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Greenwashing and Consumer Protection: What businesses need to know

Print publication

22/06/2021

Businesses which make claims about their ‘green’ credentials in order to promote products or services need to ensure, more than ever before, that they do not fall foul of consumer legislation.  Gwendoline Davies and Nick McQueen explain and offer practical advice.

Greenwashing and Consumer Protection: What do businesses need to know?

As part of its investigation into ‘greenwashing’ [1] at the end of last year, the Competition and Markets Authority (CMA) co-ordinated a global review of randomly-selected websites and discovered that some 40% of green claims made by businesses could be misleading customers.

The CMA has now published draft consumer protection guidance for all businesses making claims about their green credentials.  Whilst the draft guidance itself is not legally binding, the consumer protection legislation (the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs)) that lies behind it is.

In addition, whilst the CMA has so far indicated that merely providing guidance is an effective way to improve compliance, it is important for businesses to note that the CMA [2] has significant enforcement powers, and that breach of the CPRs can attract both civil and criminal liability. Reputational consequences can also, of course, be devastating; as can the risk of litigation being brought by or on behalf of consumers individually or as a collective action.

The CMA’s (and, in fact, the wider business world’s) current focus on ESG, compliance and consumer protection generally is likely to result in increased scrutiny of businesses’ online and ‘real world’ sales and marketing practices when it comes to environmental credentials claims.

Practical advice: What can businesses do?

The 6 principles set out in the CMA’s draft guidance should help to guard against the risk of greenwashing/breaching the CPRs:

  1. Green claims made must be truthful and accurate
  2. Claims should be clear and unambiguous
  3. Claims should not omit or hide important information
  4. Any comparative claims made should be fair and meaningful (that is, comparisons with other businesses/products/services must compare like with like, and the basis and measure/metrics of any comparison should be made clear)
  5. Claims made should consider the full life cycle of a product/service/business (that is, a complete picture of the total environmental impact must be given: taking into account, for example, supply chain issues, business processes and waste/disposal; and, crucially, not focusing on only one or ‘cherry-picked’ aspect[s] of a product/service/business)
  6. Claims must be substantiated.

Businesses may, in particular, wish to familiarise themselves with sections 3 and 4 of the CMA’s draft guidance, as these contain helpful explanatory information, along with several worked examples and case studies from different business- and sector- types, of how the above principles can be applied in practice.

There are, however, some additional practical steps which businesses can take to help minimise the risk of greenwashing or committing consumer protection breaches generally:

  • Provide CPRs and specific greenwashing training to all staff involved, directly or indirectly, with the sales and marketing (including production of hard and soft copy materials) of the business’ services/products/brand. Retain records and evidence of such training.
  • Take care that all information, online and in all other forms, that is gathered and presented to consumers (potential and actual) is accurate, fair, not deceptive or misleading and does not leave out material facts. Introduce/implement specific safeguarding procedures as to the accuracy and security of all such information.
  • Ensure that any green claims made are specific, rather than broad and too wide-ranging.
  • Remember that green claims can be made via visual graphics, not just through the written word.
  • Ensure that both written green claims and any visual graphics or symbols used are critically assessed from the perspective of what a consumer will take them to mean.
  • Signpost consumers to any additional information which might affect their decision to purchase. For example, where green claims are made, say, on packaging or within media with limited space, include additional, comprehensive information via website links or QR codes.
  • Introduce/implement policies and procedures regarding the review/maintenance/correction and updating of marketing material and other consumer-facing information.
  • Maintain an audit trail of all these efforts.
  • Finally, if/when any greenwashing complaint or allegation is made, seek immediate specialist legal advice. Depending on the circumstances, the CPRs may actually afford a business what is known as ‘the due diligence defence’; plus there are usually a number of dispute resolution tools that specialists may be able to deploy in defence or settlement of any complaint.

Next steps/How we can help

The CMA has, alongside its draft guidance, launched a consultation which invites businesses to offer views on whether the draft guidance is clear, helpful and sufficient; whether any particular sectors should be given special treatment; whether the guidance should apply to business-to-business relationships as well as to business-to-consumer; and so on.  The consultation is open for responses until 5 pm on 16 July 2021.

Walker Morris will monitor and report on any further developments in this area, but in the meantime we can help businesses with the drafting or updating of appropriate policies and procedures to guard against greenwashing; with the provision of CPRs and/or specific greenwashing training; with the strategic dispute resolution response to any greenwashing or other consumer protection complaint or allegation made against a business; or with wider commercial or dispute resolution advice in the context of the ESG agenda.

Please contact Gwendoline Davies or Nick McQueen for any further advice or assistance.

 

[1] That is, the practice of making claims (often exaggerated) about a business’ environmental credentials and the sustainability of its products, services and environmental impact

[2] and potentially also other bodies such as the Advertising Standards Authority and Trading Standards

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