The new EU Green Claims Directive and the CMA’s FMCG review shows greenwashing is firmly in the sights of EU and UK regulators

The question

What do the latest steps against greenwashing by the EU and UK regulators tell us about their appetite for enforcement?

The key takeaway

The EU and UK are taking active steps to combat greenwashing. The EU is aiming to set a standardised environmental methodology through a new directive to regulate environmental claims by businesses. At the same time, the UK’s Competition and Markets Authority (CMA) is expanding its investigations into green claims in the fashion industry (Summer 2022) to those in the FMCG sector. Businesses will be under increasing scrutiny to ensure that any environmental claims are accurate and capable of substantiation. 

The background

Brands are increasingly looking to environmental claims to make their goods and services more appealing to consumers. This has resulted in a surge in often misleading and/or unsubstantiated green claims. 

A study by the EU Commission found that, after assessing 150 claims about products’ environmental credentials, 53% of environmental claims provided “vague, misleading or unfounded information”. The EU is therefore making it a priority to eradicate greenwashing. In the UK, the cost of living crisis has prompted the CMA to targeting greenwashing across FMCG products (essentials such as toiletries, food, and drink), in respect of which its research shows that up to 91% of all dishwashing items and 100% of toilet products are marketed as “green”.

Developments in the EU

The EU is expected to propose new rules by the end of March 2023 to regulate green claims through the Green Claims Directive. This aims to scrutinise green claims from EU businesses through an authorised methodology that meets specific requirements. These claims will be reviewed by an independent verifier against the methodology to ensure they are substantiated. Furthermore, the Directive will require businesses to review and update their claims alongside findings that may impact the validity of the claim. Member States’ authorities will regularly check green claims to ensure compliance and are encouraged to impose sanctions on any business that does not take satisfactory remedial action. 

Developments in the UK

The CMA is set to review green claims across the FMCG to scrutinise potential breaches of the Green Claims Code and the Consumer Protection from Unfair Trading Regulations 2008. The CMA could use its formal powers against businesses that are found to be greenwashing, including investigations and enforcement action where appropriate against specific companies.

Why is this important?

The EU has taken an authoritative stance by encouraging member states to sanction companies guilty of greenwashing. Sanctions have been effective at encouraging organisations to change environmental communications across their wider groups, as opposed to solely adjusting their communications in the country they were sanctioned in (for example, H&M and Decathlon were sanctioned by Dutch authorities and enacted EU-wide change). The new Directive represents an important step in ensuring environmental claims are substantiated and independently verified across the EU.

Whilst the UK will not be subject to the new Green Claims Directive because of Brexit, the FMCG market review shows the CMA’s commitment to combatting greenwashing. As the CMA is on the verge of receiving new direct enforcement powers, via the Digital Markets, Competition and Consumer Bill, we are likely to see an uptick in enforcement action as the CMA flexes its new muscles. 

Any practical tips?

Businesses operating in the EU should closely examine the new rules from the Directive and see how their current environmental communications align with the rules. Adjustments may be needed both in relation to claims being made and the methodology for substantiating those claims. 
In the UK, all businesses (not just those in fashion or FMCG) should be looking at their claims to ensure they give the CMA no reason to come knocking at their door. Remember that specific, narrow claims are always easier to substantiate than broad green claims, which are almost always found to be misleading when placed under the regulatory spotlight.

Spring 2023