Article | UK's CMA launches consultation to draft consumer protection law guidance on greenwashing

3rd June 2021

CMA launches consultation to draft consumer protection law guidance on greenwashing.

The Competition and Markets Authority (“CMA”) has issued draft consumer protection law guidance, for consultation.  Interested parties are invited to respond by 16 July 2021[1].  The consultation is the latest step in the CMA’s efforts to tackle false or misleading environmental claims made by businesses that affect consumers (defined as individuals acting wholly or mainly outside of their trade, business, craft or profession.  This practice is often termed ‘greenwashing’. 

The final version of the consumer protection law guidance is expected to be published by the end of September 2021.

CMA’s draft guidance on environmental claims on goods and services

The primary focus of the CMA’s draft guidance is on environmental claims made by any business concerning their products, services, brand or operations, including any explicit or implicit claims which suggest that a particular approach is either less harmful or more beneficial to the environment.  Advertisements, product labelling and packaging, and product names will all be captured.  Broader claims around sustainability will also fall within the scope of the guidance, for instance that particular products, services or operations are made/delivered/run in a sustainable way.  The CMA expressly refers to the environment and climate change, biodiversity, animal welfare, workers’ welfare and corporate social responsibility in this context.

The draft guidance lists 6 principles for business compliance with consumer protection law to avoid ‘greenwashing’:

(a) Claims must be truthful and accurate.  Claims must be factually true and businesses must be able to live up to these claims.

(b) Claims must be clear and unambiguous. Claims must be straightforward and easily understood by the consumer.

(c)  Claims must not omit or hide important information. Claims must not be misleading and any omission must not prevent consumers from being able to make informed choices.

(d) Claims must only make fair and meaningful comparisons. Comparative claims must be based on clear and objective information and enable consumers to make informed choices about competing products and businesses.

(e) Claims must consider the full life cycle of the product. The total impact of all aspects of a product’s or service’s environmental impact should be considered. Where claims are based on a specific part of a life cycle or business activity, this should be made clear. 

(f)  Claims must be substantiated. Businesses must be able to justify their environmental claims based on scientific or other evidence.

Various case studies and examples that demonstrate how these principles may be complied with are set out within the draft guidance, together with questions for businesses to ask themselves in order to evaluate whether they are acting in accordance with the principles.

Analysis

The CMA’s guidance on environmental claims on goods and services is intended to help businesses to comply with consumer protection law - in particular the Consumer Protection from Unfair Trading Regulations 2008, which contains specific prohibitions against misleading actions or omissions that cause or are likely to cause a consumer to enter into a contract when they would not have otherwise done so, as well as rules that apply specifically to certain areas of economic activity or particular types of products.  In its current draft form, the scope of the guidance appears to be broad and far-reaching, and would be relevant to businesses at all phases of the supply chain where environmental claims are ultimately aimed at consumers. 

Whether or not a business has participated in unfair commercial practices in contravention of the law will depend upon the specific circumstances in question, including the impact of such claims on consumer decision-making.  It is notable, however, that the draft guidance expressly states that “where a business does not follow the principles, it is more likely to attract the CMA’s attention”.

Businesses who do not comply with consumer protection law risk action being taken against them by bodies such as the CMA and Trading Standards Services, as well as by consumers directly in relevant circumstances.  The Advertising Standards Authority may also take action where advertisements are deemed to be misleading and/or which contravene the CAP and BCAP Codes, for example.  Businesses may be ordered to pay fines and/or damages payments to consumers.  Potentially significant reputational damage is also a material risk.   

In light of increased environmental activism and growing public awareness around so-called greenwashing claims, we expect allegations of that nature to continue to rise.    Businesses should take heed of the draft guidance and the principles set out within it and consider contributing to the consultation where appropriate.  

To discuss any of the issues raised in this note please contact:

Matthew Gough | Partner | Head of Consumer Law

Lucy Webster | Legal Director | International Litigation and Arbitration (Energy Sector) 

Nianci Chai | Associate | Commercial Dispute Resolution


Featured videos

Keep up to date on stories,
briefings and event information

  Social spotlight

Follow us

Our partners