For most of the voluntary era, overstating sustainability carried little legal or regulatory risk. A bold net zero pledge with no plan behind it might draw criticism, but rarely financial consequences. Marketing built on green credentials seldom attracted regulators. Fund labels like “sustainable” or “ESG” were used with little discipline.
That is ending quickly, in many jurisdictions at once.
H&M and DWS: the cases that changed the standard
H&M’s Conscious collection was marketed on its sustainability credentials and sold well. In 2019, the Norwegian Consumer Authority said the company’s sustainability claims were unclear and misleading and lacked substantiation. The result was damage to the brand’s green positioning and a forced rethink of how it marketed the range.
DWS, the asset management arm of Deutsche Bank, was investigated by German authorities and the US Securities and Exchange Commission over claims that it had overstated its ESG credentials. Its chief executive stepped down in 2022, and in 2023 the SEC fined it US$19 million for misstatements about its ESG investment process. The case set a landmark: sustainability claims made to investors are investor communications, held to the same accuracy standards as any other.
Climate litigation goes mainstream
These are not isolated cases. The UN Environment Programme counted 2,180 climate cases worldwide by the end of 2022, more than double the 884 it counted five years earlier, and the number has kept rising. Cases now span the Netherlands, Germany, France, Australia, Brazil, the UK and the US, among others. In 2021 a Dutch court ordered Shell to cut its emissions by 45% by 2030. That order was overturned on appeal in 2024, but the appeal court confirmed that companies like Shell have a duty to reduce their emissions, a principle no board can ignore.
Financial regulators are acting too. The UK Financial Conduct Authority introduced its Sustainability Disclosure Requirements and an anti-greenwashing rule. In the EU, the Sustainable Finance Disclosure Regulation requires disclosure on the sustainability features of financial products, and guidelines from the European Securities and Markets Authority now restrict the use of ESG terms in fund names. The Australian Securities and Investments Commission has taken greenwashing cases to court and won.
Three implications for boards and management
First, sustainability statements to investors are now material disclosures. That covers annual reports, investor presentations, product documents and CEO letters. The documentation, review and sign off that apply to financial statements now apply to them too. A claim that would not survive scrutiny as a financial disclosure cannot survive as marketing either.
Second, claims made to consumers face consumer protection enforcement. The bar for substantiation has risen. In many jurisdictions, words like “sustainable”, “green”, “responsible” and “climate friendly” are treated as claims that need specific, verifiable evidence. From 27 September 2026, EU law will also ban claims that a product has a neutral or reduced climate impact because of carbon offsetting.
Third, board oversight of sustainability is becoming a formal governance duty. Legal opinions in several countries, including the well known Hutley opinions in Australia, conclude that directors must consider climate risk as part of their duties. Securities law has been applied to sustainability disclosures found to be materially misleading, and directors are increasingly exposed where oversight fails and investors lose money.
Why honest teams now have the advantage
Taken together, this is a structural change in the liability around corporate sustainability.
The uncomfortable corollary is that ambitious commitments without the governance to back them up are now legally dangerous. A company that publishes a 2050 net zero pledge without a transition plan, capital allocation evidence, interim milestones and verified data is exposed in a way it was not five years ago. So is the company whose report describes initiatives it cannot evidence, and the fund manager selling ESG products whose portfolio choices do not match the label.
None of this should discourage commitments. Quite the opposite. The message is that commitments must be matched by the governance and operations needed to deliver them, because the gap between promise and delivery is now a legal and financial exposure, not only a reputational one.
For the first time in two decades, the honest sustainability team has the wind at its back.
That is good news for the transition. For years, weak enforcement let the skilled communicator outcompete the honest performer, and capital flowed to whoever told the most reassuring story. Companies doing real work competed on uneven ground with companies producing good narratives.
That is changing. The legal and regulatory system now rewards real performance and penalises unsupported claims. For organisations whose sustainability work has been genuine, that is a competitive advantage. For those whose work has been mostly communication, it is a strategic risk that needs attention now.
Draws on Chapter Two of my book, Sustainability Leadership: The Global Outlook.