Hi, I'd like to help you with your question. I have experience evaluating and working with children so I hope it is alright if I answer your question.
Parents who criticize their children often do not realize that criticism is a form of verbal abuse. Parents criticize for a variety of reasons including modeling behavior they learned as a child from their parents, or as a form of control. They may think they are helping their child but in fact they are doing great harm.
Your granddaughter and grandson do not realize at their young age that they are not causing their parents anger towards them. So they internalize the criticism and think it is their fault and that there is something wrong with them. As teenagers, the child(ren) may rebel and act out towards their parents and society as a whole. They feel they need to live up to their parents expectations that they can do nothing right and that they are flawed.
What you are doing already is helpful to your grandchildren. Caring for them and helping them feel loved is important. You may also want to tell your grandchildren that sometimes adults feel things that kids are not responsible for. So while your grandchildren should be encouraged to follow the rules, let them know that how they are spoken to does not mean they are bad.
Also, work on increasing your grandchildrens self esteem. Tell them they are wonderful. Point out good traits they have. Praise them for a job well done or a picture they make. If you can provide love and attention they do not get with their parents, they will know how it feels to be loved and it will help them balance the verbal abuse from their parents.
Also, talk with your daughter again. Tell her that you found out that constantly correcting children with criticism can cause a lot of damage emotionally that has long term consequences. Gently recommend that the family might want to consider counseling. Also, you can show her articles or books that help back up what you say. Present everything as about caring for the children and not criticism of your daughter and her husband as parents. Let them know you are there for them.
Learn what you can about verbal abuse/ emotional abuse of children. The more you know, the better you can help your grandchildren. Here are some resources to help you:
The Words Hurt: Helping Children Cope with Verbal Abuse (Let's Talk) by Chris Loftis and Catharine Gallagher
The Verbally Abusive Relationship: How to recognize it and how to respond by XXXXX XXXXX
Safeguarding Children from Emotional Maltreatment: What Works (Safeguarding Children Across Services) by Jane Barlow and Anita Schrader Mcmillan
You can find these books on Amazon.com or your local library may have them for you.
I hope this has helped you,