Greenwashing comes under the regulatory spotlight
20th January 2023
UK regulators such as the Competition Markets Authority (CMA), the Financial Conduct Authority (FCA) and the Advertising Standards Authority (ASA), are all ramping up their scrutiny of green and sustainability claims in their attempt to crack down on greenwashing -the practice of making exaggerated claims about a business’ environmental credentials and the sustainability of its products, services and environmental impact.
Companies that make claims about their commitment to addressing climate change without sufficient evidence may be accused of greenwashing. The risk for food business operators (FBOs) of getting green claims wrong can be significant. Together with the potential damage to reputation and brand loyalty, FBOs also risk enforcement action from regulators. Greenwashing allegations are becoming more common, and this trend is expected to accelerate given the increasing focus of regulators.
Competition Markets Authority
Following the publication of the Green Claims Code in September 2021, the CMA is now proactively investigating green claims. Although the CMA’s current focus is on the fashion retail sector, it is not hard to imagine that the Food & Drink sector may not be far behind.
The CMA has published six core principles in making an environmental claim:
- be truthful and accurate
- be clear and unambiguous
- do not omit or hide important information
- only make fair and meaningful comparisons
- consider the full life cycle of the product
- be substantiated.
The CMA is calling for Government to add greenwashing to the list of ‘blacklisted’ practices in the Consumer Protection from Unfair Trading Regulations 2008, which would make it much easier for the CMA to take enforcement action against companies found to be making misleading green claims. When you add to that Government’s recent proposals to enhance the CMA’s enforcement powers to include the ability to fine companies up to 10% of global annual turnover for breaches of consumer protection law, you can see that being found guilty of greenwashing can have very serious consequences.
Financial Conduct Authority
In October 2022, the FCA released a consultation paper proposing new rules for sustainable investment product labels, similar to the EU’s Taxonomy Regulation. The FCA is also planning to bring in restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ can be used. It is hoped that the new rules will protect consumers from greenwashing and improve trust in sustainable investment products.
It is thought that these rules will be implemented later in 2023.
Advertising Standards Authority
The ASA is also actively enforcing the rules against greenwashing in the advertising codes of practice and has resolved hundreds of green claim complaints over the last 12 months. The ASA has a particular focus on food sustainability claims and there have been a number of high-profile cases recently relating to green claims made by food businesses.
The ASA has produced some advertising guidance which you can read here to help you avoid making misleading environmental claims.
How we can help
Walker Morris’ Regulatory and Commercial Dispute Resolution teams can help businesses with the drafting or updating of appropriate policies and procedures to guard against greenwashing and with the provision of staff training on misrepresentation and/or specific greenwashing issues. Please give us a call if you need any advice.
