Greenwashing Claims in the UK: Greater Enforcement and Higher Penalties

The Digital Markets, Competition and Consumer Bill ("the Bill"), currently being scrutinized by the UK Parliament, shows that addressing greenwashing is a policy priority in the UK. While the UK proposal is less ambitious than the proposal by the EU for a directive on voluntary green claims, it would grant the Competition and Markets Authority’s ("CMA") administrative enforcement powers to impose fines of up to 10% of annual global turnover. This fact alone is good reason for companies to audit and reassess their green/environmental claims.

Green claims are currently regulated by:

1. sector or product specific requirements (for example, energy efficiency labelling for electronic equipment/household appliances); and
2. legislation on consumer protection, which mainly consists of EU retained law on unfair business practices, in particular, the Consumer Protection from Unfair Trading Regulations 2008 ("the Consumer Protection Regulations").

The Bill proposes to replace the existing Consumer Protection Regulations. However, it does not introduce a revolutionary new regime. The same prohibitions on misleading practices are carried over, although it will be easier for the Parliament to revise the list of banned practices. The CMA power to issue fines up to 10% of a company's global turnover, will help to focus minds. This is a similar power to that which the CMA has at its disposal for enforcement of the competition rules.

To assist businesses, the CMA has published the Green Claims Code ("Code"). The Code is not legislation, but provides an insight into the CMA's views on the existing law relating to unfair commercial practices. While the main focus is on claims towards consumers, it also applies in the context of business to business dealings. Accordingly, manufacturers and wholesalers, who may not supply consumers directly should also assess their compliance with the Code.

The Code sets out the legal principles governing green claims and includes explanations of those principles and some practical examples. The six principles are as follows:

1. Claims must be truthful and accurate – as an example, the CMA highlights that general or absolute claims (such as "green", "sustainable" "eco-friendly") are likely to be inaccurate and mislead if used without any explanations or clarifications to which aspects of the product or service those claims relate.
2. The claims must be clear and unambiguous – in other words, claims should be worded in a way that is transparent and straightforward so consumers can easily understand. For example, when using a "recyclable" claim, companies should be clear whether it applies to packaging or also the product after its use.
3. Claims must not omit or hide important information that consumers need in order to make informed choices. The companies should be careful when cherry-picking beneficial aspects that are highlighted in advertising, particularly where the negative effects outweigh the benefits.
4. Comparison should be based on clear, up to date and objective information. This applies equally to a comparison with competing products, as well as a company’s own products, for example, when comparing a new version against an old version.
5. When making a claim, companies must also consider the full cycle of the product or service. At the same time, all claims do not have to cover the full product cycle but this should be made clear.
6. Finally, claims must be substantiated so they can be tested against scientific or other evidence.

The CMA is currently carrying out two investigations relating to green claims compliance with consumer laws. The first investigation focuses on environmental claims made about certain consumer goods (such as food and drink, cleaning products, toiletries, and personal care items). The CMA investigates claims that use vague and broad eco-statements (e.g. packaging or marketing a product as 'sustainable' or 'better' for the environment with no evidence), misleading claims about the use of recycled or natural materials in a product and how recyclable it is, and entire product ranges being incorrectly branded as 'sustainable' when only some products are properly considered to be 'sustainable'. The second investigation relates to a wide variety of environmental claims made by three fashion brands about their clothing, footwear and accessories.

We highlight that similar requirements as those set out in the Code are also contained in the Environmental Claims chapters of the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (the "CAP Code"). The Committee of Advertising Practice (CAP) creates and enforces the CAP Code, which allows industry to self-regulate based on a commitment by involved stakeholders to follow best practice. The Advertising Standards Authority (ASA), as the UK's independent advertising regulator, endorses the CAP Code, ensuring that the self-regulatory system works in the public interest. In December 2022 CAP and ASA published specific guidance on 'green' claims, and updated its guidance on misleading environmental claims and social responsibility in June 2023.

Beyond these two investigations, the current framework for green claims is being invoked in high profile cases. For example, a recent decision by the ASA[1] upheld complaints against a water company's advertising campaign which emphasized its investment in future environmental initiatives but omitted all reference to less positive outcomes, such as pollution incidents related to discharges from combined storm overflows (CSOs). The ads were found to omit material information and were therefore misleading. We should expect even greater attention to such ad campaigns when the Bill is adopted. Now is the time to take a cold hard look at the manner in which companies present their environmental and sustainability credentials to the market.

[1]     https://www.asa.org.uk/rulings/anglian-water-services-ltd-g22-1171967-anglian-water-services-ltd.html