UK CMA publishes Green Claims Code to combat ‘greenwashing’

The UK Competition and Markets Authority has published a Green Claims Code, with guidance for businesses making environmental claims. 

The aim is to protect consumers from misleading environmental claims and address concerns over ‘greenwashing’ (i.e. the practice of overstating the green credentials of a product or service without being able to substantiate those claims), as well as protect businesses from unfair competition and provide a level playing field. The new Code follows a recent CMA co-ordinated global review of randomly selected websites, which found that 40% of green claims made online could be misleading consumers.

The Green Claims Code applies to all businesses (products and services in all sectors) and covers advertisements, product labelling and packaging or other accompanying information, including product names.

The Code is centred around six key principles – namely, green claims must:

(1) Be truthful and accurate: Businesses must live up to the claims they make about their products, services, brands and activities.

(2) Be clear and unambiguous: The meaning that a consumer is likely to take from a product’s messaging and the credentials of that product should match.

(3) Not omit or hide important information: Claims must not prevent someone from making an informed choice because of the information they leave out.

(4) Only make fair and meaningful comparisons: Any products compared should meet the same needs or be intended for the same purpose.

(5) Consider the full life cycle of the product: When making claims, businesses must consider the total impact of a product or service. Claims can be misleading where they don’t reflect the overall impact or where they focus on one aspect of it but not another.

(6) Be substantiated: Businesses should be able to back up their claims with robust, credible and up to date evidence.

The CMA has said that it will carry out a full review of misleading green claims both online and offline (e.g. claims made in store or on labelling) at the start of 2022. The CMA will prioritise which sectors to review in the coming months, which could include industries where consumers appear most concerned about misleading claims – such as textiles and fashion, travel and transport, and fast-moving consumer goods (e.g. food and beverages, beauty products and cleaning products). However, the CMA has stressed that any sector where the CMA finds significant concerns could become a priority. And if there is clear evidence of breaches of consumer law, the CMA may take action before the formal review begins.

UK businesses have been put on warning: get your house in order now. 

As the chief executive of the CMA put it: “Any business that fails to comply with the law risks damaging its reputation with customers and could face action from the CMA.”

In addition to the CMA, other bodies such as Trading Standards Services can also bring court proceedings. And in some cases, businesses may be required to pay redress to any consumers harmed by the breach of consumer protection law. The ASA could also take action against misleading advertisements that contravene the CAP or BCAP Codes.

Concerns over greenwashing are at an all-time high at present, not just in the UK (see our previous blog post and webinar recording). Although the labelling of ESG funds has drawn particular media attention, the risks can also arise in a variety of other contexts including in respect of disclosures in IPO prospectuses (see here).