Key Impact Points
- Growing regulatory oversight: Greenwashing regulations in 25 jurisdictions are creating compliance challenges for multinational companies, especially in the U.S. and EU.
- Legal and reputational risks: Unsubstantiated sustainability claims expose companies to penalties and reputational damage, emphasizing the need for evidence-backed commitments.
- Global trends and strategies: The report provides a roadmap for navigating greenwashing risks, including compliance frameworks and best practices for transparency.
The Growing Challenge of Greenwashing
KPMG Law’s latest report, The Challenge of Greenwashing: An International Regulatory Overview, examines how evolving greenwashing regulations are impacting multinational companies. Covering 25 jurisdictions, including the U.S. and EU, the study offers key insights into compliance challenges and legal risks tied to unverified environmental claims.
“Organizations face a critical turning point in corporate environmental accountability,” said Maura Hodge, KPMG US Sustainability Leader. “With intensifying regulatory oversight and growing stakeholder demands for transparency, unsubstantiated sustainability claims now carry significant legal and reputational risks.”
Rising Regulatory Pressures
The report underscores the heightened scrutiny global companies face, especially under frameworks like the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). This directive compels companies to identify and mitigate environmental risks across supply chains, impacting U.S. firms operating internationally.
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“The message is clear: organizations must implement robust compliance mechanisms to verify and substantiate their sustainability initiatives,” Hodge emphasized. “Companies need to ensure their environmental claims are backed by clear evidence and accurate data to meet rising stakeholder expectations and regulatory requirements.”
Key Findings from the Report
The report provides an in-depth analysis of greenwashing risks, offering:
- A breakdown of common deceptive practices, such as misleading advertising and vague environmental labels.
- A framework to identify greenwashing risks at product, entity, and counterparty levels.
- Guidance on compliance strategies for navigating emerging regulations worldwide.
Consumer and Investor Expectations
Consumers, investors, and regulators are demanding transparency and accountability from companies making sustainability claims like “carbon neutral” or “net-zero waste.” While these terms communicate ESG commitments, KPMG warns that unsubstantiated claims can lead to accusations of greenwashing, which carry significant reputational and legal risks.
A 2023 KPMG UK study found that 50% of consumers are willing to pay more for sustainable products, reflecting growing public awareness of environmental issues.
Navigating the Regulatory Landscape
The report also highlights sector-specific challenges, particularly in financial services, where clear disclosure of climate transition plans and sustainability metrics is crucial.
Legal specialists across the 25 jurisdictions contributed to the report, illustrating trends in regulatory enforcement and private litigation. “Green claims and information on sustainability must be clear, not misleading, and substantiated in order to avoid greenwashing accusations,” the report states.
Final Thoughts
As sustainability becomes a competitive differentiator, companies must prioritize transparency and compliance. The global regulatory landscape, while still maturing, is evolving to enforce stricter measures against greenwashing, creating both challenges and opportunities for organizations worldwide.
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