What are the most common forms of greenwashing?

Common forms include vague or undefined claims ('eco-friendly,' 'sustainable,' 'green' without substantiation), hidden trade-offs (highlighting one green attribute while ignoring larger impacts), misleading imagery (nature scenes in marketing for polluting products), irrelevant claims (advertising the absence of substances already banned by law), and false labels or certifications. 'Greenwishing' — setting ambitious targets without credible plans — has also become a major concern, particularly around net-zero commitments.

Is greenwashing illegal?

Increasingly, yes — and enforcement is getting teeth. The EU's Empowering Consumers Directive takes effect in September 2026, banning generic environmental claims and offset-based 'climate neutral' product claims. The UK's CMA gained direct fining power (up to 10% of global turnover) in April 2025. DWS was fined €25 million by German prosecutors in April 2025 for greenwashing its ESG fund credentials. In the US, the FTC's Green Guides provide the basis for enforcement, though the current administration has deprioritized climate-related enforcement.

What happened to the EU Green Claims Directive?

The European Commission withdrew the Green Claims Directive proposal in June 2025, just before final negotiations were set to begin. The withdrawal was driven by political concerns about regulatory burden on businesses, aligned with the broader EU simplification agenda that also scaled back the CSRD. However, the Empowering Consumers Directive (already adopted) still bans generic green claims and offset-based carbon neutrality claims from September 2026.

How can investors identify greenwashing?

Look for specificity: credible sustainability commitments include concrete targets, timelines, baseline measurements, and interim milestones. Be skeptical of companies that set distant net-zero targets without near-term reduction plans, report only favorable metrics while omitting others, rely heavily on offsets rather than actual reductions, or join voluntary coalitions without making material changes. Third-party assurance and alignment with frameworks like the GHG Protocol and SBTi are positive indicators.

What is Greenwashing?

Why It Matters

Greenwashing isn't a PR problem — it's a systemic threat to the credibility of sustainability work. When companies make misleading environmental claims, they erode public trust, distort markets, disadvantage competitors who are genuinely investing in sustainability, and slow down the transition to a lower-carbon economy.

The scale remains significant. The European Commission's 2021 screening found over 40% of online green claims were exaggerated, deceptive, or false. The phenomenon ranges from minor product marketing exaggerations to serious misrepresentations in investor communications and sustainability reports.

What's changed in 2025–2026 is the consequences. DWS, Deutsche Bank's asset management arm, paid €25 million to German prosecutors in April 2025 to settle greenwashing charges — on top of a $19 million SEC settlement in 2023 for the same underlying conduct. Airlines across Europe have been forced to drop "carbon neutral flying" claims after regulatory challenges. The UK's Competition and Markets Authority gained the power to directly fine companies up to 10% of global turnover for misleading green claims. And the EU's Empowering Consumers Directive, taking effect September 2026, will ban generic green claims and offset-based "climate neutral" product marketing across the entire European market.

At the same time, the regulatory picture has become more complex. The EU withdrew its standalone Green Claims Directive in June 2025, and the US federal government has largely stepped back from climate-related enforcement. The result is a patchwork: strong enforcement in some jurisdictions, retreat in others, and growing private litigation filling the gaps.

The Enforcement Picture

Europe: Tightening Despite Simplification

The EU's approach to greenwashing enforcement is a study in contradictions. On one hand, the Commission withdrew the Green Claims Directive and significantly scaled back the CSRD under the Omnibus I package. On the other, the Empowering Consumers Directive — already adopted and entering force in September 2026 — represents the most sweeping anti-greenwashing regulation anywhere in the world.

Starting September 2026, the Empowering Consumers Directive will:

Ban generic environmental claims ("eco-friendly," "green," "sustainable") unless backed by recognized certification schemes
Prohibit offset-based carbon neutrality claims for products — companies can no longer call a product "climate neutral" based on purchased carbon offsets
Require durability and repairability information to prevent misleading claims about product longevity
Ban misleading environmental labels that aren't based on official certification or established by public authorities

Member states must transpose the directive into national law by March 2026 and apply it from September 2026. No transition period for claims already in the market.

The DWS Case: A Landmark

DWS's greenwashing saga became the most prominent enforcement case in the financial sector. After whistleblower Desiree Fixler alleged in 2021 that DWS overstated how it integrated ESG factors into investment decisions, investigations followed on both sides of the Atlantic. The SEC settled for $19 million in 2023. German prosecutors levied a €25 million fine in April 2025. The total cost — financial, reputational, and in management distraction — dwarfs the fines themselves.

The DWS case established that financial greenwashing will be pursued by multiple regulators simultaneously, and that the consequences extend well beyond marketing corrections.

United Kingdom: New Teeth

The UK's CMA gained direct enforcement power in April 2025 under the Digital Markets, Competition and Consumers Act. It can now impose fines of up to 10% of global annual turnover for misleading environmental claims — without needing to go through the courts. The FCA's anti-greenwashing rule, in effect since November 2024, requires that sustainability-related claims by FCA-regulated firms be "fair, clear, and not misleading."

United States: Federal Retreat, State Action

The federal picture in the US has shifted markedly. The Trump administration's SEC has deprioritized climate-related enforcement, and the FTC has not signaled updates to the Green Guides (last revised in 2012). However, state-level action continues. California's climate disclosure laws remain on the books, and state attorneys general have pursued greenwashing cases against energy companies and consumer brands.

Private litigation has also increased, with class action lawsuits targeting companies for misleading sustainability marketing. The legal theory that greenwashing can constitute securities fraud or unfair business practices is gaining traction in US courts.

The Taxonomy of Greenwashing

Vague claims remain the most common form. Terms like "eco-friendly," "natural," "green," and "sustainable" appear everywhere without specific definitions or evidence. The EU's September 2026 ban on unsubstantiated generic claims will force a fundamental rethink of consumer marketing in Europe.

Hidden trade-offs present a narrow benefit while ignoring the bigger picture. A product marketed as "made from recycled materials" whose manufacturing process is energy-intensive and polluting. An electric vehicle company emphasizing zero tailpipe emissions while sourcing batteries from supply chains with severe environmental and labor concerns.

Net-zero theater has become the corporate-level equivalent. Companies set 2050 net-zero targets without interim milestones, capital allocation plans, or credible transition strategies. They join voluntary coalitions to signal commitment without changing their business models. This is perhaps the most damaging form of greenwashing because it creates the illusion of collective action while delaying real change.

Financial greenwashing involves misrepresenting the sustainability characteristics of investment products. Despite the DWS enforcement actions, ESG fund labeling remains inconsistent, though the EU's SFDR framework and the UK's SDR labeling regime are improving transparency.

Building Credible Environmental Claims

Substantiate before you communicate. Every environmental claim should be backed by specific data, methodology, and evidence before it goes public. This requires coordination between sustainability, legal, marketing, and communications teams.

Be specific. Replace "eco-friendly packaging" with "packaging made from 80% post-consumer recycled content, reducing virgin plastic use by X tons annually." Provide absolute numbers, not just percentages.

Acknowledge trade-offs. Credible sustainability communication admits where progress is insufficient, where trade-offs exist, and where challenges remain. Honesty builds more trust than polish.

Use recognized standards. Align claims with established frameworks — GHG Protocol for emissions, SBTi for targets, recognized certifications for product claims. First-party claims carry far less credibility than independently verified ones.

Back targets with plans. If you set an emissions reduction target, publish the interim milestones, capital allocation, technology pathway, and governance structure that will get you there. A target without a plan is a wish.

Council Fire's Perspective

We take greenwashing seriously because it undermines every organization genuinely investing in sustainability. When a competitor makes unsubstantiated claims, it devalues the real investments our clients are making. When an ESG fund misrepresents its holdings, it erodes trust in sustainable finance.

Our approach: help clients build sustainability programs substantive enough that their communications can be specific, verified, and honest. The best defense against greenwashing accusations is having real performance to report.

The regulatory patchwork — strong enforcement in the EU and UK, retreat at the US federal level, growing private litigation — makes it critical for global companies to prepare for the strictest standards they'll face in any market. The September 2026 Empowering Consumers Directive deadline is the most immediate action item for any company selling products or services in the EU.

Council Fire helps organizations audit their environmental claims, build substantiation processes for sustainability marketing, develop credible transition plans, and prepare for the tightening regulatory environment. We'd rather help you communicate less and deliver more than the reverse.