A recent study by the EU in preparation for its announcement concerning the new Green Claims Directive found that 53% of green claims give vague, misleading or unfounded information, and in addition, 40% of green claims have no supporting evidence.
The concept of greenwashing is that of false, misleading or unfounded environmental claims - the exaggeration of a company's environmental credentials. For example, the suggestion that a product or a service is less damaging to the environment than competing goods or services, when it is not.
What does this mean for those relying on a supplier’s green credentials when procuring services and products?
It means that checking environmental credentials and compliance becomes an essential part of the procurement process.
Procurement Policy Note 06/21 states that: ‘environmental considerations and carbon reduction will be a factor in the delivery of most, if not all, contracts’.
Taking account of carbon reduction plans (CRP) and environmental impact when procuring major government contracts and other similar initiatives, public sector bodies increasingly focus on the green credentials of the products and services they are procuring.
Procurement Policy Note 06/21 states that: ‘in-scope organisations should satisfy themselves that suppliers have provided a published CRP which:
- Has been published on the supplier’s website.
- Has been signed off at an appropriate level within 12 months of the date of the procurement.
- Includes a signed declaration confirming the supplier’s commitment to achieving net zero by 2050 (at the latest).
- Details the supplier’s greenhouse gas emissions.
- Details the environmental management measures that can be applied in the delivery of the contract.’
An increasing percentage of marks are awarded for specific environmental considerations. Those bidding for such contracts can become increasingly keen to extol their green credentials, and may overstate those credentials. This is greenwashing.
The greenwashing risk profile of the awards process and related contracts can increase according to the size of the contract.
The risks can include:
- Fraud - in some cases overstatement will amount to fraud, with those responsible for the greenwashing subject to criminal enforcement action.
- Misrepresentation - those responsible for the greenwashing could face misrepresentation claims from other unsuccessful bidders.
- Panel exclusion – suppliers could be excluded from future procurement exercises.
- Judicial review - the procurement process itself could be subject to challenge if your selection criteria and the testing of pre-contract statements and representations is not robust enough.
How to manage the risks associated with greenwashing and potentially significant consequences
There are efforts both internationally and at an EU level to identify what are being termed ‘green footprint’ methods. These are standard ways of making and validating green claims. However standardised approaches are some way off.
In the interim, there are simple steps to adopt:
- Follow standard and recognised approaches to green procurement. Use resources available from locations such as the European Commission Green Public Procurement site.
- Adopt best practice and be clear about the environmental elements you will consider, and be specific about the information you require. Is it just a net zero focus or is it wider?
- Consider asking for data and information submitted pursuant to other separate legal obligations. This can include for example, the Streamlined Energy and Carbon Reporting (SECR) requirements, or data that has been independently verified by a third-party assurance programme. This could be connected with the International Standards Organisation (ISO) or BSI. In that way you are relying on data and information that has (to some extent) been de-risked.
- Where you can, avoid giving credit and taking account of areas that are hard to assess robustly: for example, carbon offsetting.
We have worked with clients with legitimate concerns relating to the carbon neutrality of products and services offered by competitors. We know from experience it can be problematic to interrogate net zero claims, especially connected to carbon offsetting.
Some obvious issues that arise include, assessing the carbon footprint of a product or service, then being able to assess the validity of any carbon offsetting programmes, as well as the application of carbon credits to a specific product or service.
My advice is to think through in advance which ‘green’ considerations are integral to the product or service you are procuring and focus on the most appropriate areas. Until we have a standardised approach to green claims, it is an area where the saying ‘less is more’ is very apt.
