When Sustainability Claims Become Evidence

In the early 2020s, being “green” emerged as a marketing differentiator. In 2026, it is increasingly a claim with legal and business consequences.¹

Greenwashing, the practice of overstating or misrepresenting environmental or sustainability performance, is no longer simply a communications issue. What used to sit comfortably in sustainability reports and brand campaigns is now being pulled into regulatory scrutiny, investor diligence and courtroom discovery.

At its worst, greenwashing can be a deliberate attempt to capture the attention and trust of sustainability-minded stakeholders, without the evidence, controls or operational substance to support the claim. But, far more often, companies create greenwashing exposure unintentionally through fragmented data systems, inconsistent governance, weak value chain oversight, or misalignment between sustainability, operations and communications teams.

Companies can no longer treat sustainability claims like marketing copy. Increasingly, they’re being treated like securities disclosures. And, that shift changes everything.

The Corporate Shift: From Aspirational to Accountable

For decades, sustainability often sat in a silo, filtered through communications and marketing, and dressed in the familiar language of glossy reports, polished campaigns and net-zero promises set comfortably far in the future. That world is gone. Today, regulators such as the European Commission, the U.S. Securities and Exchange Commission, and state-level regulators like California, now treat environmental, social and governance claims with the same scrutiny as financial earnings. If you say you’re “green,” you must be able to prove your claims with data.

Trust from regulators is the hardest currency to earn and the easiest to lose. For today’s leaders, the mandate has shifted from being the loudest voice on sustainability to being the most accurate. The question for companies is no longer whether their sustainability claims will be scrutinized, but whether they can withstand that scrutiny.

Greenwashing risk does not come from one direction. It can come from multiple stakeholders, each with different motivations and ways to apply pressure. For each group, the test is increasingly the same: can the company prove what it said?

Regulatory Protection for Investors in Public Markets

Investor-facing sustainability claims are increasingly being treated like any other market-facing statement: they must be accurate and supportable.

In the U.S., the SEC now treats ESG-related disclosures with the same rigor as other information relied upon by investors. Under the amended SEC Fund Names Rule,² investment funds using terms such as “ESG,” “Green,” or “Sustainable” generally must invest at least 80% of their assets in accordance with those characteristics. Under Sections 206(2) and 206(4) of the Investment Advisers Act,³ the SEC has anti-fraud authority to pursue misleading ESG and sustainability-related claims by investment advisors.

In Europe, scrutiny of greenwashing continues to intensify. The European Securities and Markets Authority established fund naming guidelines for ESG and sustainability-labeled investment products that are comparable to aspects of the U.S. SEC’s Names Rule.⁴

For regulators, intent is often secondary. The central question is whether a company’s public statements can be supported by credible evidence.

Consumers Rising to Challenge Claims

Consumers are no longer passive audiences for sustainability claims. They are increasingly willing to challenge companies they believe have overstated or misrepresented their environmental performance, whether through class-action litigation, complaints under consumer protection laws, or coordinated public pressure campaigns. What once looked like brand messaging can quickly become legal exposure.

Claims such as “carbon neutral,” “eco-friendly,” “ethically sourced” and other environmental commitments are increasingly being tested through longstanding consumer protection and false advertising laws, rather than new greenwashing-specific legislation.

Companies face a growing wave of greenwashing-related litigation and regulatory scrutiny under existing consumer protection frameworks like Section 5 of the FTC Act,⁵ state-level statutes like the California Consumers Legal Remedies Act, Cal. Civ. Code § 1750 et seq.,⁶ and the EU’s Unfair Commercial Practices Directive,⁷ all of which are designed to combat misleading or deceptive commercial practices.

Starbucks offers a useful example of how a company’s sustainability claims can move from brand positioning to legal challenge. In recent litigation, plaintiffs challenged the company’s “100% Ethical Coffee Sourcing” and related claims, alleging that the company’s statements misled consumers in light of reported labor and human rights issues within parts of the company’s supply chain.⁸ The case underscores a broader risk: sustainability and ethics claims can be challenged under the same consumer protection and false advertising frameworks that already apply to other marketing claims.

In the EU, that framework is becoming more explicit. In 2024, the European Commission adopted new rules under the Directive on Empowering Consumers for the Green Transition, amending the Unfair Commercial Practices Directive to address vague, unsupported or misleading environmental claims.⁹ Member states were required to transpose the Directive by March 27, 2026, and in June 2026, the Commission opened infringement proceedings against 20 member states that had failed to do so, signaling continued focus on enforcement.

Beware of Weaponization by Competitors

As sustainability becomes a competitive differentiator, competitors are paying closer attention to one another’s claims and capitalizing on opportunities to challenge them.

Greenwashing allegations can serve as a powerful competitive tool. Companies may use existing false advertising and unfair competition laws to argue that a rival has gained market share or consumer trust through misleading environmental claims. Even when litigation is unsuccessful, public allegations alone can create reputational damage, attract regulatory attention, and disrupt business operations. In a crowded market, greenwashing allegations can become a competitive weapon — not necessarily because they’re always true, but because they are hard to ignore, or even forget, once they surface.

Reputation Risk From Inside the House

Perhaps the most overlooked greenwashing risk comes from inside the organization.

Employees have visibility into business practices, supply chain operations, and sustainability data that external stakeholders may never see. As sustainability reporting becomes more integrated into enterprise decision-making, inconsistencies between public commitments and internal realities are more likely to be identified by the people closest to the business.

In June, Reuters reported that nearly one in four employees doubts their employer’s sustainability claims, according to a recent study from the UK health and safety firm Astutis. Skepticism can result in litigation, with more than a dozen major companies successfully prosecuted last year.¹⁰

Greenhushing Isn’t the Answer

Faced with increasing scrutiny, some organizations have responded by saying less about sustainability altogether, a phenomenon commonly referred to as greenhushing.

The instinct is understandable, but silence is unlikely to be an effective long-term strategy. Mandatory sustainability disclosure requirements continue to expand, and investors, customers, employees and regulators increasingly expect transparency. Moreover, greenhushing risks leaving reputational and commercial value on the table by preventing organizations from effectively communicating legitimate sustainability achievements and investments.

The challenge is not choosing between greenwashing and greenhushing. It is in finding the balance between meaningful ambition and defensible disclosure.

Balancing Multiple Stakeholder Priorities

Greenwashing is often framed as an ESG issue. It isn’t. It’s a trust issue.

Stakeholders increasingly assume that if a company makes a public claim, it should be able to prove it. Regulators want evidence. Customers want authenticity. Competitors look for inconsistencies. Employees know where the gaps are.

The companies that will succeed in today’s environment are not those that make the boldest sustainability claims, or those that avoid making them altogether. They will be the organizations that can confidently demonstrate that their commitments, disclosures and operations are aligned.

Footnotes:

1: Littenberg, Michael R., et al., “Greenwashing Litigation Trends Update,” Ropes & Gray (May 6, 2026).

2: 17 CFR §270.35d-1 (2025).

3: 15 U.S.C. §§ 80b-6(2), 80b-6(4) (2025).

4: European Securities and Markets Authority, “Guidelines on funds’ names using ESG or sustainability-related terms” (Aug. 21, 2024).

5: 15 U.S.C. § 45 (2024), see also Federal Trade Commission, “A Brief Overview of the Federal Trade Commission’s Investigative, Law Enforcement, and Rulemaking Authority” (July 2025).

6: Sturdevant, James C. and Markwalder, Alexius, “The Consumer Legal Remedies Act,” Plaintiff Magazine, (Aug. 2007).

7: European Parliament and Council Directive 2005/29, 2005 O.J. (L 149), 22.

8: Rodriguez, Ashley, “Proposed Suit Claims Starbucks’ “Committed to 100% Ethical Coffee Sourcing” Pledge is Misleading,” FreshCup.com, (Jan. 21, 2026).

9: European Parliament and Council Directive 2024/825, 2024 O.J. (L 825).

10: Balch, Oliver, “How letting go of the script allows brands to tell better sustainability stories,” Reuters (June 11, 2026).