EU action on corporate greenwashing

Consumer concerns around corporate environmental claims and potential greenwashing will be countered in the EU by new rules on sustainability claims for products. The European Commission announced its intention to bring in tight anti greenwashing regulation in 2022 and the new rules have been agreed following consultations involving EU member states and the European Parliament. 

The measures will come into effect in 2026. Among them will be ban on climate-neutral claims for products if this involves impact off-setting. Other environmental claims, and the use of prefixes such as “eco”, will have to be backed up by evidence. The regulations will also require product lifetimes to be included on labelling.  

The future risks for investment in the plastics sector have been well documented but new research from Planet Tracker into 39 big plastics companies finds that most do not link executive pay to sustainability metrics. The Plastics Executive Compensation report calls for performance related pay, sustainability to be a key metric and for the two to be linked. While all the companies have sustainability policies less than half have science-based targets. 

Planet Tracker says that there is too much reliance on downstream solutions to the plastic pollution problem, such as reuse, refill and recycle. Moreover focus on just recycling is described as an implausible strategy. Instead, a credible transition to lower corporate risk should involve more upstream solutions replacing fossil-fuel-based feedstocks.   

The UK government has long boasted about its international leadership on tackling climate change and the ambition in its 2030 and 2050 emissions and net zero planning. On the face of it, however, this seems to be no longer the priority it was. The UK prime minister, Rishi Sunak, has announced that a ban on new petrol and diesel cars will be pushed back five years to 2035. Targets for phasing out fossil fuel powered heating and energy efficiencies are to be weakened. 

The announcements have been hit with a storm of protest from business groups, politicians from across political parties, international leaders and environmental groups. UK Green parliamentarian Caroline Lucas commentated that the government’s proposals had had the unprecedented achievement of uniting green activists and car manufacturers. Industry representatives were quick to condemn the government U-turn as simply causing uncertainty – across business sectors companies have been working towards de-carbonising at the timetable the government had previously put in place. The automotive sector has invested huge sums on the basis of all-electric new vehicles by the end of the decade. The UK government’s official climate advisers, the Climate Change Committee, had said that the UK had not been on track to meet its commitments and that these changes will take the country further away from the necessary pathway. 

The Equitable Earth Coalition initiative was launched at New York Climate Week by the founding members of the Peoples Forest Partnership. This new coalition aims to work with indigenous peoples, local communities and government in developing economies to drive finance directly to communities to halt deforestation and protect biodiversity. It will achieve this through developing a new voluntary carbon market standard and platform. These will be developed in partnership with communities to deliver transformative finance to fund their development priorities. 

The coalition says that the new standard will be based on transparency and rigorous due diligence in measuring carbon, societal and biodiversity impacts. It will be designed to nest into national forest carbon programmes that contribute to global climate commitments, and holistic by driving investment both to stop deforestation and to preserve and restore forest ecosystems.   

There are more changes at the Science-Based Targets initiative. The organisation has been announcing a series of policy updates and improvements in response to criticisms around transparency and rigour of approach. The initiative will be splitting its target validation and target setting functions as well as formally incorporating as a company in the UK, with plans to set up as a charity in the near future. In addition, a new chair and independent trustees have been appointed to help oversee the process. 

The creation of separate entities for standard setting and validation is, the SBTi says, in line with recognised best practice for assurance bodies. The two will, at least initially, remain closely linked. And, there will be strengthening in the standard setting procedures, again in line with recognised best practice, according to SBTi. A driver behind the process of change is the need for the organisation to scale up – there was an increase of 87% in the number of companies setting targets with SBTi in 2022. In total there are more than 3,300 companies working with the organisation, with an estimated 10,000 potentially on board by the end of 2025.  

The International Energy Agency has predicted that the peak demand for fossil fuels will be later this decade, with the overall increase in global energy demand being met a surge in development of renewable energy solutions. However, the pace of change is insufficient to meet the Paris accords 1.5C pathway, the IEA says. This is the first time that a future drop in demand for oil, coal and gas power has been predicted. The agency also says that the predictions are based on current policy and proposals and don’t take into account any increased climate commitments over the next few years. 

The growth in heat pumps, the switch to renewable power and the forced accelerated transition away from Russian natural gas because of the invasion of Ukraine are among the factors driving the overall move away from fossil fuels. Extreme weather events may interrupt the overall trend – given that heatwaves push up short term demand for electricity and periods of drought impact hydropower. 

There is a growing number of companies that are describing themselves as plastic neutral by purchasing so-called plastic credits, units that are traded and that represent a tonne of plastic waste that’s been removed from the environment. The credits are designed to complement a company’s internal plastic reduction strategies at the same time as providing funding for waste collection in developing economies, where provision of such services is often patchy at best. 

So, how does it work? In essence a company can buy these credits so that there is a balance between the mass of plastic in products it sells and the mass of the plastic offset that it funds. Unsurprisingly, environmental groups are sceptical not least because focus is shifted from reducing plastic use to managing its use – and given there is no incentive to actually cut plastic use many accuse the process of being greenwashing. However, there’s no doubt that dealing with waste in the developing world is a significant problem and there is certainly potential for proper additionality – in other words the plastic collected via the projects funded by the credits would otherwise almost certainly remain in the environment.