How 'Green' are you? 'Greenwashing' claims scrutinised by regulators

This article was written by Ebony Ezekwesili

In a market where consumers are becoming more conscious of the environmental impact of their purchasing habits, sales of goods and services promoted as 'environmentally friendly' grew to £41 billion in the UK in 2019. Businesses in a vast array of sectors are keen to capitalise on this growing market by actively promoting their 'green' credentials. This incentive can lead to an increased risk of 'greenwashing' claims, with a recent study finding that almost 60 per cent of sustainability claims by certain fashion brands could be classed as 'unsubstantiated' and 'misleading'.

This is particularly true in the fashion and retail sector. From H&M’s 'conscious' clothing range made from sustainable materials and Boohoo’s 'Ready for the Future' range of recycled clothing, to numerous statements on ensuring sustainability through their supply chains, fashion brands are keen to position themselves as the 'go-to' retailer for the environmentally conscious shopper.

This incentive can lead to an increased risk of 'greenwashing' claims, with a recent study finding that almost 60 per cent of sustainability claims by certain fashion brands could be classed as 'unsubstantiated' and 'misleading'. These activities have caught the eye of regulators seeking to ensure consumers are not mislead in the process.

What is Greenwashing?

'Greenwashing' occurs when misleading, vague or inaccurate statements are made to consumers regarding the environmental practices of a company, or in relation to how eco-friendly a product or service is. Claims may be made by manufacturers, wholesalers, distributors and retailers, and may be made about goods or services, or particular components or aspects of them. They may also be made about a process or a brand or business as a whole.

Greenwashing is not a new phenomenon, but with the increased appetite of consumers to make more conscious shopping choices (62 per cent of UK consumers in a study said they would reconsider their purchasing decisions if retailers better communicated the environmental impact of delivery), the increased risk of consumers falling victim to unsubstantiated or exaggerated environmental claims has led to greater scrutiny by regulators, such as the Advertising Standards Agency ('ASA') and the Competition and Markets Authority ('CMA'). 

Legal Position

The legal position on greenwashing largely relates to ensuring consumers are not mislead into purchasing products that are falsely advertised as eco-friendly.

1. Consumer Regulations

Whilst there is no legislation in the UK specific to greenwashing, such claims will likely be subject to the provisions under the Consumer Protection from Unfair Trading Regulations 2008 ('CPRs').

The CPRs contain a general prohibition against unfair commercial practices, as well as specific prohibitions against false and misleading commercial practices, and misleading omissions of material information. These may cover how a business markets its products, services or brand, and includes advertisements, product labelling and packaging. Greenwashing claims will only fall foul of these provisions if the misleading claim causes or is likely to cause the average consumer to take a transactional decision they would not have taken otherwise.

A breach of the CPRs can result in a fine or imprisonment for the infringing business.

2. Advertising Laws

The ASA, as the advertising regulator in the UK, is responsible for administering the advertising codes prepared by the Committee of Advertising Practice ('CAP'), including the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (the 'CAP Code').

In addition to the CAP Code’s general principles of ensuring that all adverts are legal, decent, honest, truthful and in line with the principles of fair competition, environmental claims made by retail businesses must also comply with the following requirements in Rule 11 of the Code:

• The basis of environmental claims must be clear - unqualified claims could mislead if they omit significant information;
• The meaning of all terms used in marketing communications must be clear to consumers;
• Absolute claims must be supported by a high level of substantiation. Comparative claims such as 'greener' or 'friendlier' can be justified if the product provides a total environmental benefit over the marketer’s previous product or a competitors’ products. The basis of the comparison must also be clear;
• Environmental claims must be based on the full life cycle of the advertised product, unless the marketing communication states otherwise, and the limits of the life cycle must be made clear. If a general claim cannot be justified, a more limited claim about specific aspects of a product might be justifiable. Claims that are based on only part of the advertised product's life cycle must not mislead consumers about the product's total environmental impact;
• Environmental claims cannot suggest they are universally accepted if a significant division of informed or scientific opinion exists;
• If a product has never had a demonstrably adverse effect on the environment, marketing communications must not imply that the formulation has changed to improve the product in the way claimed. However a claim that a product has always been designed in a way that omits an ingredient or process known to harm the environment is permitted;
• Marketing communications must not mislead consumers about the environmental benefit that a product offers; for example, by highlighting the absence of an environmentally damaging ingredient if that ingredient is not usually found in competing products or by highlighting an environmental benefit that results from a legal obligation if competing products are subject to that legal obligation.

The ASA has a number of enforcement powers at its disposal if it determines that a business has made a greenwashing claim. This includes requesting the withdrawal of the infringing advert and publishing its rulings online, resulting in negative publicity and reputational damage for the business involved. In the case of persistent breaches of the CAP Code, ASA can refer a business to other regulatory bodies such as Trading Standards, who have the power to impose civil sanctions among other enforcement tools.

In a signal to ASA’s increased interest in this area, the regulator recently launched a review in this space as part of its 'Climate Change and the Environment' project to ensure that the regulation in relation to adverts that make environmental claims continues to remain effective in today’s society. On 23 September 2021, the ASA also published a statement setting out three steps it proposes to take in relation to its regulation of green ad claims. This includes:

1. plans for CAP to issue advertising guidance outlining the key principles advertisers need to follow to ensure their ads don’t mislead about the environment and are socially responsible when considering environmental issues;
2. proposals to commission research into consumers' understanding and perceptions of 'carbon neutral' and 'net zero' claims; and
3. inquiries into specific issues, focusing on priority areas requiring carbon reduction as identified by the UK Climate Change Committee – for each area, the ASA will look at current advertising claims and any problems, which may lead to issue-specific guidance for businesses in these areas.

4. Competition Laws

The CMA is the UK’s competition regulator responsible for promoting effective competition for the benefit of consumers. The CMA also has responsibility for enforcing consumer protecting legislation.

On 20 September 2021, the CMA published its Green Claims Code to help businesses ensure their environmental claims are genuinely green, whilst reducing the risk of misleading shoppers. The code follows draft guidance issued by the regulator in May 2021, in response to a CMA review of online green claims which revealed that 40 per cent of claims made could be misleading.

The Green Code is based on existing consumer law and sets out 6 key principles that businesses should adhere to when making green statements – namely, green statements should:

• be truthful and accurate - businesses must live up to the environmental claims they make about their products, services, brands and activities;
• be clear and unambiguous - the meaning consumers are likely to take from a claim and the environmental credentials and impacts of the product, service, process, brand or business should match;
• not omit or hide important information - consumers must be given the full picture to be able to make an informed choice;
• compare goods or services in a fair and meaningful way - comparisons should enable consumers to make informed choices about competing products and businesses or between different versions of the same product;
• consider the full life cycle of the product or service - businesses should always consider the effect of the total life cycle of a product or service, or of their overall activities, on the accuracy of their claims; and
• be substantiated - businesses should be able to back up their claims with robust, credible, relevant and up to date evidence.

The CMA has announced that it will carry out a full review of misleading green claims (both on and offline) at the start of 2022. As such, businesses will have until the New Year to ensure their environmental claims comply with consumer law.

The CMA will decide which sectors to prioritise for review in the coming months. This could include industries where consumers appear most concerned about misleading claims, such as textiles and fashion and fast-moving consumer goods (including beauty products). However, the CMA has made it clear that any sector where there are found to be significant concerns could become a priority. Any business found to be in breach of consumer law could face civil action or criminal prosecution.

Key Takeaways

In a bid to capitalise on growing consumer appetite for environmentally friendly goods and services, retail businesses may be tempted to overstate their green credentials. However, in light of increased regulatory scrutiny, it is vital that businesses carefully consider any environmental claims against relevant guidance to ensure they avoid misleading customers, resulting in potential civil and criminal penalties and reputational damage. In particular, in line with the latest Green Claims Code, when making green claims, businesses should bear in mind the following:

• broader, more general or absolute claims (e.g. 'green', 'eco-friendly' or 'sustainable') are much more likely to be inaccurate and to mislead because their meaning can be unclear, especially where used without explanation;
• wider environmental goals of the business should be clearly distinguished from product-specific claims – businesses should consider the scope of their claims and make clear what they apply to;
• where claims are only true if certain conditions or caveats apply, these conditions or caveats should be clearly stated and prominent enough for consumers to see and understand them;
• the visual presentation of a claim – images, symbols, logos, colours and packaging - are an important part of the overall presentation, and can also create a misleading effect. There should be a direct and verifiable link between the visual presentation and the meaning consumers are likely to draw from them; and
• in considering whether a claim could be misleading, the full life cycle of the product or service, and the whole of a business’s activities, may be relevant. Claims should not just focus on the positive environmental aspects of a product, service, process, brand or business, where other aspects have a negative impact and consumers could be misled.

If you have any questions, or would like assistance in this area, feel free to get in contact with our Commercial team contact Helen Scott-Lawler.