As the importance of sustainability and eco-friendliness grows among consumers worldwide, the UK Competition and Markets Authority (CMA) has concerns that an increasing number of businesses misleadingly market their products and services as environmentally friendly. The CMA has published a new Green Claims Code, and announced that it will start carrying out a "full review" of misleading sustainability and environmental claims in 2022. Businesses might want to use the coming months to check their own claims and compliance here, both for business in the UK and beyond in Europe.
The Green Claims Code
On 20 September 2021, following extensive consultation, the CMA published its Green Claims Code (Code). This contains the following key principles, largely based on existing consumer law, and includes no particular surprises but an interesting focus on the full life cycle of a product or service:
- Claims must be truthful and accurate.
- Claims must be clear and unambiguous.
- Claims must not omit or hide important information.
- Comparisons must be fair and meaningful.
- Claims must consider the full life cycle of the product or service.
- Claims must be substantiated.
The Code aims to help businesses comply with consumer protection law. The CMA states that if businesses follow the principles in the Code, they are "less likely to mislead consumers and less likely to fall foul of the law". Conversely, businesses which do not follow these principles are "more likely to attract the CMA's attention". Not abiding by the Code risks damaging a business's reputation with customers. If a business infringes consumer protection law, the CMA and other bodies, such as Trading Standards Services, can bring court proceedings. Businesses may be required to pay redress to any consumers harmed. The Advertising Standards Authority (ASA) can also take action against misleading advertisements.
The Code includes 28 pages of detailed guidance, which provides twelve examples and three case studies. The guidance is based on the CMA's views regarding the existing law relating to unfair commercial practices and general consumer protection, and seeks to help businesses understand and comply with their existing obligations when making environmental claims. The document does not include guidance on any additional sector or product-specific requirements that may be applicable.
The guidance states that the Code's six key principles are designed to work together, and that more than one principle may apply to a particular claim. The guidance includes the following, non-exhaustive, list of guidelines:
- Where claims are only true if certain conditions or caveats apply, those conditions or caveats should be clearly stated.
- Businesses should consider carefully whether the visual symbols or colours they use create a misleading effect.
- Claims can mislead where their contents are factually correct, but the impression they give consumers about the environmental impact, cost or benefit is deceptive.
- Businesses should not claim an environmental virtue out of something that is a necessity (e.g., based on compliance with ordinary legal requirements).
- Limitations on the amount of information that can be included do not give businesses a justification to omit or hide important information about environmental impacts. Thought should be given to how potentially important information can be disclosed to the consumer by other means, e.g., by a link to information on a website (via a QR code).
- Cherry-picking positive environmental aspects may make consumers think a product or service is greener than it really is.
- The kind of information businesses include in claims should be kept under continual review.
- Business should always consider the effect of the total life cycle of a product or service on the accuracy of their claims.
What has triggered the publication of the Code?
A recent global review on eco-claims by companies (led by the CMA and the Netherlands Authority for Consumers and Markets) found, after reviewing almost 500 websites, that 40% of these were posting potentially misleading environmental information. A screening of websites by the European Commission and national consumer authorities showed similar trends.
Regulators want to protect consumers from misleading claims so they can make informed decisions, but also businesses from unfair competition by creating a level playing field for those businesses whose products genuinely present a better choice for the environment.
The wider context
The European Commission has a number of ongoing initiatives to tackle greenwashing, including the European Green Deal, the 2020 Circular Economy action plan, a legislative proposal to empower consumers for the green transition, and a legislative proposal on the substantiation of green claims.
DG Competition is alert to sustainability initiatives that are a pretext for cartels and other anti-competitive behaviour, and has fined companies for such activities in the consumer detergents, trucks, and car emissions cases.
Sustainability claims have also emerged recently as material issues in antitrust damages litigation. Ede & Ravenscroft, a supplier of academic and court robes, is facing an antitrust damages lawsuit in the UK Competition Appeal Tribunal over alleged anti-competitive behaviour. A central plank of the claimant's (Churchill Gowns) antitrust suit is its bid to break into the academic dress market based on the "innovative" supply of gowns made of recycled material. At a hearing this month over pre-trial issues, Ede & Ravenscroft made counter-allegations that Churchill Gowns' own environmental claims are misleading. The court is now going to determine, through analysis of expert evidence, whether these claims are true.
Greenwashing is one of several recent examples of the CMA using its consumer protection powers to investigate markets and individual company conduct that may have adverse effects on consumers. For example, the CMA recently took action in relation to two COVID-19 issues: the cost of PCR tests, and the way package holiday companies were dealing with refunds when holidays were cancelled as a result of the pandemic.
The CMA will decide in the coming months which sectors it will prioritise for the review of misleading sustainability and environmental claims. It stated that the areas of focus could "include industries where consumers appear most concerned about misleading claims – textiles and fashion, travel and transport, and fast-moving consumer goods (food and beverages, beauty products and cleaning products)".
Extensive scope of application
B2C and B2B claims – In addition to business-to-consumer (B2C) claims, the Code applies to business-to-business (B2B) claims. While the CMA acknowledges that the legal framework regulating B2B marketing is less comprehensive than for B2C commercial practices, it highlights the need for all businesses to act fairly in their transactions with other businesses, especially where small businesses are concerned.
Implicit claims – It is clear that implicit environmental claims, such as information that is not included or is hidden, or colours, pictures and logos used, may be considered relevant when assessing whether a business' marketing complies with the Code.
The CMA shares consumer protection law enforcement powers with other bodies, including the ASA, to which the CMA can refer an identified consumer protection law issue relating to advertising, as an alternative to taking enforcement action itself. The two authorities cooperate closely.
On 23 September 2021, the ASA issued a statement on the regulation of environmental claims and issues in advertising. The ASA announced that later this year its sister body, the Committee of Advertising Practice, will issue Advertising Guidance that will set out the key principles advertisers need to follow to ensure that their ads do not mislead about the environment and are socially responsible when considering environmental issues. The ASA states that it will be commencing a series of enquiries regarding advertising claims in aviation, cars, waste, animal-based foods and heating (commencing with energy, heating and transport issues). The statement emphasises that the ASA will address any concerns in partnership with the CMA. The ASA intends to publish new issue-specific guidance for business, which incorporates the findings from these enquiries.
After "an initial bedding-in period", the CMA has announced that it will carry out "a full review" of misleading green claims, both on and offline, from the start of 2022. It is not clear at this stage exactly what a "full review" will entail, but it is expected that this will involve a detailed scoping exercise to identify the priority cases that the CMA will bring under general consumer protection legislation, such as the Unfair Trading Regulations 2008. Nevertheless, the CMA emphasises that where there is "clear evidence" of consumer law breaches, it may take action before the formal review starts.
Businesses should review the Code and guidance carefully, and conduct an audit of existing claims – including visual claims – to check compliance with the Code. The audit should check whether there is robust, credible and up-to-date evidence to substantiate environmental and sustainability claims. Marketing and in-house legal teams will need to collaborate on an on-going basis to ensure that vague or general statements of environmental benefits are avoided, and that the correct internal processes are in place to ensure Code compliance. Since greenwashing is a concern in other jurisdictions, and generally in the EU, an audit will be valuable more generally for business outside the UK.
Timeline of CMA/ASA scrutiny
- 2 November 2020: CMA launches an examination into how "eco-friendly" products and services are being marketed and whether consumers are being misled when purchasing these
- 2 November 2020 - 14 December 2020: CMA conducts call for information surveys
- 21 May 2021: CMA publishes for consultation draft consumer protection law guidance for businesses making environmental claims
- July 2021: Consultation closes for draft consumer protection law guidance
- 20 September 2021: CMA publishes Final Green Claims Code and accompanying guidance
- 23 September 2021: ASA publishes statement on the regulation of environmental claims and issues in advertising
- Q4 2021: The Committee of Advertising Practice will publish Advertising Guidance; ASA are commencing enquiries into specific issues (new issue-specific Guidance for businesses may follow these enquiries); ASA will commission research into consumer understanding of Carbon Neutral and Net Zero claims and consumer perceptions of hybrid claims in the electric vehicle market
- January 2022: CMA will begin "full review" of misleading sustainability and environmental claims
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2021 White & Case LLP