Greenwashing and the CMA's Green Claims Code: Businesses have until January 2022 to ensure their environmental claims comply with the law - Boodle Hatfield

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13 Dec 2021

Greenwashing and the CMA’s Green Claims Code: Businesses have until January 2022 to ensure their environmental claims comply with the law

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Alexander Martinelli View profile
5 min read

The UK's Competition and Market's Authority (CMA) is cracking down on false and misleading environmental claims made by businesses, who now have until the end of the year to ensure that their sustainability promises comply with the law.

What is "Greenwashing" and why is it a problem? 

More than ever, a business's environmental promises are driving consumer behaviour.

Obviously this is no bad thing, but only where customers are encouraged to buy genuinely environmentally-friendly products.

The appetite for sustainable products means that businesses can be prone to misleading consumers with false or highly exaggerated claims about the environmental impact of their products. Where a business's environmental claims are misleading, that is known as "greenwashing".

Key concerns over greenwashing are explained by the Chief Executive of the CMA (Andrea Coscelli) as follows:

“More people than ever are considering the environmental impact of a product before parting with their hard-earned money. We’re concerned that too many businesses are falsely taking credit for being green, while genuinely eco-friendly firms don’t get the recognition they deserve."

What has happened this year? 

Following extensive consultation with stakeholders, on 20 September the CMA published the “Green Claims Code” and accompanying guidance ("the Code"), helping businesses understand and comply with existing obligations under consumer protection law when making "green" claims.

The Code contains a number of principles that businesses need to make sure they comply with. Helpfully, it provides practical examples of how each principle applies and detailed case studies where multiple principles apply. We include a summary of those principles below.

Who does the Code apply to? 

It applies to all businesses who make environmental claims, regardless of whether the claims are about, for example, a product, a service, the brand, the business as a whole, or simply a process that the business carries out. This is not as simple as outright lying, but includes exaggeration, omission and unfair comparison.

What do businesses need to do? 

Businesses now have until the New Year to make sure their claims comply with the law, and the Code has been drafted to help businesses do this.

The CMA has now officially put businesses "on notice", and in January 2022 the CMA will begin a review of environmental claims (both online and offline, i.e. on websites but also in shops and on product labels).

Certain sectors will be prioritised. It seems likely these will include industries where concerns about these claims are strongest, for example the fashion industry.

We also note a warning by the CMA that they may take action before the formal review begins where there is clear evidence of breaches of law.

What will happen if businesses fail to comply?

Those caught out may be subject to civil and criminal enforcement action, including fines and litigation.

The CMA (and bodies such as Trading Standards Services) can bring Court proceedings against businesses who fall short, and businesses may need to pay redress to consumers impacted by the breaches.

Consumers themselves can also directly take legal action against businesses who fail to comply with certain elements of consumer protection law.

On 15 November the Chartered Trading Standards Institute (CTSI) released an infographic called 'Squash the Greenwash' giving customers information on how to report concerns over misleading 'green' claims. It is therefore important to maintain awareness of the guidance, review existing environmental claims, and seek legal advice where necessary.

How can businesses prepare? 

Businesses should ensure they read and understand the Code, the principles of which are summarised below. A business should carry out an audit of their environmental claims against these, in order to spot any areas that need attention, and, importantly, any environmental claims which should be removed. Legal advice should be sought where necessary.

In short, think: full and frank disclosure.

Be truthful and accurate

Focus on whether any claims (even where factual) may be misleading consumers into thinking your brand is more environmentally friendly than it is.

A clear example is where a company makes statements surrounding use of specific materials, components or processes; or implies that a specific practice is environmentally neutral or positive when use of that practice, material, component or process is required under the law or is standard in the sector.

Be clear and unambiguous

Ensure that any statements are specific and easy to understand.

Half-truths don’t fly - do not omit or hide relevant information

Omission of key information will fall foul of the guidance. You should be considering the overall impact of all components of a product if you are making an environmental claim about it. In other words, don't cherry pick the good bits.

Only make comparisons that are fair and meaningful

If a product uses 50% less waste than other brands, who are the 'others'? Is it a wide range of competitors or only the most waste-heavy businesses that have been chosen as comparators?

Consider the full life cycle of the overall product

Each element of a product should be looked at. For example, any packaging, labels and inks, not just the core product itself.

Often 'natural' materials involve emissions-heavy processes for manufacture and are not eco-friendly when they break down.

All aspects of the environmental impact of a product's life cycle can be important, and so the total life cycle of a product (or service) should be considered.

Use statistics/figures to substantiate claims (or have these to hand for any investigation by the CMA).

You should be ready to back up your claims.

Final thoughts

It is important that brands and businesses are alert to the CMA guidance; enforcement of the rules will only become stricter as the Government seeks to meet its ambitious environmental targets.

Businesses also need to remember to consider additional sector specific rules: additional guidance may apply to certain sectors / products (particularly food or fashion) on top of existing consumer law obligations.

"In the event that your existing statements relating to the environment cannot be substantiated, remove them until you have the required measurement and supporting evidence for them. The risks from CMA attention, activist litigation and consumer backlash make this an issue that has moved centre stage and worth immediate attention in the coming weeks."

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