputational damage for the foreign purchaser, it may also lead to an action by the purchaser against the supplier.
Either way, greenwashing only works on the short run. In the long run, it is not worth it.
This article was written by Prof. Dr. Harald Sippel and only contains general information. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. Prof. Dr. Harald Sippel is admitted to the Austrian Bar as Rechtsanwalt and to the Malaysian Bar as a Foreign Lawyer. He regularly provides advice to European and Malaysian companies on matters of ESG.
