Awareness of environmental issues such as climate change has increased in recent years and sustainability is now firmly on the agenda for consumers and other stakeholders concerned about doing their bit for the environment. As a result, there is a growing demand for ‘environmentally friendly’ goods and services.
In 2019, UK consumers spent £41 billion on ethical or sustainable goods and services, almost four times more than consumers spent on similar products twenty years ago. The Covid-19 pandemic has further increased the pace of this consumer-led focus on sustainability. In June 2022, a survey carried out by BCG indicated that 57% of consumers say their perception of a brand is influenced by its sustainability practices.
This surge in demand for green products and services has led to businesses in many different sectors trying to profit from this growing market by actively promoting themselves as ‘eco-friendly’ and as having environmentally sustainable practices and values. However, this has increased the risk of companies overstating their sustainability credentials to attract and retain customers and investors - known as ‘greenwashing.’
What is Greenwashing?
Greenwashing is when a company makes false or misleading statements about its environmental credentials or how eco-friendly a product or service is. This can be done unintentionally or as a deliberate marketing strategy.
Buzzwords or vague language like ‘natural,’ ‘green’ and even ‘sustainable’ can be used to greenwash as they have no clear definition or any widely recognised standard to warrant their use.
Other ways in which companies might greenwash include:
- by promoting one ‘green’ feature, while ignoring other more important environmental issues
- not being specific, for example, using a recycling symbol on packaging without specifying which part can be recycled
- not providing evidence to back up a claim or using evidence that is significantly out of date
- by making redundant claims, like advertising a product as vegan or plant-based when it would be anyway, for example, water promoted as ‘vegan.’
Is there a Greenwashing Consumer Law?
At the moment, the UK does not have any specific anti-greenwashing legislation. However, businesses falsely advertising products or services as ‘green’ or ‘sustainable’ may be caught out by restrictions contained in existing laws.
A fraudulent misrepresentation claim was brought by more than 90,000 car owners in the UK against Volkswagen in the well-known 'Dieselgate’ emissions scandal. The car manufacturer was accused of using software that made it possible for vehicles to cheat emissions tests, which, as well as breaching air pollution laws, led customers to believe they were getting a more environmentally friendly car than was the case. The case was settled in May 2022, but it does pave the way for further greenwashing class actions in the future.
Greenwashing claims may also fall foul of the Consumer Protection from Unfair Trading Regulations 2008 (CPRs), which protects consumers from unfair or misleading trading practices and bans misleading omissions. A greenwashing claim will, however, only be caught by the CPRs if the misleading claim is likely to affect the average consumer’s purchasing decisions.
Most high-profile examples of greenwashing became known following investigations by regulatory bodies. Several UK regulatory bodies have made greenwashing one of their focus areas in the last couple of years, most notably the Competition and Markets Authority (CMA).
The Competition and Markets Authority
The CMA, which is responsible for enforcing consumer protection legislation, carried out a review into whether sustainability claims are used to deceive or mislead consumers. It concluded, based on the websites randomly selected for review, that 40% of green claims made online could be misleading.
In September 2021, it published its Green Claims Code to help businesses make sure their environmental claims are genuinely green and compliant with the law. Then in July 2022, having given companies a period of time to get their assertions in order, it launched a review into the fashion sector and is currently investigating the eco-friendly and sustainability claims made by ASOS, Boohoo and Asda about their fashion products.
Green Claims Review to Target Household Essentials Sector
On 26 January 2023, the CMA announced that it will move its focus to green claims made about household essentials, such as food, drink and toiletries, to ensure that consumers are not being misled. As part of its review, it will consider environmental claims made about such products (both online and in-store) to decide whether companies are complying with UK consumer protection laws.
Accordingly to the CMA, practices that may be of concern include the use of ambiguous and broad eco-statements, such as ‘better for the environment’ on marketing or packaging with no supporting evidence; misleading claims about the use of recycled or natural material in a product and how recyclable it is; and entire ranges being incorrectly branded as ‘sustainable’. The CMA has confirmed that it will be scrutinising claims made by both large and small companies.
What Powers Does the CMA Have?
The CMA can start an investigation into specific companies using its formal powers if it finds evidence that suggests green claims could be misleading or incorrect. Where a breach of the CPRs has occurred, it may seek an undertaking from the company in question to change the way they operate or apply for an enforcement order from a civil court. Once the Digital Markets, Competition and Consumer bill becomes law, (see our previous article here-link to Witans news alert on online selling practices), the CMA will also have new powers to fine greenwashing companies.
Key Takeaways for Businesses
The tide is turning against businesses found to be greenwashing and aside from potentially falling foul of the law, these companies risk long-term damage to reputation and brand loyalty.
We expect to see further steps taken to clamp down on greenwashing in the future and it is therefore a good time for businesses to review their practices to ensure that any green claims they make are not misleading or incorrect.
Contact us today for more advice on the legal and regulatory developments in this area.
