The UK’s Competition and Markets Authority (“CMA”) has recently published its final guidance on misleading green claims. The Green Claims Code (“the Code”) aims to help businesses comply with their existing obligations under consumer protection law when making environmental claims in the UK. The CMA has announced that it will conduct a formal review of misleading green claims by businesses both online and offline, starting at the beginning of 2022. Therefore, businesses are well advised to use the time between now and the end of the year to ensure that their green claims comply with the Code. In this blog, we are joined by Cooley competition specialist, Christine Graham, to take a look at the consequences for products stakeholders.
Background to the Code
Consumers are becoming more ‘eco-conscious’ and, as a result, environmental claims are playing an increasingly pivotal role in buyers’ decision-making processes. This is good news for responsible businesses who place sustainable products on the market. Unfortunately, it’s also led to an increase in so-called ‘greenwashing’, where sellers give a false impression or misleading information about the environmental credentials of a product or service. The CMA is concerned about this becoming increasingly prevalent – a report cited by the CMA found 40% of green claims made online could be misleading.
In response, the CMA published a first draft of the Code in May 2021. After consultation with businesses and consumer groups, it has now published a final version of the Code. The publication forms part of its wider programme of work and awareness campaign about green claims (which we’ve reported on previously).
Application of the Code
The Code applies to any business making environmental claims, including manufacturers, wholesalers, distributors and retailers. An environmental claim is any claim which suggests that a product, service, process, brand or business is better for the environment. It becomes misleading when, as whole, it gives the impression (or omits or hides information to give the impression) that the product, service etc. is less harmful or more beneficial to the environment than it really is.
The scope of the Code is not limited to marketing materials; it also includes packaging, branding and other information provided to consumers.
The CMA has stressed that the Code is not intended to deter businesses from making green claims. Instead, it acts as a framework to help businesses make environmental claims that inform and, importantly, do not mislead consumers. It comprises 6 core principles:
- Claims must be truthful and accurate. This considers what the ordinary consumer would understand from the terms used. Untruthful or inaccurate claims extend to those, for example, that suggest a product has particular environmental benefits, when in fact those features are standard for products of that type. Any caveats or conditions must be clear, and businesses must tell the whole story.
- Claims must be clear and unambiguous. For example, vague terms such as ‘eco’ should not be used without explanation.
- Claims must not omit or hide important relevant information. For example, information on sourcing materials and the use and disposal of products should be included where green claims are made. The CMA has stressed that businesses should not cherry pick parts of the life cycle that are ‘greener’ – they must tell the whole story. If providing all of this information creates logistical challenges, the CMA suggests considering using e-labelling such as a QR code.
- Comparisons must be fair and meaningful. Comparisons must be like for like and include a fair representation of competitors. The information must up to date and continually reviewed.
- Claims must consider the full life cycle of the product or service. The CMA has suggested that the “full lifecycle” means the elements of the life cycle that consumers are likely to be most interested in or are significant due to their impact on the environment.
- Claims must be substantiated. Businesses should hold robust, credible, relevant and up-to-date evidence to support claims. The CMA or other interested bodies can ask for this evidence. It should be an accepted science or methodology, and ideally independent.
What are the consequences?
The purpose of the Code is not to replace or substitute existing legal obligations, including under sector specific rules and consumer protection laws. Instead, it is designed to help businesses understand and comply with existing obligations.
The Code is not legally binding, but this does not mean it should be viewed lightly. The CMA has stated that it will consider non-compliance with the Code to be potential evidence of non-compliance with consumer laws and those in breach could face action by the CMA and Trading Standards, including by way of court proceedings. Other consequences of not complying include potential reputational damage, a risk of investigation for misleading advertising by the UK’s Advertising Standards Authority, or even claims by affected consumers and environmental action groups.
The CMA’s review
Starting in 2022, the CMA will be reviewing green claims, with a view to bringing enforcement action against businesses with misleading claims. It will prioritise sectors including textiles and fashion, travel and transport, and fast-moving consumer goods (food and beverages, beauty products and cleaning products). However, any sector could be in scope as the CMA has stated that it stands ready to take action against offending firms wherever there is a clear breach of consumer law.
This comes at a time when the CMA is seeking to increase its consumer enforcement powers, reinforcing the need for businesses to ensure they fully comply with the Code.
What about the position in the EU?
Greenwashing is also on the agenda in the EU (as we’ve reported previously), with legislative proposals to tackle this due to be published on 14 December 2021. The aim of this initiative is to require companies to substantiate claims they make about the environmental footprint of their products and services by using standard methods for quantifying them. The objective is to make such claims reliable, comparable and verifiable across the EU and reduce “greenwashing”. According to the Inception Impact Assessment published in July last year, the Commission has been exploring whether to introduce requirements to use a standardized method on a voluntary or mandatory basis. Further information on this initiative can be found on the Commission’s webpage for the initiative here.
Our recommended next steps
To mitigate the risk of non-compliance with the Code, it is essential that businesses:
- understand what constitutes a green claim;
- identify where they are making green claims and review whether the claims are compliant with applicable laws and the CMA Code (seeking legal advice as needed);
- put controls in place to monitor green claims so that, for example, supporting evidence is kept up to date.
