“Different shades of green: An analysis of the EU disclosure regulation and its effectiveness on limiting “greenwashing”” by Maria Nieto (European Banking Institute) and Chryssa Papathanassiou (European Central Bank (ECB)) was jointly published on 4 July 2024 in the EBI Working Paper Series No. 177.

Greenwashing is currently a generic term used for breaches of various legal provisions ranging from unfair competition, securities rules and unethical advertising to wrong reporting/disclosure. This paper focuses on the latter, discusses relevant greenwashing literature and litigation cases based on misleading corporate reporting/disclosure and makes a critical analysis of the sustainability disclosure framework in the EU. The EU corporate reporting adopts the “double materiality” approach, namely that sustainability information, which is material from an environmental impact perspective, should be clearly differentiated from other information included in a company’s management report. The paper also discusses the differences of the reporting and disclosure framework for banks. Penalties for corporate disclosure entail large discretion across Member States, however, they have been harmonised in the Corporate Sustainability Due Diligence Directive and Capital Requirement Directive 6. In turn, the impact assessment should be subject to due diligence process. The paper makes some recommendations going forward so that the regulatory framework for sustainability reporting is effective in combating greenwashing. Any potential future regulation of greenwashing should be based on the existing sustainability reporting framework

Read the entire article here: https://ssrn.com/abstract=4885291 or http://dx.doi.org/10.2139/ssrn.4885291.