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The era of unchecked sustainability claims is over. 

Regulators are now imposing multi-million dollar penalties for greenwashing, creating a serious business threat for product teams that fail to substantiate their environmental credentials.

With Skyjed's governance framework, product teams can reduce greenwashing risk and transform regulatory challenges into opportunities while cutting compliance administration time by at least 50%.

Sustainability claims can significantly boost a product's appeal. However, with increased regulatory scrutiny and consumer awareness, product teams must ensure their environmental claims are accurate, substantiated, and transparent. The growing concern around "greenwashing" – making misleading sustainability claims – has led to severe penalties and reputational damage for many organisations.

Skyjed's digital platform enables teams to set sustainability goals, assess risks and claims, and continuously monitor performance while centralising data into a single source of truth, creating audit-ready documentation that meets regulator expectations and cutting administration time in half.

The Current State of Greenwashing Globally

According to the October 2024 report from RepRisk, for the first time in six years, greenwashing has made a 12% decline globally. However, high-risk incidents have surged by more than 30% in 2024, showing that while the overall number of cases may be decreasing, the severity is increasing.

The report shows some interesting regional variations:

• Europe leads with the highest number of companies at risk (918), though this represents a 19% decrease from 2023
• UK saw a slight drop of nearly 4% in 2024, but remains 179% higher than 2018 levels
• United States experienced a modest increase of just under 6% in companies linked to greenwashing
• Asia saw a 19% decrease from 2023
• Africa showed a concerning trend with companies at risk increasing from 61 in 2023 to 97 in 2024
• Australia experienced an 11.5% increase in companies at risk of greenwashing

Stricter regulations appear to be making a difference. In the EU's banking and financial services sector, which is subject to tighter regulations, climate-related greenwashing incidents declined 20% in 2024.

Despite these improvements, consumer scepticism is growing. Research from Capgemini reveals that 52% of consumers now believe organisations are greenwashing their initiatives—up dramatically from 33% just a year ago.

Key Regulatory Frameworks

To combat greenwashing, various regulations have been introduced globally, focusing on the main goals of maintaining trust in the market and enabling consumers and investors to make informed decisions while transitioning to a more sustainable economy.

Australia

Anti-Greenwashing ASIC Guidance INFO Sheet 271                                                                  Issued in 2022, this guidance outlines ASIC's expectations for financial services organisations making Product Disclosure Statements for sustainability-related products. While it functions as guidance rather than formal regulation, it sets clear standards for transparency and accuracy in sustainability claims.

United Kingdom

FCA Anti-Greenwashing Rule                                                                                                                In effect since May 31, 2024, this rule applies to FCA Authorised firms and UK Asset Managers making product sustainability claims.

Sustainability Disclosure Requirements (SDR) and investment labels policy statement (PS23/16): Provides a framework for how financial products should be marketed in terms of their sustainability credentials.

Key Learnings from ASIC's Major Greenwashing Cases

The consequences of greenwashing are increasingly severe, with ASIC taking strong enforcement action over the past 12 months.  ASIC has successfully prosecuted several landmark greenwashing cases, resulting in substantial penalties. 

Let's examine the key learnings from these major cases:

1. Mercer Superannuation (Australia) Limited - $11.3 million penalty (August 2024)

Mercer made misleading statements about seven 'Sustainable Plus' investment options, marketing them as suitable for members "deeply committed to sustainability" by excluding investments in companies involved in carbon-intensive fossil fuels, alcohol production, and gambling. In reality, these investment options included companies from these very industries.

Justice Horan highlighted that Mercer's contraventions "arose from failures to implement adequate systems to ensure that ESG claims in relation to its superannuation products were accurate, and to monitor and enforce the application of any sustainability exclusions."

2. Vanguard Investments Australia - $12.9 million penalty (September 2024)

Vanguard received the highest penalty yet for greenwashing conduct after misleading investors that their Ethically Conscious Global Aggregate Bond Index Fund would exclude bond issuers with significant business activities in certain industries, including fossil fuels. In reality, approximately 74% of the securities in the Fund by market value were not researched or screened against applicable ESG criteria.

Justice O'Bryan noted that Vanguard's misrepresentations "concerned the principal distinguishing feature of the Fund, being its 'ethical' characteristics," and that Vanguard "benefited from its misleading conduct" by enhancing its ability to attract investors and its reputation as a provider of investment funds with ESG characteristics.

3. Active Super - $10.5 million penalty (March 2025)

Active Super claimed it eliminated investments that posed too great a risk to the environment and community, including gambling, coal mining, oil tar sands, and Russian investments. However, the fund held direct and indirect investments in companies involved in these very industries.

Justice O'Callaghan emphasised that Active Super "benefitted from its misleading conduct by misrepresenting the 'ethical' nature of a significant part of its investments" and that "investors lost the opportunity to invest in accordance with their investment values."

Essential Learnings Across All Cases

1. Implement Robust Screening and Verification Systems: All three cases demonstrate the critical importance of having a comprehensive system to screen investments and verify they align with stated ESG exclusions.
2. Ensure Ongoing Compliance Monitoring: One-time verification is insufficient; organisations need continuous monitoring to ensure investments remain compliant with ESG claims as portfolios evolve.
3. Close the Gap Between Marketing and Reality: Courts were particularly concerned with the gap between marketing claims and actual investment holdings, highlighting the need for close alignment between promotional materials and investment practices.
4. Recognise Increased Regulatory Scrutiny: The significant and escalating penalties (from $11.3 million to $12.9 million) reflect ASIC's growing focus on greenwashing as an enforcement priority.
5. Understand the Reputational and Financial Consequences: Beyond penalties, the courts recognised that these institutions gained reputational benefits and attracted investors based on misleading sustainability claims, suggesting damages extend beyond just the penalties.

As Deputy Chair Sarah Court stated regarding the Vanguard case, "Greenwashing is a serious threat to the integrity of the Australian financial system," making it imperative for financial institutions to carefully review and substantiate all sustainability-related claims.

These cases demonstrate ASIC's commitment to cracking down on misleading sustainability claims, with financial penalties now routinely reaching into the millions of dollars.

Preventing Greenwashing 

1. Ensure Accuracy in ESG Claims: Develop processes to verify that all ESG claims are accurate and supported by reliable data to avoid misleading consumers and potential penalties.
2. Implement Robust Internal Controls: Establish strong internal controls and monitoring systems to check and validate sustainability claims consistently.
3. Prepare for Regulatory Scrutiny: Stay updated on regulatory requirements and reinforce the company's ability to substantiate ESG claims to mitigate financial and reputational risks associated with greenwashing.

Is Your Product Team Vulnerable?

Product teams are particularly vulnerable to greenwashing risks due to several factors:

1. Pressure to differentiate in a competitive market- The rush to position products as sustainable can lead to exaggerated or unsubstantiated claims.
2. Siloed information and poor communication- When product, marketing, and compliance teams don't collaborate effectively, inconsistent messaging can emerge.
3. Inadequate verification processes- Without robust systems to verify sustainability claims, inaccuracies can slip through
4. Evolving regulatory landscape- Keeping up with changing regulations across different jurisdictions presents a significant challenge

Practical Steps Your Product Team Can Take

1. Implement a Robust Verification Process
- Establish a cross-functional review process for all sustainability claims
- Create checklists aligned with regulatory guidelines
- Document the evidence supporting each claim and maintain this documentation

2. Adopt Lifecycle Management
Implement a comprehensive lifecycle management approach that:
- Centralises all sustainability data points into a single source of truth
- Enables regular reviews throughout the product lifecycle
- Includes automated alerts when potential greenwashing risks emerge

3. Stay Informed on Regulatory Developments
- Assign responsibility for monitoring regulatory changes
- Participate in industry forums and discussions on sustainability disclosures
- Conduct regular training for product teams on compliance requirements

4. Foster Cross-Functional Collaboration
- Ensure marketing, product development, legal, and compliance teams work closely together
- Create clear processes for reviewing sustainability claims
- Establish accountability for the accuracy of sustainability messaging

5. Conduct Regular Audits
- Regularly assess existing products against current regulations and best practices
- Address any identified issues promptly

Skyjed's Proven 3-Step Onboarding Process for Success

Skyjed has developed a streamlined, proven process to help organisations implement effective anti-greenwashing controls:

STEP 1: Set Sustainability Goals and Assess Claims

Define clear sustainability goals within your strategy and leverage Skyjed's tools to self-assess your claims against global best practice checklists aligned with financial regulators like FCA and ASIC.

STEP 2: Build Evidence to Support Your Claims

Gather sustainability-related data that aligns with ESG reporting standards, centralise historical records, and implement automated risk thresholds to trigger immediate mitigation actions when potential greenwashing risks emerge.

STEP 3: Continuous Monitoring and Improvement

Conduct regular reviews throughout your product's lifecycle, utilise performance dashboards to monitor impact, and leverage Risk and Strategy Actions Reports to continuously refine your approach.

This proven methodology has helped numerous organisations successfully navigate the complex regulatory landscape while protecting their reputation and avoiding costly penalties.

Key Outcomes for Companies Using Skyjed

Companies implementing Skyjed's solutions achieve measurable results:

• 50% Reduction in Compliance Time: Double productivity by cutting administration time in half, allowing your team to focus on innovation instead of paperwork
• Risk Reduction: Dramatically decrease your exposure to greenwashing penalties through automated monitoring and verification processes
• Enhanced Customer Protection and Trust: Build consumer confidence through transparent, accurate and verified sustainability claims
• Strengthened Shareholder Confidence: Provide investors with reliable, consistent, and independently verifiable sustainability information
• Superior Accountability and Transparency: Achieve gold-standard corporate responsibility with comprehensive audit trails and reporting
• Streamlined Compliance and Assurance: Meet regulatory requirements with less effort while maintaining stronger documentation than manual processes could ever achieve

As the global regulatory landscape and multiple high-profile cases demonstrate, the consequences of greenwashing can be severe. The penalties for non-compliance are becoming more significant, with consumer scepticism growing.

By implementing robust processes for verifying sustainability claims, adopting lifecycle management approaches, and staying informed about regulatory requirements, product teams can mitigate the risk of greenwashing while building genuine sustainability credentials and lasting consumer and industry trust.

Contact the Skyjed team today 

• Request a free Skyjed greenwashing assessment session (including demo)
• Access our comprehensive anti-greenwashing checklist
• Learn how teams using Skyjed double their compliance productivity by cutting administration time in half

Skyjed Features

Skyjed offers a digital solution to help companies streamline a robust lifecycle governance framework by leveraging effective governance tools, reports, and monitoring workspace as a foundation to understand product lifecycles.

Here's how Skyjed can assist:

• Digitise the Lifecycle Governance Framework: Streamline the compliance process with digital governance tools
• Access Pre-Built Checklists: Utilise anti-greenwashing checklists from FCA, ASIC, and other regulators to assess and review your claims
• Leverage Templates: Easily build the necessary evidence to back up sustainability claims with purpose-built templates
• Maintain Audit Trails: Keep comprehensive audit trails of ESG data and decisions
• Automated Risks and Opportunities: Prioritise key risks and opportunities and receive notifications when you meet pre-defined thresholds
• Collaborate Across Teams: Enable cross-functional collaboration to ensure thorough compliance
• Dual Focus: Offers both product-level and organisation-wide ESG capabilities
• Audit Readiness: Supports external assurance with superior transparency through templates and audit trails, making the assurance process smoother for organisations facing mandatory audited reporting.
• Significant Efficiency Improvement: Teams using Skyjed double their compliance productivity, cutting administration time in half.

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