The EU is set to finally publish their Taxonomy for Sustainable Activities, or ‘The Taxonomy’, in 2022. The Taxonomy is “technical screening criteria for environmentally sustainable economic activities” meant to be used as a metric for things such as the EU’s Green Bond Standard, Non-Financial Reporting Directive (NFRD) and their covid-relief stimulus. Basically, it tells you what is green and what is not, which is something that never actually been done before on such an extensive regulatory scale. It really is a big deal and could be used as the global standard if done properly and sufficiently ambitiously. Through a series of measurements, The Taxonomy provides either thresholds or requirements for any economic activities falling into climate-sensitive industries to qualify as green. This then extends to corporations and manufacturers to meet these criteria to attain a green rating. It is intended to be the stepping-stone towards the EU’s objective of sustainable finance, and they have done a good job so far, especially in the area of ensuring increased corporate disclosure for climate-related activities. However, one added benefit that is not given much attention is that it begins the process to slay an equally monstrous beast: greenwashing.
I’ve been wanting to write a post about greenwashing for a while now, but it has taken me some time to formulate my thoughts. It angered me too. Greenwashing is when companies falsely market their products as environmentally friendly, such as when McDonald's marketed their paper straws which ended up being essentially equivalent to plastic straws. Often, there is some truth behind the companies’ claims, but it is greatly exaggerated in an attempt to mislead consumers. If you haven’t heard of it before, you’ll probably see it everywhere you go now if you look properly. Firstly, I find the foundational notion that consumers should be in any way responsible for the suitable waste disposal of common environmentally abrasive products they are often almost forced to buy preposterous and wholly unfair (why is fruit still wrapped in plastic? Why?). But the fact that some companies then trick well-meaning people who attempt to recycle or buy greener products into buying their fraudulently labelled products just to make more money is frankly egregious. A consumer should not have to doubt any label that says “green” on it. Especially not if they have to pay a higher price for it. A green premium is only justifiable if either the product or technology is not as cheap as the alternatives. Paying an inflated price for more sustainably sourced chocolate is okay. Paying for a meaningless green leaf on the front of your plastic water bottle is not. Greenwashing is a serious obstacle to consumer-side environmental progress and has been plaguing the environmental movement for decades. Corporations have only been able to do it thus far because frequently it is not technically false advertising – there is no definition or threshold for “green” in any country. There are consumer protection acts and guidelines, so they cannot outright lie, but these can be wriggled around with clever wording and deceptive labelling, and it is regularly. This is the stepping-stone that The Taxonomy strives toward. Once there is a clear definition of green activities, even if not originally for consumer products, then companies cannot as easily greenwash their products without breaking the law. This is huge news for anyone who tries to buy green products and everyone who cares about climate change.
However, it isn’t all sunshine and rainbows. There are problems with the EU’s Taxonomy. It has been, throughout the whole process, subject to intense lobbying from all sides. After all, they are targeting almost every industry. Of course, as with every piece of regulation, industries and companies will want more favourable rules for themselves. The Taxonomy has been no different. It has also got bogged down in the admittedly complex classification of nuclear power and natural gas, needlessly delaying the process. These problems then extend to consumer products. If one product’s green label means something different to another due to successful lobbying, then the label is rendered near useless. This project will only see succeed if it can bravely withstand the lobbying from powerful interest groups and roll out the project as quickly as possible. Of course, if it takes too long, that logically means the thresholds and criteria need to be artificially raised to meet their new goal of carbon neutrality by 2050. And higher thresholds mean harder lobbying, delaying the process, and so the vicious cycle goes. The EU has done an admirable job so far, but now comes the real test of their strength. I want an end to greenwashing, and this seems like the best path to that, let’s hope they get there – and fast.
References
https://view.e.economist.com/?qs=0c29ff607418928972c4f84b4bbeec025f6ef9fb2d5fd964dd6af011d285d27bcd6851687c4b42b78eb11ba550f63237ac01e95397f525caae06a5836e320a8ecd1f95c771ff61a00ebab78c3cbb5c9e
https://www.iges.or.jp/sites/default/files/inline-files/20191011-1-2.pdf
https://www.fitchratings.com/research/corporate-finance/eu-green-taxonomy-to-channel-capital-to-sustainable-activities-21-04-2021
https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en