By Dr. Wan Khatina Nawawi
Greenwashing is increasingly recognised as a source of consumer harm. But its wider implications for market competition, regulatory governance and trade deserve closer attention.
This article is the third in the Truth and Accountability series, which examines how rules, systems, and market practices align, or fail to align, with how consumers and businesses actually engage with markets.
This article discusses sustainability claims and the growing concern of greenwashing. While greenwashing is often discussed as a consumer protection issue, it also has important implications for competition policy and law. In some jurisdictions, national competition authorities (NCAs) are beginning to act. In others, greenwashing is now directly addressed through amendments to competition law. These developments offer potential models for jurisdictions, including for the ASEAN Member States, where regulatory responses remain limited. The article concludes with reflections on how trade rules and enforcement cooperation can help reduce greenwashing across borders.
From consumer harm to market distortion
Greenwashing generally refers to environmental claims that are misleading, vague, or unsubstantiated. These may relate to a product’s sustainability, carbon footprint, recyclability, or broader business practices. Many such claims are framed using broad or unverified descriptors such as “eco-friendly”, “climate neutral”, or “sustainable”, often without evidence.
The regulatory response to greenwashing has so far been grounded in consumer protection law. For example, the UK Competition and Markets Authority (UK CMA) has developed a Green Claims Code to guide business conduct and ensure that consumers are not misled. In July 2022, the UK CMA issued targeted guidance to fashion retailers, requiring that terms such as “sustainable” and “eco-conscious” be clearly defined and substantiated.
Similarly, in the Netherlands, the Authority for Consumers and Markets (ACM) reached settlements with H&M and Decathlon following an investigation into the use of sustainability claims. The ACM required H&M and Decathlon to clarify their marketing practices and contribute EUR500,000 and EUR400,000 respectively to fund credible sustainability initiatives. In ACM’s public statement, it emphasised that greenwashing can distort competition, as it allows firms to gain reputational or commercial advantage over those investing in verified environmental performance.
While these actions were not framed as breaches of competition law, they reflect a broader understanding that greenwashing may affect not only consumer trust, but also the conditions of competition. Firms that make vague or exaggerated claims may benefit from consumer demand, brand value, and procurement opportunities without incurring the cost of genuine environmental improvement. This creates the risk of distorted competition, particularly in sectors where sustainability is used as a differentiating factor.
In contrast to the UK and the Netherlands, Canada has explicitly incorporated greenwashing into its competition law. Amendments introduced in Bill C‑59, passed in June 2024, expanded the scope of the Competition Act to include two specific provisions:
- Product-related environmental claims must be supported by “adequate and proper testing”
- Business-wide environmental benefit claims must be substantiated using methods that are internationally recognised
Importantly, the law reverses the burden of proof. If challenged, the firm making the claim must provide evidence. This represents a significant shift in enforcement, signalling that environmental representations are not simply a matter of marketing, but of competitive integrity.
In June 2025, the Competition Bureau of Canada (CBC) issued final enforcement guidelines, including six key principles to guide businesses in making environmental claims. These emphasise specificity, accuracy, and substantiation. Civil penalties for contravention can now reach the greater of CAD10 million or three times the value of the benefit obtained.
The law also enables private enforcement, allowing members of the public to bring complaints before the CBC. In 2024, environmental advocacy group Stand.earth filed a complaint against Lululemon, alleging that the company’s “Be Planet” marketing campaign misrepresented its actual emissions performance.
Taken together, these developments position Canada at the forefront of jurisdictions treating greenwashing as a competition issue, rather than merely a matter of consumer misdirection.
Emerging implications for developing jurisdictions
To date, greenwashing enforcement has largely been concentrated in developed economies with mature regulatory frameworks. However, the risks associated with greenwashing are not confined to these jurisdictions.
In Malaysia, the Consumer Protection Act 1999 (as amended in 2019) contains provisions prohibiting misleading and deceptive conduct (Sections 10 and 12). Part 11 of the Malaysian Code of Advertising Practice also require that environmental claims be substantiated. However, to date, there have been no enforcement cases involving greenwashing, nor is there specific guidance on what constitutes a valid or acceptable environmental claim.
As sustainability becomes more central to business strategy, whether through ESG reporting, procurement standards, or public investment criteria, there is a need for clearer regulatory expectations. Developing jurisdictions may wish to consider:
- Issuing guidance or codes of practice for green marketing claims
- Clarifying how competition or advertising law applies to environmental representations
- Reviewing green claims in the context of merger assessments or sector inquiries
- Building technical capacity to assess life-cycle claims, offsets, and labelling
A trade and cross-border concern
Greenwashing is also relevant in the context of international trade. Environmental claims are increasingly used in branding, procurement, and marketing for export. When standards differ between jurisdictions, firms may engage in regulatory arbitrage, tailoring claims to weaker markets while benefitting from environmental branding in stricter ones. This raises the risk of non-tariff distortions.
While many modern Free Trade Agreements (FTAs) include Trade and Sustainable Development (TSD) chapters, few address green claims in a substantive way. The Agreement on Climate Change, Trade and Sustainability (ACCTS), signed in November 2024 by Costa Rica, Iceland, New Zealand and Switzerland, is among the first trade treaties to explicitly tie eco‑labelling to sustainability objectives. It eliminates tariffs on over 300 environmental goods and includes measures addressing fossil‑fuel subsidies and climate transition. Crucially for greenwashing, ACCTS incorporates eco‑labelling guidelines that are principles‑based, transparent, and non‑discriminatory. While this guidelines is voluntary, it demonstrates a promising model for integrating eco‑labelling credibility into trade governance. By establishing shared principles and oversight for environmental claims, ACCTS aims to reduce the risk of misleading green claims in international markets. For competition policy, it offers a framework to prevent greenwashing-driven trade advantages and ensure eco-labels signal real environmental value and not just marketing spin.
Greenwashing by institutions
While much of the discussion on greenwashing focuses on corporate behaviour, public institutions also have a role to play in either reinforcing or weakening market credibility. This includes NCAs and regulators that increasingly incorporate sustainability considerations into their assessments, priorities and communications.
In supporting climate goals or sustainable development, institutions may at times accept broad environmental commitments or assumptions without applying the same level of scrutiny typically reserved for other commercial claims. For example, when reviewing mergers or strategic collaborations, NCAs may consider environmental benefits in their analysis. If those benefits are framed in vague terms or remain unverified, there is a risk that decisions could be made based on representations that are not adequately supported by evidence.
The concern here is not about intent. Most NCAs seek to balance their mandates with growing environmental responsibilities. But where claims about sustainability influence policy, procurement or regulatory outcomes, it is important that those claims be treated with the same degree of rigour and transparency as any other factor affecting market structure or competitive behaviour.
This is particularly relevant in the context of emerging green industrial policy and ESG-led investment frameworks. If public institutions are to guide markets toward more sustainable outcomes, they must also maintain high standards of verification. In doing so, they ensure that sustainability commitments are not just accepted, but also accountable both to the public and to the firms competing on that basis.
Conclusion: embedding credibility in sustainability
Some NCAs, particularly in developing and emerging economies, may argue that sustainability enforcement is not an immediate priority. Other regulatory and developmental challenges may understandably take precedence. Businesses too may be cautious, seeing environmental claim scrutiny as an added compliance burden, especially in sectors facing economic uncertainty.
Nonetheless, there are long-term risks in treating greenwashing as a concern only for more developed jurisdictions. In a global economy, uneven enforcement of sustainability standards may create opportunities for regulatory arbitrage. Firms may choose to pursue more aggressive marketing or even relocate certain activities to jurisdictions where environmental claims are not closely scrutinised. This kind of forum shopping can disadvantage local businesses that invest in genuine sustainability and reduce the effectiveness of competition in the long run.
Consumers in developing markets are also affected. If environmental claims are left unexamined, consumers may place trust in representations that do not reflect actual performance. This undermines consumer confidence and creates an uneven playing field, both within domestic markets and across borders.
Regulatory cooperation and alignment are not about replicating models from elsewhere but about reinforcing credibility and fairness in sustainability claims. As environmental labelling and ESG performance become more closely linked to procurement, investment and trade decisions, the need for consistent verification becomes more urgent.
NCAs in developing jurisdictions may not prioritise greenwashing today. But the longer these claims go unexamined, the more likely it is that markets will reward style over substance, and that trust will be replaced by uncertainty. A measured, credible response now can reduce that risk and help ensure that sustainability supports, not undermines, competition.