Crackdown on greenwashing by UK’s Competition and Market Authority leading up to COP26
On 20 September 2021, the Competition and Markets Authority (CMA) published the Green Claims Code (the Code). The Code provides guidance to companies on how to comply with obligations under existing consumer protection law, when said companies make positive environmental statements (green claims) in the marketing of their products.
The guidance comes after an announcement last year that the CMA was investigating green marketing by companies and its impact on consumers. At the time, initial reports found that around 40 per cent of “green” claims made online could have been misleading.
An environmental claim suggests a product, service, process, brand, or business is better for the environment. The focus is on whether the claim creates the impression or suggests that a product or a service:
- has a positive impact or no impact on the environment; or
- is less damaging to the environment than competing goods or services or even than a previous version of the same good or service.
The claim may be explicit or implicit, and can appear on advertisements, marketing material, branding, packaging, or other information a business provides to consumers. In assessing whether a claim is genuine or misleading, the CMA will consider the meaning of the terms used, the qualification and explanations of what is said, evidence supporting the claims, whether information is not included or hidden, the imagery (colours, pictures, and logos) used and the overall presentation.
The Code proposes six principles which represents the CMA’s views as to the way in which business should comply with consumer law.
- A claim must be truthful and accurate
Companies must ensure that claims give an accurate impression in relation to the green or sustainable nature of their product, service, process, brand or business. For example, companies should include the correct information about a product, and not overstate or exaggerate its sustainability credentials or positive environmental impact. They should be able to justify the use of words with specific meanings or with widely assumed meanings (e.g. the use of the term “organic” should meet expectations of consumers as to being made up of almost entirely organic components), and be clear about conditions or caveats that apply to claims made. The principle extends to situations where companies focus only on part of a product to draw attention to a particular sustainability benefit.
- Claims must be clear and unambiguous
Companies should not present their product or service in such a way that confuses consumers or gives the impression it is better for the environment than it is. Vague and general statements are likely to mislead and will be difficult to substantiate. For example, general or all-encompassing claims such as “eco”, “sustainable”, and “biodegradable” can be problematic, as they don’t provide any real indication of what is meant. The CMA advises companies to use words according to their ordinary meaning and in a way that consumers will understand.
- Claims must not omit or hide important information
The CMA is attentive to the fact that what is not said could also influence how consumers make decisions. It notes that consumers consider a range of factors such as sourcing of materials and disposal of waste when making decisions. Consumers’ ability to make informed choices should not be impacted by the withholding of information. A company should not focus on the benefits of a relatively minor aspect of the product, service, or business activities. Companies may also mislead if they do not say anything at all about the environmental impact of the product. The CMA also emphasises that companies should be clear about their efforts to achieve Net Zero. For example, if they are offsetting, companies should provide information about the scheme they are using.
- Comparisons must be fair and meaningful
Companies must ensure that comparative claims do not mislead. They should be based on clear, up to date, and objective information. Companies should compare like products with like. The product or service must be for the same need or purpose, and the company should compare the important and representative features of the product. If a company is comparing the organic composition of a product, for example, it must be using the same measurements as another company. Finally, claims can become outdated, so companies should consider the period of time for which the claim can be made.
- Full life cycle of the product or service must be considered
Companies should consider the full life cycle of the product when making a claim. For example, a company should consider a product’s use, disposal, manufacturing, parts, and the period in which a benefit could be realised. The CMA states that companies should consider which aspect of the life cycle would likely be of interest to consumers.
- Claims must be substantiated
Finally, companies should be able to provide robust, credible, relevant, and up to date evidence to support environmental claims. These claims are likely to be objective or factual claims that can be tested. The CMA cautions that a claim made without regard to whether a business knows there is evidence to support them could be problematic, even if the claim later turns out to be true.
The CMA encourages companies to check if their claims comply with the Code and to seek legal advice if it is unclear whether their claims comply with the law. Companies have until January 2022 to comply. At this time, the CMA will begin a full review of potentially misleading claims made online and offline, including claims made in stores and on labelling. If there is evidence of non-compliance, the CMA will consider further action such as enforcement.
The CMA’s principles put the consumer first. At their core, they protect the ability to make decisions about the environmental impact of products and services. Throughout the guidance, the CMA urges companies to take a holistic view (i.e. looking at the entire product life cycle) and consider what consumers direct their minds to when engaging with the product or service.
It is also noticeable that the application of the principles is broad. They apply to business-to-business claims, such as environmental claims made by manufacturers without direct contact with consumers and to claims made on online marketplaces. The CMA recognises that small businesses are reliant on the information provided by manufacturers. Importantly, the principles apply to claims about a broad range of commercial activity: “product, service, process, brand or business”.
The Code is not itself legislation. It represents the CMA’s view on the law and the CMA has said that companies that follow these principles are less likely to ‘fall foul of the law’. What remains to be seen is the CMA’s enforcement activity following the deadline and the application of these principles in practice. This includes which sectors the CMA will prioritise, which the CMA will do in the coming months. In its press release, the CMA indicates that its focus will be on sectors where consumers appear most concerned about misleading claims. There is some indication that this will include textiles and fashion, travel and transport, and fast-moving consumer goods, although that has yet to be confirmed. It appears unclear as to how the CMA will determine and collate potentially misleading statements and it remains to be seen how effective the code will be at identifying and, ultimately, reducing misleading claims in connection with the environment and climate.
In the lead up to COP26, the principles illustrate a trend in regulatory concerns that companies are not putting their money where their mouth is and are instead benefiting from greenwashing. Environmental concerns are increasingly a priority for consumers, who should be able to rely on environmental claims made in relation to the products and services they are considering.
With thanks to Intern Connor Hounslow for co-authoring this piece.