Companies are rightly concerned about the European greenwashing regulations

Businesses communicating about sustainability need to be mindful of their words. Europe is keeping a close eye. Walter Jacob of KPMG Law and Sven Bosman of Vastned Belgium explain what the changing regulations on greenwashing mean for organizations.

Companies that communicate with the outside world usually aim to promote themselves, their products, or services. In doing so, they like to present themselves in a favorable light, but that is not always allowed.

"When it comes to environmental and sustainability claims, it is simply not allowed to present yourself as better than you really are," according to Walter Jacob, Senior Counsel at KPMG Law. “This so-called greenwashing is detrimental to the interests of consumers and investors, because they often consciously choose sustainable products and companies.”

Institutional investors often use criteria outlined in their investment policy. If it turns out that they based their investment choices on incorrect information, this can negatively impact third parties. The company is also likely to suffer reputational damage and may face sanctions.

“Until now, such problems at the Belgian level were often associated with laws on unfair trade practices, fraud, or the prospectus law. In Europe, we see that more specific legislation on greenwashing is now being rolled out,” says Jacob. “Consider, for example, the European Taxonomy Regulation, the Green Claims Directive, and the SFDR (Sustainable Finance Disclosure Regulation) for the financial sector.”

It is important for companies to be aware of this. Knowledge of legislation is a prerequisite for communicating about sustainability in a detailed and concrete manner.

“As a result, some companies will put less emphasis on their efforts in the field of sustainability. While this is regrettable and an unintended consequence of stricter regulations, they are right to be cautious. Companies must have internal procedures and responsible individuals in place to ensure that the information they share can be verified. And those regulations are evolving. So, it's essential to keep track of them continuously,” says Jacob.

“Some companies employ a Sustainability Officer for this purpose. In others, this responsibility falls under the legal department. What is most important is that companies are aware that this requires active monitoring."

Sven Bosman, Operational Managing Director at Vastned Belgium, has already become well acquainted with sustainability legislation. Together with KPMG, he worked on developing the sustainability policy of Vastned Belgium, focusing on investments in Belgian commercial real estate.

“We pay attention to all aspects of ESG (Environmental, Social & Governance). As a publicly listed company, we must adhere to governance rules. For us, the environmental aspect mainly involves making our real estate energy efficient, both within and outside city centers. For instance, retail parks can be insulated, equipped with solar panels, and fitted with double glazed windows."

For urban real estate, this is more challenging. Bosman: “We also experience the complex regulations. In Bruges, the historic city center is a UNESCO World Heritage site. This requires a more integrated approach to collaborate with the relevant authorities to make the buildings more sustainable while respecting their heritage value. Consequently, you cannot simply add extra insulation to the exterior of a building."

Vastned Belgium communicates its ESG approach through various channels, including its annual report. However, Bosman aims to approach this differently in the future. “We could provide more extensive communication about the history of certain buildings. The Etam store on Antwerp's Meir was previously a Tilquin store (a specialty shop for table art), and even the interior is protected.”

By sharing this information, Bosman hopes to set realistic expectations about what is possible in terms of sustainability for such a building.

“For our retail parks, we can perfectly map out the difference in energy consumption before and after renovation. It is an asset to be able to communicate about this objectively, but we didn't do it until we had a clear policy in place. Now that we have completed our double materiality analysis, we can. Everything starts with outlining a realistic sustainability policy."