The Competition and Markets Authority (CMA) is sharpening its focus on “greenwashing”- giving a false impression (including through words, logos, branding or advertising) that a product or service is “green”, or more sustainable or environmentally friendly than alternatives.
To do this, it published a new code, in effect from 20 September 2021, that companies making environmental claims need to adhere to, to ensure they are properly substantiated and do not mislead consumers.
The code applies to advertising and any product or service, by any commercial entity, aimed at/supplied to a UK consumer, including by a non-UK business, a distributor or an online platform.
The requirements are stringent; claims must be fully backed up with data, clear, complete and consider a product’s whole lifecycle, production to disposal. Any shortcomings could constitute greenwashing and lead to action by the regulator for misleading consumers.
Businesses should review the code to make sure that any branding, advertising, logos or descriptions that would lead a consumer to think a product or service was “green” or “environmentally friendly” would stand up to scrutiny.
This article gives a summary of the Code and its implications and suggests steps businesses can take now to manage risks associated with any environmental claims.
This article is relevant to any business advertising or selling to UK consumers, especially those in the transport, fashion and textiles and fast-moving consumer goods sectors (food and beverages, beauty and cleaning products) which are under particular scrutiny by the CMA now.
Aim of Green Claims Code
The key aim of the Green Claims Code is to combat greenwashing. Products with environmental credentials can drive consumer preference and command a price premium. The CMA is keen to protect consumers from being mislead to ensure that only businesses which have proper evidence to make a valid environmental claim reap these commercial benefits.
Environmental claims are those that suggest or create the impression that a product, brand, or service:
- Has no impact or a positive impact on the environment;
- Is less damaging to the environment than a previous version of the same product; or
- Is less damaging to the environment than a competitor’s goods.
Examples include claiming a product is “fully recyclable” when it is only recyclable in part, or a claim made in good faith that a product is “greener” than a competitor’s on the basis of one part of the supply chain, without considering the whole life cycle of a product, from material sourcing and manufacture to disposal.
Where claims are ultimately aimed at consumers in the UK, the Code will apply, even if the claims are being made by a UK or overseas business, a manufacturer, wholesaler or distributor.
Resellers and retailers, including online marketplaces, should ensure that any claims on products they sell to consumers, even if the claim was made by others, are accurate and not misleading. To do this, companies will need to ask suppliers for the data behind their green claims, and remove from sale any items with claims they know to be incorrect.
The Code could also apply to environmental claims made by companies in their sustainability or other corporate reports about environmental credentials, if these are directed to the consumer. This could have very serious implications when one considers Task Force on Climate-Related Financial Disclosures (TCFD) reporting in the UK, which applies to premium listed companies from 2021 and wider registered companies from April 2022.
The Code is enforced through the Consumer Protection from Unfair Trading Regulations 2008, which make it an offence to use “unfair commercial practices” as well “misleading actions” and “misleading omissions”. Companies can face fines, or requirements to remove advertising or products from sale. Furthermore, in the worst cases, officers of companies making unsubstantiated environmental claims could face imprisonment of up to 2 years.
Businesses may also face legal action from consumers, who can bring legal proceedings in response to a business’s conduct or seek redress in the courts for certain breaches of consumer protection law.
It is key to take proper advice both on substantiating green claims, to avoid investigation and, if regulatory action is commenced, to manage the process and co-operation, with proper reputation management. There is a defence of due diligence when substantiating environmental claims, making it key for businesses to pre-emptively assess any claims they are making, including in advertising, packaging, graphics, logos and branding, to ensure that the underlying data is compliant.
Key principles
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To help businesses apply these principles, the CMA has published the following non-exhaustive checklist to suggest if a claim might be misleading:
The claim is accurate and clear for all to understand;
There’s up-to-date, credible evidence to show that the green claim is true;
The claim clearly tells the whole story of a product or service, or relates to one part of the product or service without misleading people about the other parts or the overall impact on the environment;
The claim doesn’t contain partially correct or incorrect aspects or conditions that apply;
Where general claims (‘eco-friendly’, ‘green’ or ‘sustainable’ for example) are made, the claim reflects the whole life cycle of the brand, product, business or service and is justified by the evidence;
If conditions (or caveats) apply to the claim, they are clearly set out and can be understood by all;
The claim won’t mislead customers or other suppliers;
The claim does not exaggerate its positive environmental impact, or contain anything untrue – whether clearly stated or implied;
Durability or disposability information is clearly explained and labelled;
The claim does not miss out or hide information about the environmental impact that people need to make informed choices;
Information that really cannot fit into the claim itself can be easily accessed by customers in another way (QR code, website, etc.);
Features or benefits that are necessary standard features or legal requirements of that product or service type aren’t claimed as environmental benefits;
If a comparison is being used, the basis of it is fair and accurate, and is clear for all to understand.
It is important that, for all claims made, if the claim does not fulfil any of the above, or if its adherence to the checklist and the principles cannot be substantiated with data and evidence, urgent action is taken to substantiate or remove that claim.
Action businesses can take now
It is key that to prevent misleading claims being made, proper governance is put in place around how the business makes environmental claims. This will also help businesses properly capitalise on the genuine environmental benefits of products and be confident that the claims are made in a way that is transparent and fair to consumers.
Key actions to consider now are:
- Reviewing policies, structures and governance in place around green claims;
- Considering a risk assessment of current activities, including direct claims and claims by external agencies or suppliers;
- Holding a reputation risk workshop to identify high likelihood and high impact reputational risks - using the principles as a case study;
- Undertaking a scenario planning workshop to analyse the reputation risk, assess its potential impact on the business and stakeholder trust, and develop mitigation plans;
- Training staff to recognise reports of potentially misleading green claims, and to escalate appropriately;
- Carrying out a review of existing claims and assess compliance;
- Implementing training and workshops to raise awareness of the Code with marketing, procurement, corporate affairs, media relations teams and those commissioning external advertising or creative work.
In practice, consideration of the Code whilst preparing green claims should now be part of legal risk and reputation risk management for organisations in any sector. If a CMA investigation does materialise, advice on how best to cooperate with the regulator is key to minimising reputational damage and eroding stakeholder trust.
How can the team help?
PwC has a combined team of reputation management, environmental law and regulatory disputes specialists who can help businesses navigate the new guidance in relation to Green Claims.
- We can carry out a Green Claims Risk Analysis to:
- Review specific green claims that you wish to make or which you are making already, and consider how they might be viewed by the CMA; and
- Check the review processes you have in place to verify your green claims;
- Advise on updates to your review processes in light of the Code.
- Conduct reviews of supplier contracts for environmental claims and compliance with the Code
- Conduct gap analysis - non-financial reporting and existing environmental strategy
- Deliver reputation risk and scenario planning workshops - using the principles as a case study
- Conduct ‘lessons learned’ reviews after CMA investigations or enforcement action
- Deliver training sessions and workshops to raise awareness of the Code amongst procurement, corporate affairs, media relations teams and those commissioning external advertising or creative work.
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Senior Manager, UK Environmental Regulatory Legal Lead, PwC United Kingdom
Tel: +44 (0)7483 326978
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