UK: CMA sets out green compliance standard for environmental claims in the fashion sector

Tackling “greenwashing” - where firms overstate the eco-credentials of their products or services - is a clear priority for the UK's Competition and Markets Authority (CMA). The CMA has previously published  guidance on the use of green claims (known as the Green Claims Code) and spoken publicly about its concerns, but no enforcement had been concluded - until today. 

In a significant development, on 27 March 2024, the CMA published legally binding commitments agreed with ASOS, Boohoo and Asda (George) in relation to their green claims, alongside an open letter to the fashion retailer sector on the use of environmental claims. Critically, the open letter sounds a warning to fashion retailers: comply with the guidance on green claims, or risk fines of up to 10% of global turnover.

Green claims: commitments  provide green compliance standard for wider industry 

Green claims are statements businesses make to their customers about the eco-friendliness of products and/or services. The CMA has expressed concern previously about “greenwashing” - i.e. businesses overstating how eco-friendly their products are, or using vague or misleading language which suggests products are more eco-friendly than they are. The CMA has made clear that where such claims are misleading, the CMA considers they could breach of consumer law, which prohibits businesses from misleading consumers. 

In January 2022, the CMA launched a review of green claims in the fashion sector, and in July opened a formal investigation into ASOS, Boohoo and Asda. 

In the undertakings published today, each of these businesses have agreed to modify the display, description, and promotion of their green credentials, ensuring that green claims are accurate and not misleading. 

Specifically, the companies have agreed to comply with the following principles:

1. Statements must be clear. Descriptions of fabric as “eco”, “responsible” or “sustainable” are likely to be considered vague, and are often provided without further explanation. Statements regarding fabrics should be specific and unambiguous such as specifying what percentage of fabric is “recycled” or “organic”. In order to label a product as “recycled” or “organic” it must first meet certain criteria.
2. Green ranges must have clear criteria for inclusion. Businesses need to establish a set criteria and minimum requirements for inclusion in any eco or sustainable ranges. For example, if a product needs a certain percentage of recycled fabrics to be included in the range, this should be clear. Products should not be marketed as part of an eco or sustainable range unless they meet all criteria to be included in that range.
3. Imagery should not be misleading. Businesses should be cautious when considering the use of “natural” imagery in marketing to ensure that this does not make products appear more sustainable than they actually are.
4. Filtering should be accurate. Where a customer filters, for example, for “recycled trousers”, only products made from predominantly recycled materials should be displayed.
5. Environmental targets must be substantiated. Claims made to consumers about environmental targets must be backed-up by a clear and verifiable strategy, and details must be is readily accessible to customers. This information should include targets, the date on which those targets are expected to be met, and the steps a company will take to achieve the targets.
6. Accreditation schemes must not be misleading. Statements made about a company’s accreditation scheme must be clear as to whether the accreditation applies to the business as a whole or particular products only.

Further guidance from the CMA

The commitments have been published alongside more general guidance to firms in the fashion sector in the form of an open letter which outlines general principles which firms should bear in mind to ensure that environmental claims are not misleading - namely, to verify that claims:

• Are truthful and accurate.
• Are clear and unambiguous.
• Do not omit or hide important information.
• Compare goods or services in a fair and meaningful way.
• Consider the full cycle of the product or service.
• Are substantiated.

The open letter also indicates that the CMA intends to publish further guidance on green claims, in addition to the existing guidance on the use of green claims (known as the Green Claims Code) which the CMA is set to build on with additional information tailored to the fashion sector. 

Raising the stakes – mistakes are about to get much more expensive

Consumer law in the UK has previously been a poor cousin to competition law: while under competition law the CMA could find and fine (up to 10% of global turnover for) breaches, currently, consumer law required a cumbersome court process to prove a breach and penalties were vanishingly rare. The Digital Markets, Competition and Consumers Bill (DMCC), which is currently passing through the UK Parliament and expected to be in force by the end of 2024, will see a dramatic change in the risk to businesses of breaching consumer law.

The DMCC introduces direct enforcement powers for the CMA, and gives the CMA power to fine businesses up to 10% of global turnover for infringements. 

The CMA has indicated that it expects businesses to review environmental claims and where necessary change practices so that they comply with consumer protection law. Failure to do so before the DMCC comes into force could lead to substantial, directly enforceable, penalties for businesses considered to have infringed consumer law.