The UK’s CMA Publishes Guidance on Environmental Claims Used in Advertising
As interest in, and demand for, sustainable goods and services continue to increase rapidly, so too has the volume of statements, assertions and claims, often in the context of advertising, regarding the sustainability credentials of those goods and services.
In a further sign of the continued trend towards stricter regulation, and enforcement, in the context of so-called “greenwashing”, the UK’s Competition and Markets Authority (CMA) recently published its “Green Claims Code” (the “Code“), a guidance note for businesses on making environmental claims when advertising goods and services in the UK.
The CMA’s aim in publishing the Code is to enhance protections for consumers from misleading environmental claims, by ensuring that businesses are aware of their existing obligations under UK consumer protection law when making environmental claims. The CMA has also announced that it will carry out a full review of environmental claims made by businesses at the beginning of 2022, with a view to commencing enforcement action against businesses with regard to claims that do not comply with UK consumer protection law. The need for businesses to understand fully, and comply with, their obligations under UK consumer protection law when making environmental claims is acute; there will be an increased focus on such claims as 2022 progresses.
But what are environmental claims, and how can businesses ensure that they comply with their obligations under UK consumer protection law when making them?
What are environmental claims?
Environmental claims broadly describe statements, or claims, by businesses that suggest their goods or services have a positive or neutral environmental impact, or perhaps less of a negative environmental impact than other similar goods or services. As consumers become increasingly aware of the environmental, and socio-economic, impacts of the purchasing choices they make with regard to goods and services, these claims can, and increasingly do, heavily influence consumers’ decision-making. Particularly in this context, there is a considerable risk that businesses – in response to consumer demand – are making, and will continue to make, environmental claims which may not be fully justifiable and, more egregiously, may be deliberately misleading. This ‘greenwashing’ risk is demonstrated by the fact that the International Consumer Protection Enforcement Network’s global review of randomly-selected websites, which was conducted earlier this year, found that 40% of environmental claims could be misleading consumers. By making misleading claims, businesses are at risk of breaching their obligations under UK consumer protection law.
What are the obligations of businesses when making environmental claims?
Businesses’ obligations under UK consumer protection laws derive from two main sources (both of which may impact environmental claims): sector- or product-specific rules; and general consumer protection laws, such as the Consumer Protection from Unfair Trading Regulations 2008.
Sector- or product-specific rules require specified information to be provided to consumers in certain ways, for example, energy labelling requirements may apply to claims regarding certain household appliances.
In addition, general consumer protection laws: (i) prohibit certain specific practices; (ii) prohibit misleading acts and omissions; and (iii) contain a general prohibition on unfair practices, all of which are potentially relevant to the making of environmental claims. For instance, businesses inaccurately claiming that particular products have been approved by a public body as “sustainable”, or omitting to provide adequate information to enable consumers to make informed decisions about the environmental impacts of their products, may constitute breaches. Explicit claims about the sustainable nature of particular products, or indeed implicit claims, must be accurate and justifiable.
Given the variety of ways in which businesses may breach UK consumer protection law in making environmental claims, there is a considerable risk that businesses may fail to comply with these obligations.
Potential consequences of non-compliance
Businesses who do not comply with these obligations when making environmental claims face the (increasingly enhanced) threat of enforcement proceedings against them from the CMA. The Advertising Standards Authority may also investigate any misleading advertisements thought to contravene the Non-Broadcast (CAP) and Broadcast (BCAP) Codes, which can lead to proceedings being issued by the Trading Standards Services. Needless to say, as well as the significant reputational harm that will be suffered, any enforcement action will likely have significant financial consequences for businesses, particularly given that the CMA will have the ability to fine businesses up to 10% of their global turnover for consumer law infringement under the current proposals for reforming competition and consumer policy.
In addition, of course, businesses may face litigation from consumers (or consumer groups), perhaps with the benefit of third party funding, seeking redress for breaches of UK consumer protection law.
The stakes, already high, are growing, and the importance of ensuring compliance with obligations around environmental claims will become more acute.
Promoting compliance with obligations
The Code includes six core principles which should form the basis of businesses’ approach to environmental claims, namely that such claims must:
- Be truthful and accurate: claims must not mislead consumers by giving them an inaccurate impression, even if the claims are factually correct. Claims must only give an impression that goods or services are as green and sustainable as they really are;
- Be clear and unambiguous: claims should be worded in a straightforward and transparent manner, which is not liable to confuse consumers or give the impression that goods or services are better for the environment than they are;
- Not omit or hide important information: consumers must be provided with the information they need to make informed choices, since omitting or hiding information can inappropriately influence consumer decisions;
- Only make fair and meaningful comparisons: comparisons should be based on clear, up-to-date and objective information, and should not benefit one product or brand to the detriment of another if the comparison is inaccurate or false;
- Consider the full life cycle of the product or service: all aspects of a product’s or service’s environmental impact over its lifecycle may be relevant to the accuracy of a claim including, for example, the manufacture and transport of a product; and
- Be substantiated: claims must be capable of being tested against scientific or other evidence.
Ensuring that the principles are observed is key, both as a matter of ensuring best practice, and in the interests of reducing potential exposures. Although not legally binding, the CMA has stated that it will consider non-compliance with the principles as potential evidence of UK consumer protection law infringement which, in turn, increases the potential exposures faced by businesses.
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