In November 2020, concerned about the impact of misleading green marketing on consumers, the UK's competition and consumer law enforcement body the Competition and Markets Authority ("CMA") asked the question: "how can consumer protection legislation tackle greenwashing?" In January 2021, the CMA stated that 40% of green claims made online could be misleading consumers.
After extensive consultation with businesses, the CMA has today published a Green Claims Code, which aims to help businesses understand and comply with their existing obligations under consumer protection law when making environmental claims. This is in anticipation of a formal review of misleading green claims made by businesses, both online and offline, due to start in 2022. The CMA has stated that it "stands ready to take action against offending firms", and may take action prior to the conclusion of the formal review where there is a clear breach of consumer law.
The CMA will soon announce the sectors it intends to prioritise in its formal review. It has indicated that these may be those industries in which consumers are likely to be most concerned about misleading claims, such as textiles and fashion, travel and transport, and fast-moving consumer goods (food and beverages, beauty products and cleaning products). However, any sector where the CMA finds significant concerns could become a priority.
The CMA has defined green claims as claims that:
"suggest or create the impression that a product or service:
- has a positive environmental impact or no impact on the environment;
- is less damaging to the environment than a previous version of the same good or service; or
- is less damaging to the environment than competing goods or services."
The key piece of consumer protection legislation relevant to the CMA’s guidance is the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). The CPRs contain a general prohibition against unfair commercial practices and specific prohibitions against misleading actions and misleading omissions. Businesses must remember that this applies to all commercial practices, which can include various aspects of a trader’s behaviour, including but not limited to how it markets its products, services, processes or brand. This includes advertisements, product labelling and packaging or other accompanying information, and even product names.
The key principles of the Green Claims Code are as follows:
- claims must be truthful and accurate
- claims must be clear and unambiguous
- claims must not omit or hide important relevant information
- comparisons must be fair and meaningful
- claims must consider the full life cycle of the product or service
- claims must be substantiated
Accompanying each principle is guidance on how the principle should be applied, including examples. Businesses making green claims should review them against the guidance in preparation for the CMA's formal review in 2022 to avoid sanctions. The CMA have stressed that the Green Claims Code does not constitute legal advice, and if businesses are unsure whether their claims would be compliant, they should seek legal advice.
More information can be found at here.
Latest update - 27/09/2021
Following this announcement, the Advertising Standards Authority ("ASA"), who have been working closely with the CMA on their Climate Change and the Environment project, have published a statement setting out three steps it proposes to take in relation to its regulation of green advertising claims:
First, the Committee of Advertising Practice will issue guidance for advertisers, in line with the CMA's guidance, on how to ensure their ads are socially responsible and avoid greenwashing;
Second, the ASA will be commencing a series of enquiries into specific issues, starting with the Climate Change Committee’s identified priority areas requiring carbon reduction. These inquiries will be followed by any necessary guidance on specific problem areas. Energy, heating and transport issues will be the first areas of focus.
Finally, this autumn the ASA will commission research into consumer understanding of Carbon Neutral and Net Zero claims, and research to understand consumer perceptions of Hybrid claims in the electric vehicle market.
The full statement by the ASA can be found here.
It is clear, therefore, that in the coming years businesses will face increasing scrutiny in relation to any climate-related environmental or social claims that they make. Businesses making such claims will need to take care to adhere to the new guidance.
Latest update - 17/01/2022
The CMA announced on 10 January that it has commenced a review of environmental claims in the fashion retail sector, with further sectors to follow.
There has been much discussion of the huge environmental cost of "fast fashion" in recent years. In 2018, the Environmental Audit Committee (EAC) investigated the social and environmental impact of UK's love of fast fashion, and the wider fashion industry. In 2019 the EAC made recommendations to the UK Government, ranging from a producer responsibility charge to pay for better clothing collection and recycling to requiring due diligence checks across fashion supply chains to root out forced or child labour. However, most of the recommendations were rejected. In 2020, the UK Government asked the EAC to follow up on its 2018 inquiry, as it had since identified textile waste as a priority area.
As the public consciousness shifts more and more to a sustainable future, consumers are seeking out sustainable brands. As a consequence, many fashion brands from global giants to smaller independent designers are promoting their green credentials.
The CMA estimates that UK consumers spend £54 billion annually on clothing and footwear, with this number only set to grow. It has said that it will be reviewing the full spectrum of "green" claims, including that individual items of clothing are sustainable or better for the environment, claims about use of recycled materials in new clothing and entire ranges of clothing within stores being branded as “sustainable”.
If the CMA ultimately finds that brands or retailers have been making false or misleading claims, it is likely to seek undertakings from those companies to cease making those claims. As a final sanction, the CMA has the power to take companies to court if they fail to comply with its requests.