Companies have until the end of the year to stop making misleading claims about the green credentials of their products and services or face regulatory action, the U.K.’s competition watchdog warned Monday.
The Competition and Markets Authority (CMA) is concerned “too many businesses are falsely taking credit for being green” in an attempt to appeal to environmentally minded customers, “while genuinely eco-friendly firms don’t get the recognition they deserve.”
Launching its Green Claims Code, the CMA said following an initial three-month “bedding-in” period, it will carry out a full review of misleading “greenwashing” claims made in store or on labelling at the start of 2022.
The regulator warned, “Where there is evidence of breaches of consumer law, we may also take appropriate action even before the formal review begins.”
Noncompliance might result in court proceedings with unlimited fines, while in some cases, businesses might be required to pay redress to any consumers harmed by the breach of consumer protection law. There is also the potential for individuals to face jail sentences of up to two years for unfair trading.
CMA Chief Executive Andrea Coscelli said in a statement, “The Green Claims Code has been written for all businesses–from fashion giants and supermarket chains to local shops. Any business that fails to comply with the law risks damaging its reputation with customers and could face action.”
Last year, the CMA began an investigation on the impact of green marketing on consumers. It found 40 percent of green claims made online could be misleading, suggesting thousands of businesses could be breaking the law.
The regulator has published a checklist for companies to assess whether the claims they are making about their products comply with consumer law.
“The Green Claims Code has been written for all businesses. … Any business that fails to comply with the law risks damaging its reputation with customers and could face action.”
Andrea Coscelli, Chief Executive, Competition and Markets Authority
For example, the CMA wants assurance claims are accurate, backed up with credible evidence, and do not contain only partially correct information (that relates to a specific aspect of the product, rather than the product as a whole). Companies should also make sure claims are not exaggerated, nor should they attempt to hide information or caveats about the potential adverse impact any product or service might have on the environment.
Another U.K. regulator, the Advertising Standards Authority, has also recently clamped down on several major companies over greenwashing advertisements, including airline Ryanair, carmaker BMW, and oil company Shell. The Financial Conduct Authority has made it a priority to curb financial firms from mis-selling investment products through exaggerated or false ESG claims.
Among other EU countries, France has introduced legislation that means organizations accused of greenwashing could be fined up to 80 percent of the cost of any false promotional campaign. Germany has just closed a consultation on making sure sustainable financial products meet proper green criteria, while the Dutch consumer watchdog in May launched an investigation into companies in the apparel, energy, and dairy sectors over allegations of greenwashing.
It is widely expected the European Commission will soon pass legislation to combat greenwashing.
Richard Reichman, partner in the business crime and regulatory team at law firm BCL Solicitors, says the code signifies a “real intent” by the CMA to encourage companies to rethink how they market their products, as well as show it is ready to act where necessary.
Enforcement might not be an easy task, though. “Given the guidance document is 56 pages long, many companies are going to find some of the rules confusing,” says Reichman. “Furthermore, even if the CMA gets the increased power and resources it wants under the government’s review, clamping down on thousands of misleading eco-friendly claims will be very time-consuming.”