Snapshot on key 'green claims' developments
As consumers increasingly demand more sustainable products, businesses are innovating to reduce their environmental impact. This has driven an increase in the use of 'green' marketing claims and, with it, increased scrutiny by consumer regulators seeking to protect consumers from the risk of 'greenwashing'. Significant developments are ongoing in this area, both in the UK and the EU - a snapshot of the key recent developments is below.
1. Europe: The EU's proposed 'Green Claims Directive'
The European Commission is expected to propose new rules next month to regulate green claims under a so-called 'Green Claims Directive'. This is according to a leaked draft proposal (available here). The proposed Green Claims Directive aims to provide a standardised framework to assess the environmental impacts of products and substantiate green claims. If introduced, the new rules will apply to all products and services on sale in the EU single market (except for financial services).
What are the proposals?
The proposed Green Claims Directive is expected to introduce the following key requirements:
(1) Businesses will only be able to make green claims if they have been substantiated through an authorised methodology that meets specific requirements (draft Articles 3 and 4(1)(a)).
(2) Businesses will not be permitted to make positive green claims where a product has a corresponding negative environmental impact unless the negative impact is also clearly communicated (draft Article 4(1)(b)).
(3) Businesses will have to make the basis for any green claim clear – in particular, they must make information available to consumers about the assessment on which the claim is based. This information must be available via a weblink, QR code or equivalent (draft Article 4(1)(e)).
(4) Comparative claims must: (a) use the same methodology to assess environmental impacts; (b) use the same manner of generating or sourcing data used to substantiate the comparative claim; and (c) cover the equivalent and most significant environmental impacts and stages along the value chain (draft Article 6).
(5) Claims relating to future environmental performance must: (a) be based on commitments backed by those at the highest management level in the relevant business; (b) set out clearly specified time frames and milestones; and (c) not include actions or targets already achieved. Businesses will be expected to report annually on the progress against these commitments and milestones (draft Article 7).
(6) Businesses will have to review and update substantiating materials when there are circumstances that may affect the accuracy of the green claim, such as updates in the scientific methodology substantiating the claim. In all other cases, businesses will have to review the accuracy of their claims no later than five years from the date of the underlying studies or calculations (draft Article 8(1)).
(7) Member States' authorities will be required to undertake regular checks of green claims and carry out a full evaluation where they have sufficient reason to believe a claim may breach the rules in the Directive. If a claim is found to breach the rules, the relevant authority must notify the business, who would then have 10 working days to respond. Where the business does not (or does not satisfactorily) respond, the relevant authority must require the business to take corrective action (which must be taken within 30 working days) (draft Article 14).
Advice for businesses
The proposals are expected to be formally presented by the European Commission by the end of March 2023. There is then likely to be a period of around 18 months for the European Council and Parliament to comment and for any amendments to be introduced. Businesses should review the draft proposals carefully when they are published, examine how their green claims currently stand up against the new rules and consider if any changes or qualifications are needed. Business should also keep an eye out for any developments as the proposed Directive passes through the EU legislative process.
2. UK: CMA review of green claims in the FMCG sector
The CMA's review
The CMA has launched a review of green claims in the fast-moving consumer goods (FMCG) sector (which includes food and drink, cleaning products, toiletries and personal care items). This will involve a review of both online and instore claims to check for compliance. The CMA has said it is particularly concerned about: (a) vague and unsubstantiated claims, such as "sustainable" or "better for the environment"; (b) misleading claims about the use of recycled or natural materials in products; and (c) misleading claims about the recyclability of products. The CMA is likely to be on the lookout for these kinds of claims. This workstream follows the CMA's recent review of green claims in the fashion sector.
Advice for businesses
The CMA has made it clear that where its upcoming review reveals specific businesses that are misleading consumers, it will take appropriate enforcement action. With this in mind, businesses should act now and review their existing green claims to ensure they comply with the CMA's Green Claims Code.
Businesses should ensure that claims are accurate and are supported by robust, credible and up-to-date evidence. Claims should be transparent and as specific as possible – in particular, businesses should avoid using unclear or vague language (such as "eco-friendly", "sustainable" or "better for the environment") and include qualifiers to clarify their claims where necessary. Businesses making claims about use of recycled materials, or the recyclability of products, should also take extra care given the CMA's comments that this will be a focus area for its review. For further information on the Green Claims Code, including our 'top tips' for compliance, see our previous blog.
Businesses can keep up to date with the CMA's investigation on the 'Misleading Environmental Claims' case page.
3. UK: CMA guidance on business collaboration on sustainability initiatives
The CMA has also announced that it will shortly be consulting on draft competition law guidance for businesses that are looking to collaborate on sustainability initiatives. The CMA recognises that collaboration will be crucial to meeting the UK's net zero targets and is keen to ensure that competition law is not an unnecessary barrier.
The exact details of the CMA's draft guidance are yet to be seen, however Sarah Cardell (Chief Executive of the CMA) has indicated that the guidance will explain when collaboration is likely to breach competition law and when it is not. In particular, the CMA will provide guidance on the circumstances in which an environmental sustainability agreement between businesses might restrict competition (i.e. falling within the scope of the Chapter I prohibition under the Competition Act 1998 (CA 1998)) but may nonetheless be permitted under an exemption under s.9 of that Act.
S.9 of the CA 1998 allows exemption from the Chapter I prohibition if the agreement contributes to "improving production or distribution, or promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit", subject to specified conditions. The CMA's guidance will set out how environmental sustainability agreements can meet each of the section 9 conditions and will include guidance on the kinds of benefits which are likely to be relevant and how businesses can demonstrate that consumers will receive a fair share of those benefits.
Advice to Businesses
Businesses should look out for the CMA's consultation later this month and consider responding to help shape the final guidance. The CMA is particularly interested to hear from businesses with any questions or concerns that are not already covered in the draft guidance.
For business looking to collaborate on sustainability initiatives in the near future, the CMA has also said it will provide direct advice on the risks and possible solutions. Businesses are encouraged to contact the CMA directly and at an early stage of any such collaborative project.