What is greenwashing?

Greenwashing is a practice whereby a company or organisation misleadingly conveys the impression that its products, services or operations are sustainable or environmentally friendly, without backing this up with facts, evidence or real actions.

Various international organisations have defined greenwashing as follows:

European Commission: "Consumers can be misled by unreliable environmental claims and companies can create a false impression about their environmental impact or benefits - a practice known as greenwashing."

Global Reporting Initiative (GRI): "Greenwashing is tantamount to fraud: it misleads stakeholders, markets and consumers - and must be stopped. Exaggerating sustainability efforts should be viewed on the same level as exaggerating revenues or profits, as both can be equally damaging to investors and public confidence."

United Nations Organisation (UN): "Greenwashing promotes false solutions to the climate crisis that distract attention and delay concrete and credible action."

Organisation for Economic Co-operation and Development (OECD): "Greenwashing refers to unsubstantiated or possibly inauthentic claims about the environmental benefits of a product or service, often in the form of exaggerations."

International Monetary Fund (IMF): "Greenwashing is defined as when companies with poor environmental performance issue green bonds, misleading investors about their actual sustainability."

European Supervisory Authorities (ESAs): "Greenwashing is a practice where sustainability claims, actions or communications do not clearly and accurately reflect the true sustainability profile of a financial entity, product or service, misleading consumers and investors."

The ISAs do not contain a specific definition of greenwashing, but auditors need to be aware of the risks associated with unsubstantiated or misleading sustainability claims, particularly in the context of ISSA 5000 sustainability assurance engagements.

The ISO Standards also do not provide an explicit definition of greenwashing. However, some ISO Standards, such as ISO 14021 and ISO 14001, set requirements and guidelines that help to prevent greenwashing practices by promoting clear and verifiable communication of organisations' environmental performance. ISO 14021 provides guidance on the correct use of environmental claims such as "reusable" or "biodegradable". The standard emphasises that environmental claims should not be vague, ambiguous or without factual support, thus helping to reduce the risk of greenwashing. ISO 14001 establishes a framework for implementing an effective environmental management system. Although it does not define greenwashing, the standard promotes transparency and continuous improvement of environmental performance, indirectly helping to prevent misleading claims.

Why is it important for businesses?

In a market where consumers and investors demand real responsibility for sustainability, greenwashing is immoral and risky.

Firstly, intentional or unintentional misleading of the public can attract legal sanctions, damage reputations and lead to investor withdrawal.

Second, current European regulations require standardisation and transparency in ESG reporting. Through the CSRD (Directive (EU) 2022/2464), the SFDR (Regulation 2019/2088) and the forthcoming Green Claims Directive, companies must substantiate their sustainability claims with verifiable data, audits and clear methodologies. Also, Directive (EU) 2024/825, regulates the commercial and marketing practices of companies, ensuring transparency and accuracy of sustainability information. The Ministry of Economy, Entrepreneurship and Tourism and the National Authority for
Consumer estimates that the transposition of the Directive's provisions into Romanian law will be realised by early 2026.  

Hypothetical example

A fashion company is launching a collection of "eco" clothes, promoting them as made from recycled materials. But the label indicates a very low percentage of recycled material, and the production process involves the same emissions and poor labour conditions. Without clear documentation and traceability, this campaign could be seen as greenwashing - even if there is a grain of truth to the claim.

Real example

One notorious case of greenwashing involved Volkswagen, which promoted certain car models as "clean" and "environmentally friendly" while using software that manipulated emissions tests. The Dieselgate scandal had major legal and financial implications, and remains an example of how an environmental communications strategy without real cover can seriously damage a company.

How can companies avoid greenwashing?

To avoid the pitfalls of greenwashing, some recommendations are that it is beneficial for companies to ensure that all environmental claims are specific, verifiable and backed up with evidence, and to use internationally recognised reporting standards such as GRI, ISO 14001 or EU Taxonomy. It is also recommended to avoid ambiguous or hyperbolic language such as "100% green" without context and data. It is advisable to adopt an honest approach: if a product is only partially sustainable, make this clear.