You’ve heard of ‘greenwashing’, but have you heard of ‘bluewashing’, ‘rainbow washing’, ‘AI washing’ and more? And do you understand the legal and commercial implications of this ESG-related phenomenon?

In this article, Walker Morris’ Diversity & Inclusion and Employment law specialists, Jessica Harvey and Lucy Gordon explain and offer practical advice.

ESG context and glossary

Regulation, investors, employees, other stakeholders, and society as a whole are driving the need for businesses to address their ESG (Environmental, Social, Governance) agenda. Recent years have seen an unmistakeable cultural shift towards a global community with an increasing social and environmental conscience. National and international laws, regulations, policies, politics, and wide-ranging commercial pressures all impose tangible and intangible requirements on businesses to get their ESG approach right.

Responsible businesses will be aware of the concept of ‘greenwashing’. That is, the practice of making false or exaggerated claims about a business’ environmental credentials and the sustainability of its products, services and environmental impact in order to appear more environmentally conscious, and less damaging to the planet.

But corporate and consumer scruples increasingly extend beyond the ‘E’. They also encompass a demand for transparency, honesty, and for modern commerce to be co-opted as a force for positive change. So, businesses also need to know about wider aspects of the ‘washing’ phenomenon:

• ‘Pinkwashing’ is a term that has two main different connotations. It can signify: insincerely claiming to care about breast cancer and/or support breast cancer charities – sometimes whilst producing or using products containing toxic substances; or the unsubstantiated use of a variety of gay-friendly approaches in commercial promotions.
• ‘Rainbow washing’ is when businesses superficially signal support for the LGBTQ+ community (such as including rainbow banners on their marketing material), but don’t take any significant, concrete action to advocate for the freedom, justice and equality of LGBTQ+ people.
• ‘Bluewashing’ refers to organisations committing to various human rights principles (for example as proposed by the United Nations under the UN Global Compact or the UN Sustainable Development Goals – hence ‘blue’, as per the UN’s logo), but undertaking little or no action to back up any such pledge.
• ‘Purplewashing’. Purple is associated with feminism, so purplewashing refers to the practice of co-opting female-focused, feminist and gender equality support within promotional material, despite the maintenance or enhancement of discriminatory practices within an organisation or its supply chain.

In addition to ‘colour washing’, there’s:

• ‘Social washing’. This is where businesses market themselves as having exemplary diversity and inclusion-, workforce- and community- focused policies and practices when, in fact, they pay little more than lip service to those concerns.
• ‘Mom washing’ is the practice of portraying motherhood in a way that suggests mothers are fully valued in all aspects of society and the workforce when, in reality, they’re not. Mom washing examples include marketing materials which show mums happily supporting children with healthy snacks, sparkling clean clothes and wholesome activities, instead of harried parents juggling work and childcare; and the advertising of family-friendly working where, in fact, genuine support for working parents is lacking. The latter occurs particularly wherever there’s few or restricted flexible or home-working options, limited family leave, limited or no access to affordable childcare, and women taking a career hit when they start a family.
• ‘Privacy washing’ is the portrayal of an untrue or exaggerated impression of the prioritisation of privacy and data security. It often involves the implementation of minimal or token privacy measures.
• ‘AI washing’. An emerging concept, AI washing is where organisations make inaccurate, over-inflated claims about their use of AI. It can involve: companies claiming to use AI when they’re actually using much less-sophisticated computing; over-statement of the efficacy of AI tech; or the intimation that AI solutions are fully operational, when they are not, to gain a competitive advantage [1].

‘Washing’: Legal and commercial implications

The commercial drivers for making positive ESG claims are clear. For example:

• A 2021 GreenPrint survey found that 78% of consumers were more likely to buy a product if it had green credentials; that 75% of millennials would pay more for a green product; and that 76% of people would even switch from a preferred brand for sustainability. Those figures are likely to have increased, potentially significantly, since.
• PwC’s 2021 Consumer Intelligence Series survey on ESG found that 83% of consumers think companies should be actively shaping ESG best practices.
• The 2023 Net Positive Employee Barometer survey found that 77% of Gen Z and Millennials, and 69% of Gen X and older respondents, rate a company’s commitment to sustainability as an important factor when considering employment. 51% of US workers would consider leaving their job if ESG credentials didn’t align with theirs, and 35% already have. 44% of Gen Z and Millennial respondents said they would take a pay cut to work for a company that shared their values.
• A 2023 KPMG survey found that a third of 18-24 year olds in the UK have rejected a job offer based on a company’s ESG record.

Against that backdrop, the ‘washing’ phenomenon demonstrates an unwillingness on the part of end-users, the workforce generally, investors, regulators and other stakeholders to put up with token gestures or paying lip service when it comes to promotion of the ESG agenda and the implementation of AI tech advances.

So, a failure to make, and, crucially, to live up to, all manner of ESG-related claims can leave businesses vulnerable to significant economic disadvantage.

Purely from a ethical perspective, a failure to advance positive change can mean that an organisation is falling short of its philanthropic potential. That can, of course have unfortunate (albeit unquantifiable) environmental and societal implications.

But there are legal implications too.

The Consumer Protection from Unfair Trading Regulations 2008 (the CPRs) apply in the UK to prohibit businesses from engaging in unfair commercial practices in their dealings with consumers. Unfair practices include (non-exhaustively), giving false or misleading information and failing to give material information. Washing can often amount to a breach of the CPRs, which can give rise to civil, and even criminal, liability.

Washing can, in many cases, also amount to legally actionable misrepresentation, and sometimes even fraud.

Recently, we’ve also seen an increasing tendency for shareholders and investors to bring overvaluation claims and claims under the Financial Services and Markets Act 2000 when share prices fall following ESG failures. It’s easy to see how washing exposures could prompt share price decline, and consequential claims.

Privacy washing can also lead, indirectly, to data protection breaches, data leaks and potentially data breach claims.

As well as the management time and potential financial loss involved in defending any washing claim, reputational consequences can, of course, be devastating. It also has a significant impact on employee culture, with staff losing trust and confidence in their employers if they are aware that publicly-made claims aren’t justified. This can give rise to discontentment, a lack of co-operation, and workers increasingly looking elsewhere.

Practical advice: Keeping ESG claims clean

So what’s the answer? You may have heard of ‘green hushing’ (or, by analogy, pink/rainbow/blue/privacy/AI/etc. hushing). It’s the practice of saying silent on ESG-related credentials and activities. But that’s not a practical solution for businesses who wish to remain commercially competitive. Neither will it be an option for regulated businesses who are under ESG-related corporate reporting obligations.

Quite simply, the best advice is to be responsible, honest and transparent in your dealings and your communications.

Broken down, that involves the following:

• Creation, implementation and delivery of a successful ESG strategy – our briefing explains how.
• ESG claims should be truthful and accurate, clear and unambiguous.
• Claims should not omit or hide important information.
• Crucially, claims must be substantiated.
• Any comparative claims made should be fair and meaningful (that is, comparisons with other businesses/products/services must compare like with like; and the basis and measure of any comparison should be made clear).
• Claims should consider the full life cycle of a product/service/business. A complete picture of the total ESG impact must be given: taking into account, for example, supply chains, business processes and waste; and not focusing on only one or ‘cherry-picked’ aspect[s] of a product/service/business.
• Claims should be specific, rather than broad and too wide-ranging.
• Remember that claims can be made via visual graphics, not just through the written word.
• Signpost, perhaps via website links or QR codes, end-users/consumers to any additional information which might affect their claim-based decisions.
• Introduce/implement policies and procedures regarding the review/maintenance/correction and updating of marketing material and other consumer/market-facing information.
• Maintain an audit trail of all these efforts.
• Provide washing training to all staff involved, directly or indirectly, with the sales and marketing (including production of hard and soft copy materials) of the business’ services/products/brand. Retain records and evidence of such training.
• Stay informed as to ESG best practices, emerging threats, and changes in legal and regulatory developments.
• Finally, if or when any washing complaint, whistleblow, or allegation is made, seek immediate specialist legal advice.

Addressing the washing phenomenon: How we can help you

We can help businesses with the drafting or updating of appropriate policies and procedures to guard against the risks associated with all types of washing. We can provide training tailored to your business and we can help you stay informed with legal updating and horizon-scanning. If and when necessary, we can also provide a swift, effective and strategic dispute resolution response to any washing, consumer protection or other ESG-related complaint, allegation or investigation.

Please contact us for further information or advice.

[1] Walker Morris’ Michael Cordeaux was recently featured in BBC article What is ‘AI washing’ and why is it a problem?