Understanding Greenwashing: How Do I Spot Misleading Sustainability Claims?

Many companies continue to use statements in their marketing and communications that are overly general, vague, outright misleading, or untruthful. Additionally, numerous problematic labels related to sustainability remain in use. This practice is known as greenwashing.

Greenwashing in marketing and advertising refers to claims about environmental impacts that are untruthful, deceptive, or misleading, and can therefore be considered unfair. These claims often assert a positive or reduced environmental impact or even suggest no negative impact at all. They are commonly made concerning climate-related impacts or in the context of a circular economy approach, such as recyclability of materials.

Terms like “climate-neutral,” “climate-positive,” “recyclable,” “green,” or simply “sustainable” are often used. Green claims appear across all aspects of our lives, from consumer products and services to financial products and investment opportunities. If such a claim is not properly founded, it is considered greenwashing.

Many product marketing claims have been retracted after it was revealed that products advertised as being made of recycled material were, in fact, only partially made from such materials – often just 60% or 70%. This is why we now see more and more specific claims such as “made of XY% recycled material.” On the other hand, recyclability of products has also sparked debate, as many products advertised as “recyclable” are not fully recyclable or require energy-intensive or chemical-heavy processes to be recycled. 

In addition to greenwashing, misleading communication practices related to social impacts have also been observed. “Pinkwashing” is used as an umbrella term for advertisements promoting a company’s commitment to supporting women, LGBTQIA+ communities, and diversity movements, even when this commitment is not reflected in reality. Specifically within the LGBTQIA+ diversity movements, the term “rainbow-washing” has also emerged. More recently, false or misleading claims generally based on societal aspects have been labeled “blue-washing,” especially when associated with the United Nations Development Goals. Here, “blue” refers to the color of the UN flag. 

According to a study by the European Union, more than half of all green claims give vague, misleading or unfounded information and around 40% have no supporting evidence. When it comes to sustainability labels and green-energy labels, the level of transparency differs vastly, with around half of all green labels offering only weak or non-existent verification. This situation is undermining consumer and investor trust when it comes to financial products. It also raises risk and compliance issues for companies using such labels. Therefore, it is important that companies, regulators, and consumers engage and move towards a more reliable system with trustworthy frameworks.

Many companies have a solid foundation to claim that their business, products, or services support the transition to a more sustainable economy, and they can provide evidence to back their green marketing. For example, if a company is on a credible net-zero emissions path that aligns with scientific frameworks and has external verification, communicating this is not greenwashing – it is a valuable marketing opportunity. The challenge for business partners and consumers lies in distinguishing between genuine claims and those that are unfounded or misleading. 

Substantiated means that any claim made around environmental impacts can be proven by using current state-of-the-art climate science approaches. The scientific consensus on climate science is developed internationally and bundled together by the Intergovernmental Panel on Climate Change, which is the United Nations body for assessing the science related to climate change. The Greenhouse Gas Protocol establishes comprehensive global standardized frameworks to measure and manage greenhouse gas emissions from private and public sector operations, value chains and mitigation actions. Companies rely on initiatives and service companies offering tools to define their best approach to climate impact measuring and reduction. SIX, for example, works with the Science Based Targets initiative (SBTi). SBTi is a corporate climate action organization that enables companies and financial institutions worldwide to play their part in combating the climate crisis. 

It is important to note that unfair competitive behavior, advertising with self-evident facts or with untrue facts, as well as communication around services and products omitting important information is already prohibited in existing competition and consumer laws.

Legislation and regulation specifically regarding greenwashing are currently under development worldwide. The most prominent one is the Green Claims Directive by the European Union that is currently in consultation. These new legislations and regulations have made or will soon make greenwashing illegal in the corresponding jurisdictions.

The proposal on green claims by the European Union aims to …

• … make green claims reliable, comparable, and verifiable across the EU;
• … protect consumers from greenwashing;
• … contribute to creating a circular and green EU economy by enabling consumers to make informed purchasing decisions;
• … help establish a level playing field when it comes to environmental performance of products.

In terms of financial services industries, the EU has already put in place a transparency framework: the Sustainable Finance Disclosure Regulation (SFDR). By setting out how financial market participants have to disclose sustainability information, the SFDR helps investors who want to support sustainability objectives make informed choices about where to put their money.

Switzerland has a self-regulatory approach in place in the financial industries and will update its Unfair Competition Act in 2025 with an addition regarding green claims. 

As an investor, business partner or customer it is important to check sustainability claims thoroughly. The six questions listed above can be helpful, as well as having a closer look at the offered scientific proof of the claims. It should rely on established verifications systems or labels with high credibility, such as the SBTi. Communication statements should not oversimplify complex issues. Limitations and scope should be made transparent, as well as the use of estimates, for example in CO₂ calculations.

CO₂ calculations should be based on measured emissions rather than on estimates. While estimates are still necessary in many cases, they should be aligned with widely recognized official sources and systems. Precise statements that include limitations or exact emission reductions are generally more credible than broad, general claims.