Why Retail Brands Are Hesitant to Make Green Claims – And Why They Shouldn’t Be

As green claims regulations tighten, retail brands face increased scrutiny over their sustainability claims. The EU's Green Claims Directive and the UK's Green Claims Code are just two examples of the shift towards more stringent anti-greenwashing policies. These regulations have severe and costly consequences, prompting some brands to stop making green claims altogether.

However, there are numerous arguments why abandoning claims is the wrong move and will ultimately be more costly to your business. Fortunately, there is a viable alternative. As a brand or multi-brand retailer, you can still make credible and compliant green claims without the risk of fines.

We know the Compare Ethics solution set can eliminate the financial risks of making green claims and help you navigate regulations effectively and cost-efficiently, allowing you to continue reaping the many rewards of making public claims. In this article, we outline why and how.

The argument against making green claims is loud

A desire to gain favour among increasingly discerning shoppers has undoubtedly resulted in a rise in greenwashing. In 2021, the Competition and Markets Authority (CMA) found that 40% of green claims made online could be misleading consumers. To combat this issue, many markets are updating consumer protection laws to ensure only accurate information reaches consumers.

Non-compliance with these new regulations carries severe consequences. Brands face costly legal action and significant fines; in the UK, the CMA is set to have powers to fine companies up to 10% of their global revenue for making misleading claims. And over recent years, numerous high-profile brands have faced court cases following accusations of greenwashing.

But legal and financial repercussions are just the beginning. Non-compliance can also lead to increased operating costs, damaged reputation, reduced investor confidence, and limited market access. These risks are substantial and can severely impact your business' finances and operations.

Given these potential pitfalls, it's understandable why many brands are hesitant to make green claims. The fear of getting it wrong is high, and confidence in navigating these regulations correctly is often too low. As a result, some brands are opting to eliminate their green claims altogether to avoid the associated risks.

But the argument in favour is louder

However, this decision carries significant repercussions, both environmentally and financially.

Most importantly, eliminating green claims from your strategy will reduce the impetus to invest in better practices and lead to a de-prioritisation of efforts to reduce environmental impact, undoing progress towards a healthier planet. But beyond the environmental concerns, it's crucial to understand that this path can also significantly impact your top-line and bottom-line growth.

Inevitable future compliance costs

Regardless of whether you choose to pursue a greener agenda, upcoming regulations such as the Directive on corporate sustainability due diligence will soon mandate specific disclosures about your sustainability credentials. Brands that fail to prepare for these now risk incurring higher and more urgent costs in the future. You will also miss out on the numerous benefits of adopting sustainable initiatives. We identify five to six key business benefits, which we will discuss in more detail below.

Not meeting consumer demand

Failing to communicate your sustainability efforts will also mean you’ll lose out on market share. According to FARFETCH’s 2023 Conscious Luxury Trends Report, global demand for conscious products has steadily risen in recent years. In 2022, 27% of FARFETCH customers purchased at least one 'Conscious' product, up from 16% in 2021. Conscious sales also grew 16% faster than overall sales on their marketplace, and there was a 78% year-on-year increase in Conscious-related search terms.

Consumers are increasingly making purchasing decisions based on a company's environmental credentials, and failing to highlight these efforts can erode their loyalty.

Reduced wholesale revenue

Because of the consumer opportunity they see, EU wholesale partners are also increasingly favouring brands with strong sustainability credentials. As such, abandoning green initiatives could cut you off from a major revenue source.

For instance, Selfridges have announced that, by the end of 2025, 10 of the key materials in their supply chain must come from certified sustainable sources. Anyone who wants to supply to or work with Selfridges will have to comply with these requirements by 31st December 2025. Brown Thomas has also pledged that by 2025, they will ensure all their priority materials come from certified and sustainable sources. Not aligning with these expectations means you’ll risk losing key partnerships and revenue opportunities.

Lower investor appeal

Verified green claims can attract a growing investor base and strengthen relationships with existing shareholders, who seek better quality data on environmental stewardship. This is partly due to the fact that investors themselves must comply with the FCA's greenwashing rules, and can lead to better access to capital and increased stock valuation for brands. According to McKinsey research, top ESG performers enjoy faster growth and higher valuations than other players in their sectors, by a margin of 10 to 20 percent in each case.

Poor employee engagement and retention

Sustainability initiatives are not only important to consumers but also to employees. A company known for its environmental responsibility can attract and retain top talent, particularly among younger generations who prioritise corporate social responsibility. This can significantly lower the cost of employee attraction and retention for a business, as well as improving company culture and productivity.

Indeed, according to a Deloitte survey, 72% of employees in retail organisations with “leading” sustainability programmes say they rarely think about looking for another job, and 79% plan to stay in their roles for the next couple of years. In comparison, only 40% of employees from retailers with “lagging” sustainability programmes are as committed to their current positions.

Reduced innovation and efficiency

Committing to sustainability often drives innovation and operational efficiency. Companies that prioritise green practices tend to invest in new technologies and processes that reduce waste, lower energy consumption, and optimise resource use. These improvements can lead to cost savings and increased operational efficiency, further enhancing profitability. Public claims and declarations of progress also go a long way in bringing innovators and potential partners to you. This lowers the cost of innovation and can help drive new opportunities.

The best of both worlds

In short, the choice to avoid making green claims can have far-reaching consequences. It not only undermines environmental progress but also impacts your profitability and competitive edge in the market. It’s important to recognise the importance of compliant green claims for both planetary and financial good.

Fortunately, there is a solution that benefits everyone—consumers, brands, and the planet. Compare Ethics, a sustainability compliance platform, takes on the compliance risk of making green claims on behalf of the brands and multi-brand retailers that we work with.

For any claims we assure, we assume the financial and legal liability against any enforcement action. This enables brands to navigate the complexities of sustainability regulations with ease, maintaining their commitment to progress without jeopardising their business.

Our solution is also incredibly efficient. Our AI-powered software quickly identifies compliance gaps, automates and scales claim verification, and simplifies the sharing of compliance reports—reducing your cost of compliance by up to 80%. Our expert advisory team will also keep you informed about upcoming regulations, helping you prioritise effectively and maintain a competitive edge.

Say goodbye to risk in the right way

Navigating the rapidly changing landscape of sustainability regulation can be challenging. These changes, while positive and necessary for protecting both customers and the planet, introduce complexities that leave many brands uncertain about next steps.

But ceasing to make green claims is not the answer. Instead, brands like yours can leverage tools like Compare Ethics to make compliant green claims without exposing themselves to significant risk.

To learn more about how Compare Ethics can help your brand, chat with one of our team members today.