What is Greenwashing?
The ‘green’ market in the UK is worth billions and is set to grow as the UK strives to reach a net zero economy by 2050. With an ever growing environmentally conscious consumer market, more businesses and organisations are eager to compete by promoting its environmentally friendly products and services; sometimes in an unlawful way that is known as ‘greenwashing’.
The term greenwashing, although not a strictly legal definition, describes when companies and businesses make false or exaggerated claims about their environmental credentials to appear more sustainable than they actually are. This can apply to any misleading act about the environmental effect of a product, service, process, brand or business.
The Legal Position
There isn’t any specific and targeted laws against greenwashing. What the UK does have however, is a diverse range of rights originating from existing legislation, rules and codes. Claims about the environmental practices of businesses that are found to be untrue, misleading or unverified carry the risk of breaching consumer protection laws.
The Competition and Markets Authority (CMA) is the principle regulator in the UK and is responsible for preventing anti-competitive activities and protecting consumers from greenwashing.
The Advertising Standards Authority (ASA) regulates the information of adverts by ensuring its own advertising codes are enforced against misleading adverts. Businesses here can also face scrutiny and face legal claims from consumers for potential consumer protection law breaches.
The ASA’s powers are more limited in that it cannot impose financial penalties or require that its rulings be implemented. The biggest risk arising from an ASA investigation is reputational. Companies may face additional legal risks in the event that the ASA refers complaints to other bodies, such as National Trading Standards (for non-broadcast advertising) or Ofcom (for broadcast advertising), or where an ASA ruling attracts the attention of other regulators looking at compliance.
The Financial Conduct Authority (FCA) also works to ensure that companies and businesses are not making misleading or false claims about their environmental practices.
Focusing on consumers, the key regulation that offers protection is the Consumer Protection from Unfair Trading Regulations 2008 which makes it unlawful for a business to act in any unfair commercial practices, for example acting in a way that would deceive the average consumer by providing false green claims about the size of its carbon footprint. Another example is using bait advertising that tries to promote misleading environmental policies or claims. A breach of consumer regulations can ultimately result in a fine or imprisonment for the offending business.
The CMA published for the first time its Green Claims Code in September 2021 and aims to provide guidance to help businesses understand and comply with their obligations under existing consumer protection law when making environmental claims.
To support the above, there are also various regulatory codes from the CMA (the Green Claims Code) and rules from the ASA (the CAP Code). The Green Claims Code has six principles to ensure the mitigation of greenwashing, being that environmental claims must:
- be truthful and accurate;
- be clear and unambiguous;
- not omit or hide important information;
- be substantiated;
- consider the product or service’s full life cycle; and
- comparisons must be fair and meaningful.
It is also worth noting that misleading environmental claims are also prohibited within a business to business setting under the Business Protection from Misleading Marketing Regulations 2008, this is especially relevant in the field of marketing and advertising services.
Looking Ahead
The UK Government is currently finalising the Digital Markets, Competition and Consumers Bill (DMCC Bill) and when it receives royal assent, it will have the effect of reinforcing anti-greenwashing law and target the rise in digitally based businesses engaging in greenwashing.
The DMCC Bill will give the CMA the power to impose requirements on firms that have a significant share in digital activity generating industries, with targeted fines to be imposed should those conditions not be adhered to. Also, the CMA will be given the power to intervene and directly enforce consumer protection rules and laws through enforcement that is typically used under its Competition Act Powers; again fines can be imposed as well as awarding financial awards to consumers.
This will ultimately allow the CMA to have more investigatory powers into firms who may engage in greenwashing and use targeted fines to ensure compliance without requiring the often burdensome and lengthy process of taking offending companies to court.
For advice on navigating greenwashing regulations and understanding your rights and obligations as a business, please contact our team of corporate and commercial solicitors today at 0345 2073 728 or via email at info@thursfields.co.uk.
