Greenwashing and advertising

Answer

As the UK government sets its sustainability goals including the drive to reach net-zero greenhouse gas emissions by 2050, the UK population is becoming increasingly aware of the drive to be more sustainable in everyday lives. As a result, greenwashing claims are on the rise, but what is greenwashing? ‘Greenwashing’ relates to companies that make green or environmental claims in their advertising for products, when in fact, the claims are unsubstantiated or misleading.

Who regulates greenwashing in the UK?

In the UK, advertisements by companies are largely self-regulated by the Advertising Standards Agency (ASA), which enforces the Committee of Advertising Practice (CAP) Code. Broadly speaking, this requires businesses to ensure that their marketing communications comply with the core principles of the CAP Code (ie, that they’re legal, decent, honest, truthful, don’t mislead and are in line with fair competition).

However, the Competition Markets Authority (CMA) also enforces statutory consumer protection laws that apply to misleading advertising, including the Consumer Protection from Unfair Trading (CPUT) Regulations 2008. The CMA has much wider statutory powers than the ASA that it can use, if necessary, to require businesses to provide information during an investigation.

What does the law say?

In terms of applying the above to greenwashing claims, in September 2021 the CMA published its Green Claims Code which sets out requirements for businesses that wish to make ‘green’ or environmental claims about their products and services. This includes, for example, a requirement for businesses to hold relevant evidence and certification before making an environmental claim.

Rule 11.1 of the CAP Code also states that “the basis of any environmental claim must be clear and not omit significant information”. To ensure guidance is clear and easily understood, CAP will provide examples of what may be problematic, including referring to ASA rulings where complaints were upheld. The ASA will apply the CAP code when investigating complaints. A recent example of an ASA ruling is Q River Ltd baby wipes. The key point to be taken from that case is that when a green claim is made, the ASA will consider the full lifecycle of the advertised product, including how it decomposes. Therefore, greenwashing claims aren’t limited to the isolated situation being described.

On top of the UK-specific regulation set out above, there’s also government and international guidance on environmental advertisements including ISO 14021 and the government’s specific Green Claims Guidance. We’ve also seen the importance of greenwashing issues raised at the COP27 climate conference whereby the United Nations explained the importance of drawing a ‘red line’ around false environmental claims.

While the ever-evolving recognition of greenwashing is useful to deter companies from creating misleading advertisements and in turn, drives companies to become sustainable. There are also genuinely innocent greenwashing advertisements that arise due to the lack of UK-agreed definitions for environmental terms. ISO 140121 provides guidance on this issue, however it’s arguably difficult to determine as there are many interpretations for each word, for example, carbon neutrality. As a result of the lack of definitions, in March 2022, the CMA recommended that the government make legislative changes to the CPUT Regulations, in particular creating standard definitions of commonly used environmental terms.

If companies make greenwashing claims, they may suffer damage to reputation, sales and receive bad press. They may also receive:

• enforcement from the CMA (including via the courts if necessary) requiring the relevant business to change its practices;
• the CMA is likely in the near future to have the power to impose penalties of up to 10% of a firm’s global turnover for breaches of the CPUT Regulations (the Digital Markets, Consumer and Competition Bill is due to receive its first reading in Parliament in spring 2023);
• ASA can request the company to withdraw the advert which could result in significant wasted expenditure and costs;
• ASA can disqualify companies from media awards; and
• ASA can ask CAP to notify members who in turn may refuse to give the company advertising space.

As businesses are beginning to align their strategies with sustainability, it’s arguably inevitable that external sources will begin to scrutinise the way that businesses communicate those sustainability strategies to consumers. With that in mind, it’s likely that law firms will continue to see the rise of greenwashing instructions in the near and foreseeable future. It’s therefore paramount that law firms have the knowledge to be able to advise in this growing area.

Lacey Hill (she/her) is a trainee solicitor in the commercial dispute resolution team at TLT LLP.