Greenwashing Under the Microscope: How Are Misleading Environmental Advertising Claims Regulated?

1. Introduction

Amid growing climate anxiety and increasing corporate investment in sustainability, concerns around greenwashing have extended beyond corporate marketing practices. Greenwashing is defined as ‘a PR tactic used to make a company or product appear environmentally friendly, without meaningfully reducing its environmental impact’ (Das, 2022). This definition highlights the broader legal and regulatory implications of greenwashing, particularly its intersection with misleading advertising, corporate disclosure obligations, and consumer protection.

Although widely used, greenwashing is not a new term. The term was coined in the 1980s by field biologist Jay Westerveld who criticised a hotel’s appeal to customers to reuse towels to ‘save the planet’, arguing that its underlying motive was to reduce laundry costs (The Sustainable Agency, 2025).

Growing public concern surrounding environmental issues has influenced consumers’ purchasing decisions, prompting companies to recognise the potential commercial benefits of environmentally friendly products. However, claims of environmental responsibility may be merely performative, with companies promoting environmental responsibility whilst concealing their contradictory practices. This concern is illustrated in the examples involving Volkswagen and McDonald’s, with both companies facing varying degrees of legal, regulatory, and public scrutiny over their environmental claims. In the case of Volkswagen, the company was subjected to extensive legal and regulatory action, whereas the McDonald’s example appears to relate more to public opinion and questions surrounding environmental messaging.

This piece traces the origins of greenwashing, examines the regulatory response in the UK and EU, and considers Volkswagen and McDonald’s as illustrative cases

2. Regulatory Responses

Greenwashing has become so embedded in advertising that genuine sustainability efforts are difficult to distinguish from misleading claims. In 2021, it was estimated that as many as 40% of green claims made online could be misleading (Competition and Markets Authority, 2021), a finding that suggests greenwashing cannot be treated solely as a matter of corporate ethics. Instead, legal and regulatory intervention is increasingly required.

Consequently, legal and regulatory measures have been introduced to improve the transparency of environmental claims and penalise misleading claims. For instance, in 2021, the UK Competition and Markets Authority (CMA) issued the Green Claims Code which sets out six principles to help businesses comply with the applicable consumer protection laws (Competition and Markets Authority, 2021).

 These principles require claims to be supported with credible evidence and full life cycle consideration through acknowledging the total environmental impact of a product (including manufacturing, use, and disposal). The Code also requires claims to be truthful and unambiguous. The introduction of the Code was an important step towards improving transparency and accountability in environmental advertising, increasing awareness of greenwashing.

Since then, the CMA has continued to strengthen its approach to tackling greenwashing. Under the  Digital Markets, Competition and Consumers (DMCC) Act 2024, which introduced new consumer protection provisions, the CMA now has direct enforcement powers against businesses that breach consumer law, including misleading environmental claims. These powers allow the CMA to impose fines on businesses without needing to pursue court proceedings (Competition and Markets Authority, 2025). These powers illustrate a shift from guidance-based regulation towards a stricter approach to consumer protection, which can also be applied to misleading environmental claims.

Similarly, the Financial Conduct Authority (FCA)which regulates the UK financial services industry, introduced an anti-greenwashing rule which came into force on 31 May 2024. The rule applies to all FCA-authorised firms within its regulatory scope and requires firms to ensure that sustainability related claims with respect to products and services are fair, transparent and not misleading (FCA Handbook, 2024, ESG 4.3.1R – Anti-greenwashing).

Similar measures have also emerged internationally, particularly within the European Union (EU) which has introduced several legislative initiatives to address greenwashing. These include Directive (EU) 2024/825 which prohibits generic environmental claims such as ‘eco’ or ‘green’, unless the legal requirements for using such terms are met (European Parliament and Council of the European Union, 2024).

In addition, in March 2023, the European Commission presented a proposal for the Green Claims Directive. The proposal places further emphasis on the requirement for companies to substantiate environmental claims with credible evidence (European Commission). Overall, the initiatives introduced by both the UK and the EU reflect a broader international shift towards stricter regulation of environmental marketing claims.

3. Case Studies

Regulatory developments have been shaped by earlier high-profile cases, which illustrate the legal, financial and reputational risks of misleading environmental claims. A prominent example is the Volkswagen ‘Dieselgate’ scandal of 2015 where the US Environmental Protection Agency (EPA) found that Volkswagen had installed software capable of detecting emissions tests and altering the car’s emission readings to appear significantly lower than the genuine figures. (The Guardian, 2015)

After the truth came out, Volkswagen recalled 8.5 million cars in Europe and 500,000 in the US, allocating almost €6.7 billion towards fines and other penalties (BBC News, 2015). Furthermore, in settlements and related payments, Volkswagen paid around $14.7 billion. (The Guardian, 2016). Volkswagen shares also fell substantially after the scandal was publicised (BBC News, 2015).

This incident became a defining example of how misleading environmental claims can create substantial legal, financial, and reputational consequences for businesses. Beyond vehicle recalls and regulatory penalties, the car giant faced extensive scrutiny from governments, investors, and consumers across multiple jurisdictions, calling for greater transparency in environmental reporting.

Around the same period, new and more reliable emissions testing procedures were introduced, including Real Driving Emissions (RDE) and the Worldwide Harmonised Light Vehicles Test Procedure (WLTP). These procedures are used to measure vehicle emissions and fuel consumption for regulatory purposes (European Commission, 2017). Dieselgate is frequently cited as an example of environmental misrepresentation, illustrating how attempts to inflate environmental credentials can ultimately result in severe long-term economic and reputational damage.

Whilst the Volkswagen incident demonstrated the consequences of calculated environmental deception, other companies have faced criticism with respect to the manner and style of communicating their sustainability efforts. In the UK alone, the fast-food chain McDonald’s uses 3.5 million straws every day, amounting to 1.3 billion per year (BBC News, 2018). In an effort to reduce waste, McDonald’s announced in 2018 that it would replace its plastic straws with paper ones. This change preceded the restriction on single-use plastic straws in England, which took effect in October 2020 (Department for Environment, Food & Rural Affairs, 2018).

Having made the change before the requirement came into force, McDonald’s arguably presented itself as ahead of the curve in its sustainable efforts, by presenting the new straws as ‘eco-friendly’. Although, the paper straws were recyclable, it was challenging to recycle them due to their thickness. They were subsequently disposed of as general waste. Conversely, the previous plastic straws were recyclable, raising questions about the comparative environmental benefits of the change. This highlights how a claim that a product is ‘eco-friendly’ may not necessarily reflect its genuine environmental impact. Overall, this case illustrates how selective presentation of information can create a potentially misleading impression for customers.

While these cases highlight the need for stronger measures against greenwashing, some argue that overly stringent regulations may create a ‘greenhushing’ effect, where companies with legitimate sustainability goals become reluctant to publicise their environmental efforts for fear of regulatory and reputational scrutiny (BBC News, 2025). Having said this, the deterrence effect of greenwashing regulation is arguably also a strength. By increasing the legal and financial risks associated with misleading environmental claims, businesses are encouraged to substantiate their claims before marketing them to customers, reducing the likelihood of environmental misrepresentation. Consequently, regulators must balance the need to protect consumers against the risk of discouraging credible sustainability-related information.

4. Conclusion

Greenwashing has evolved from a marketing concern into a significant legal and regulatory challenge at both national and international levels. Its continued prevalence warrants ongoing attention because misleading claims can distort consumer decision making and undermine environmental objectives. While regulatory frameworks like the CMA Green Claims Code, FCA rule, the DMCC Act, and EU consumer protection directives demonstrate important steps towards improving transparency and increasing accountability, high-profile cases such as Volkswagen and McDonald’s illustrate the risk of misleading environmental claims. These examples highlight the tension between sustainability marketing and measurable environmental performance.

Although concerns around greenhushing remain, the increasing deterrent effect of enforcement suggests a shift towards stricter policies on misrepresentation. Ultimately, effective regulation will be essential to ensuring that sustainability marketing reflects genuine environmental progress rather than unsubstantiated claims.

5. References

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