CMA publishes guidance on environmental claims – how can retailers avoid greenwashing?

What is happening?

Regulators are taking action in respect of ‘greenwashing’ to help protect consumers from misleading environmental claims. Following an investigation last year that found that 40% of green claims made online could be misleading, the Competition and Markets Authority (CMA) has published guidance to help businesses understand and comply with their consumer protection law obligations in order to avoid enforcement action. Based on six core ‘principles’, the guidance broadly restates the position under existing UK consumer law (particularly under the Consumer Protection from Unfair Trading Regulations 2008) and includes examples of what compliance might look like in practice for green claims. Following a two-month consultation period, the CMA published its final guidance on 20 September 2021 and will expect businesses to comply by January 2022. The CMA has said there will be no ‘grace period’ come January 2022 – this is because they will be applying existing law and, strictly speaking, businesses should already be complying with this.

The CMA’s final guidance was published just as this edition of Retail Compass launched. We are reviewing this closely and will publish further guidance in the coming months. We note from our initial review that the CMA has maintained its six ‘principles’ and notably says these “must” be complied with rather than “should”. Following the consultation responses, the CMA also: clarified that the guidance applies both to B2C and B2B claims, updated some of the examples and added some slight extra detail eg on how it will go about its decision-making on claims, such as which parties to enforce against and which other authorities may be placed to investigation (eg ASA). The following should therefore be read in conjunction with the new guidance.

Why does it matter?

With consumers increasingly demanding greener and more sustainable products, many retailers are innovating to reduce the environmental impact of their business/products (eg by reducing plastic packaging, switching to renewable energy sources, using recycled fabrics and using less water in their production processes). Retailers will naturally want to share these successes with consumers and tap into the growing ethical consumer market, however the risks of getting environmental claims wrong can be significant. Retailers face not only enforcement action from regulators (such as the CMA and the Advertising Standards Authority (ASA)) but also risk damaging brand loyalty with increasing numbers of consumers ready to switch allegiance where a brand does not live up to its purported environmental credentials.

The CMA has made it clear it expects businesses, including retailers, to take steps to comply with the new guidance by January 2022, although the CMA has confirmed that it intends to investigate particularly egregious examples of greenwashing now. The ASA is also reviewing its green claims guidance and has shown it is prepared to take enforcement action against businesses for misleading green claims. A number of recent ASA decisions have resulted in businesses having to pull their ads which can be costly as well as reputationally damaging (see for example: Hyundai were forced to withdraw ads that claimed their new car “purifies the air as it goes”; and claims by Ryanair about its CO2 emissions were deemed misleading, as were Gousto’s claims that their new cool boxes were 100% plastic free).

83% of consumers feel misled by green and sustainable advertising; 90% think retailers need to be more transparent about their green claims.

Source: Retail Gazette

What action should you consider?

With a tougher enforcement environment looming, retailers and consumer brands should review their environmental claims now to ensure they comply with consumer protection laws. Our ‘top tips’ for compliance are:

1. ensure your business lives up to any environmental claims it makes: any claims about your brand, products or services must be truthful and accurate. Ensure your claims are specific; avoid making broad, absolute claims (eg “eco-friendly”) unless you clarify what they mean; explain any caveats/ qualifications that apply; and don’t use visual symbols or imagery that might give consumers a misleading impression about the environmental impact of your products and/or services
2. be transparent: do not use unclear or vague statements and make sure any information about the environmental impact of your brand, products or services is presented in a way consumers can easily understand
3. include all relevant information: do not ‘cherry-pick’ or omit information about the environmental impact of your brand, products or services if it might prevent consumers from making an informed choice. If necessary, include additional information by linking to your website or using a QR code
4. ensure comparisons are fair and meaningful: make sure any comparative claims compare ‘like with like’ – ie products intended for the same purpose and using the same measures/metrics. Make the basis of any comparison clear
5. consider the full life cycle of the product (where appropriate): when making environmental claims, you may need to consider the total environmental impact of your brand, products or services – eg the supply chain, business processes and product disposal. In particular, you will need to do so where you are making broad claims that relate to a product as a whole (eg “environmentally-friendly cheese”) – these will be more likely to mislead consumers if they don’t account for the full product life cycle; however claims that relate to a specific part of a product, such as packaging (eg “40% less packaging than [X product]”) will be less likely to mislead and will not need to be substantiated across the full product lifecycle. Finally, avoid claims that focus on one aspect while ignoring others, or which do not reflect the overall environmental impact unless you clearly specify what they relate to
6. substantiate your claims: ensure your claims are supported by robust, credible and up-to-date evidence. Demonstrating that your claims have been independently verified and are based on accepted scientific evidence may help ensure they are robust.

This article was written by Sophie Tuson and Ciara Cullen as part of RPC's Retail Compass Autumn edition 2021.