The CMA seeks to tackle misleading "green" claims by companies
The CMA seeks to tackle misleading “green” claims by companies
On 21 May 2021, the UK's competition and consumer law regulator, the Competition & Markets Authority (CMA), issued, for consultation, draft consumer protection law guidance for all businesses making environmental claims.
It follows the CMA's investigation into misleading environmental claims which commenced in November 2020 with the aim of developing a better understanding of the process known as "greenwashing". Greenwashing occurs whereby businesses make false or misleading claims regarding the environmental soundness of their product or service in an attempt to capitalise on the growing demand for environmentally sound products.
According to estimates, the UK market for sustainable products was worth £41bn in 2019 and throughout the Coronavirus pandemic there has been a further shift in consumer behaviour towards more sustainable products.
The CMA is concerned that the surge in demand for green products and services could incentivise some businesses to make misleading, vague or false claims about the sustainability or environmental impact of the things they sell.
Therefore, the purpose of the draft guidance is to help businesses understand and comply with their existing obligations under consumer protection law when making environmental claims. It also sets out in detail what businesses should do to apply those principles.
The draft guidance sets out six core principles for business compliance with consumer protection law in order to avoid greenwashing:
claims must be truthful and accurate
claims must be clear and unambiguous
claims must not hide or omit important relevant information
comparisons must be fair and meaningful
claims must consider the full life cycle of the product
claims must be substantiated.
Fundamentally, the draft guidance applies to all businesses who make environmental claims and can include various dimensions of a trader's behaviour, including but not limited to how it markets its products, services or brand. In producing the draft guidance the CMA provides several case studies to demonstrate potential scenarios when environmental claims may arise. These range from claims surrounding the sustainability of consumer goods to the level of electricity obtained from renewable sources.
The guidance will also undoubtedly be a future tool used by the Advertising Standards Authority in adjudicating complaints relating to environmental claims going forward.
Businesses making environmental claims should be aware that the CMA shares consumer protection law enforcement powers with other bodies, such as Trading Standards Services and sectoral regulators, and where appropriate the CMA may work with other enforcement or regulatory bodies in relation to environmental claims.
Notably, if a business does not comply with consumer protection law, the CMA has made it clear that it will not hesitate to take enforcement action where appropriate.
In keeping with the CMA's objective to make markets work for consumers, businesses and the broader economy, its provisional view is that the draft guidance to businesses will be the most effective way to improve levels of compliance in environmental claims across consumer markets.
The CMA is inviting views on the draft guidance up to 16 July 2021, with a view to issuing final guidance by the end of September 2021. We will produce more detailed analysis on how companies should present and verify their green credentials when this guidance is finalised.