CMA publishes new guidance to combat "greenwashing" in the fashion retail sector

The Competition and Markets Authority (CMA) is increasingly active in regulating the use of environmental claims to prevent "greenwashing", which occurs when a customer is misled (or could be misled) by a claim as to the environmental merits or sustainability of a product or service, because of how it has been marketed for sale by a business.

It has recently published new guidance (Guidance) to explain how fashion retail businesses should follow its Green Claims Code (Code) when making environmental claims. The Guidance provides additional clarity to retail businesses, as the Code is directed to all businesses generally on how to comply with consumer protection law when making environmental claims.

Businesses should be mindful of the Code and the Guidance, given there are consequences to non-compliance. The CMA has enforcement powers it can use in response to breaches of consumer law, and its powers are expected to become more robust from April next year with the power to impose fines for such breaches, as a result of the Digital Markets, Competition and Consumers Act (DMCC Act). Businesses should also continue to monitor the evolving EU regulatory landscape in relation to greenwashing.

The Guidance, as summarised below, focuses on ensuring that consumers can make informed decisions in their purchases, and therefore important information must be detailed next to certain environmental claims about products. It will be interesting to see whether and how the CMA's guidance will develop in other areas such as the fast-moving consumer goods (FMCG) sector.

Summary of the Guidance

The Guidance includes the following clarificatory information for businesses:

Important information, as needed to make sure a claim is not misleading, must be made clearly visible and presented close to the environmental claim. Customers must not be required to follow hyperlinks or QR codes to reach such information (Important Information Guidelines). Limits such as space do not provide a justification for hiding important information.

Supporting or further information can be set out separate to the relevant environmental claim, for example: (i) online, using tools to reveal further information which is immediately displayed (e.g. drop down fields) provided these are in the same location or webpage as the claim, and are clearly signposted and labelled; or (ii) in store, such as if a claim is made on the front of a product tag, the supporting information can be presented on the back of it or in an adjacent tag, as long as this is clearly signposted (Supporting Information Guidelines).

Unclear terms should be avoided, specifically broader, general or absolute terms, including "green", "sustainable" or "eco-friendly", and these should not be used to name product ranges.

Imagery and icons should not be used in a misleading way – for example, earth logos or leaf symbols used without explanation. Using a recycle logo may not be misleading where there is sufficient explanation of how the product can be recycled.

Comparisons against other products (such as comparing carbon footprint) must set out a summary of the basis for the comparison, and this summary must follow the Important Information Guidelines. Terms such as "better materials" or "less damaging production techniques" do not provide a clear basis for comparison – rather, specific comparisons should be made, such as a range being said to use 50% less water than a previous range.

Clear explanation of required consumer action is required where the claim is only true if such action is taken (for example, if a consumer can take certain action to prolong the use of that product) and must follow the Important Information Guidelines.

Filters and other navigation tools should not be used to group together products based on absolute environmental claims such as "sustainable" (unless all of those products are truly sustainable on verifiable criteria). Rather, specific characteristics can be used in search filters, such as "at least 50% recycled content".

Criteria for product ranges must be clearly and prominently displayed so that these are visible prior to a purchase, and the full criteria should be available. When a product is offered for purchase such as on a product webpage, the criteria can be set out using the Supporting Information Guidelines.

Descriptions of fabrics must focus on objective properties such as "recycled" or "organic" as opposed to "environmentally-conscious" and "responsible". When using objective properties, supporting evidence is required, the specific percentages of the relevant fibres in the product must be set out, as well as the minimum percentages required (for which the Supporting Information Guidelines can be used).

References to affiliation and accreditation schemes (which provide certain assurances about materials and fabrics) should only be used where the product actually has these characteristics. There are specific details which must be provided when an environmental claim is based on these schemes (for which the Supporting Information Guidelines can be used). Businesses can still provide information about these schemes in certain circumstances.

Claims as to a product's lifecycle should be accompanied with a summary of the aspect of the life cycle that the claim relates to, following the Important Information Guidelines.

Environmental targets must include a summary of the nature of the target and contain information about: (i) what the target is aiming to achieve; (ii) the date the target is expected to be met; and (iii) the main ways the business is intending to meet the target, for example stating who the business is working with to secure the target. This information can be provided through a separate link, webpage or QR code.

Regulators' approaches to greenwashing

The Guidance follows the CMA's previous investigation into environmental claims made by businesses in the retail sector concluded earlier this year. In addition, the CMA is currently investigating environmental claims made in the FMCG sector, including those made in relation to household essential items.

The EU is also tackling greenwashing, as part of its package of measures to achieve its "Green Deal" (with the overarching aim of making Europe climate-neutral by 2050). This includes:

the Empowering Consumers for the Green Transition Directive (which will give consumers better protection against unfair practices and better information to make sustainable choices). This came into force on 26 March 2024, and member states have until 27 March 2026 to transpose it into national law, which they must then apply from 27 September 2026. Amongst other things, the directive adds some green claims to the list of claims that are always considered as unfair (and are therefore not permitted). For example, unsubstantiated, generic environmental claims such as "eco-friendly" and "green"; and

the Green Claims Directive (for substantiation and communication of explicit environmental claims). The directive is still going through the legislative process before it becomes law, it is currently being negotiated between the European Council and European Parliament. The directive seeks to introduce a verification and pre-approval system for companies making environmental claims.

For more information about these EU greenwashing reforms, please see our "Green Reforms in Retail" handbook.

CMA's enforcement powers

At present, the CMA is able to take consumer law enforcement action through the courts or where appropriate through other measures such as accepting undertakings to avoid court action. However, the DMCC Act, a new law introduced this year, will equip the CMA with additional enforcement powers, once these come into effect through secondary legislation (expected to be in April 2025). These new enforcement powers include the ability to impose fines of up to 10% of a business' worldwide turnover. We have previously summarised the DMCC Act in more detail here.