Head of Retail & Consumer | Head of Risk | Commercial
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The health and wellbeing of Plant Earth has understandably risen to the top of the political and social agenda. This heightened environmental awareness is having an impact on our buying habits too; in 2021, 28% of consumers stopped buying certain products due to ethical or environmental concerns.
Given this, it is unsurprising that retail businesses are increasingly likely to want to herald their green credentials, making certain environmental and 'green' claims in an effort to appeal to more consumers. Whilst this is a perfectly rational response for retailers, claims made about one's green credentials have come under greater scrutiny from regulators.
There are certain legal and marketing requirements that must be complied with before making such claims, otherwise businesses risk being found to be 'greenwashing' which may lead to reputational damage as well as criminal and civil sanctions.
'Greenwashing' refers to exaggerated claims as to the environmental benefits of a business' products (or a particular element of such product), services, or the business itself to attract consumers who wish to make more conscious and sustainable purchases.
Businesses may, for example, design packaging or promote advertising in which the product appears to be eco-friendly when in fact it is not, which misleads consumers into spending more on the 'environmentally-safe' products.
The CAP Code: The UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code) is the rule book for non-broadcast advertisements, sales promotions, and direct marketing communications. It monitors the content of marketing communications, and the Committee of Advertising Practice (CAP) prepares and updates the CAP Code. Under Rule 11 of the CAP Code, businesses must ensure that all adverts and marketing materials that contain any environmental claims comply with the following requirements:
Competition & Markets Authority (CMA): The CMA is the UK's competition regulator, and it aims to tackle practices and market conditions which harm consumers and hinder decision making whilst promoting effective competition. If businesses fail to comply with consumer protection law, the CMA can bring court proceedings to enforce this. The CMA has issued guidance to help businesses advertise their products correctly, and avoid the consequences of breaching consumer protection law. It lists the following six key principles that businesses should adhere to when making any environmental claim:
The ASA is an independent advertising regulator that enforces these advertising rules, drawn up by CAP and the Broadcast Committee of Advertising Practice (BCAP). Where the ASA deems that a business has made a misleading environmental claim, the ruling is published online, which inevitably gives rise to the risk of reputational damage. In addition to this, the ASA's enforcement powers include referring cases to Trading Standards which in turn, has the power to issue penalties, cautions and enforcement orders.
Both the ASA and Trading Standards will take into account the Consumer Protection from Unfair Trading Regulations 2008, which prohibit unfair commercial practices, and which extend to misleading actions or omissions. Retailers need to have in mind the "average consumer", and consider whether or not such a person would make a decision about buying their product that they would not otherwise have made given what has been stated. A breach of these Regulations could lead to an unlimited fine, legal costs and reputational damage.
We are already seeing increased scrutiny from regulators and claims against businesses that make misleading environmental claims and, in its latest annual report, the ASA notes that 435 cases relating to such marketing claims were resolved in 2021. For example, in the case of Magnatech Technology Ltd, the ASA ruled that the evidence used to substantiate claims that its magnetic technology would improve fuel efficiency, save energy and reduce greenhouse gas emissions was misleading. Magnatech Technology were prevented from using the advertisement and could not make the same claims without adequate substantiation. Similarly, in Oatly the ASA ruled that the advertisements which made false claims about the environmental benefit of the company's oat milk were misleading, and there was no sufficient evidence to support them.
CAP and BCAP have published advertising guidance, which should be read in parallel to the CMA guidance, and is designed to help retail businesses, marketing teams and agencies understand the rules around environment-related advertising issues.
We have summarised the key takeaway points below.
Foot Anstey's specialist Regulatory lawyers work closely with retail business operators nationwide supporting them as they navigate the regulatory framework applicable across the sector. For a more detailed discussion of how these advertising rules might affect your business and how we can support you in ensuring that your marketing claims are compliant, please contact the team below.