FRANCE INTRODUCES ONE OF THE WORLD’S FIRST GREENWASHING LAWS
The French government have introduced a legal sanction that means organisations accused of greenwashing could be fined up to 80% of the cost of the false promotional campaign.
The introduction of fines is one of the world’s first legal sanctions directly tackling greenwashing. Listed companies will now be help accountable for false advertising under the consumer code in France, with fines up to 80% of the false promotional campaign cost, a correction on billboards or in the media, and a 30-day clarification on the company website.
Sustainable finance has become increasingly prevalent for investors in recent years. The rise in ESG policies and lack of governance on what constitutes a sustainable fund has resulted in extensive greenwashing.
Greenwashing, the spread of false or misleading information about sustainability, pushes companies to spend more resources on marketing themselves as environmentally friendly and less on implementing an effective environmental strategy.
French financial regulators have been urging the EU to set common standards for environmental, social and governance for several years.
In a public statement from November 2019, Robert Ophèle, chairman of the Authorité des marches financeirs, said “At a time when assets under "responsible" management are increasing very rapidly and their commercial pitch is becoming increasingly ambitious, or even aggressive, in this area, it is essential to be able to rely on a body of minimum standards, in order to avoid the distortion of the very notion of ESG, in short to avoid the kind of greenwashing that would be disastrous in every respect.”
The move will discourage brands from greenwashing, as the reputational damage from being held accountable would more damaging than lacking a sustainability strategy to begin with.
Other countries are likely to follow in France’s footsteps with Denmark’s Financial Supervisory Authority having set up a dedicated unit to monitor investor’s sustainability disclosures last month.