'Greenwashing' – What is it and how do you stay on the right side of the line?

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.

What is Greenwashing?

'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.

What are the advertising rules?

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:

• The basis of environmental claims must be clear. Unqualified claims could mislead if they omit significant information (11.1).
• The meaning of all terms used in marketing communications must be clear to consumers (11.2).
• Absolute claims must be supported by a high level of substantiation. Comparative claims such as "greener" or "friendlier" can be justified, for example, if the advertised product provides a total environmental benefit over that of the marketer's previous product or competitor products and the basis of the comparison is clear (11.3).
• Marketers must base environmental claims on the full life cycle of the advertised product, unless the marketing communication states otherwise, and must make clear the limits of the life cycle. If a general claim cannot be justified, a more limited claim about specific aspects of a product might be justifiable. Marketers must ensure claims that are based on only part of the advertised product's life cycle do not mislead consumers about that product's total environmental impact (11.4).
• Marketers must not suggest that their claims are universally accepted if a significant division of informed or scientific opinion exists (11.5).
• If a product has never had a demonstrably adverse effect on the environment, marketing communications must not imply that the formulation has changed to improve the product in the way claimed. Marketers may, however, claim that a product has always been designed in a way that omits an ingredient or process known to harm the environment (11.6).
• Marketing communications must not mislead about the environmental benefit that a product offers; for example, by highlighting the absence of an environmentally damaging ingredient if that ingredient is not usually found in competing products or by highlighting an environmental benefit that results from a legal obligation if competing products are subject to that legal obligation (11.7).

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:

• Claims must be truthful and accurate.
• Claims must be clear and unambiguous.
• Claims must not omit or hide important relevant information.
• Comparisons must be fair and meaningful.
• Claims must consider the full life cycle of the product or service.
• Claims must be substantiated.

Risk of misleading consumers

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.

Summary

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.

Do

• Read the CAP and BCAP/CMA guidance on making environmental claims on goods and services, to ensure that your business is complying with consumer protection law.
• Use the CAP Code to check that the environmental claims that your business makes are genuine and not potentially misleading to consumers – can you substantiate the claims that your business is making?
• Make the necessary changes to comply with the law e.g., supporting claims with evidence and providing consumers with the information required to make informed choices.

Don't

• Make false, vague, or deceptive statements - your business must not give consumers the impression that it is (or the product/service it is marketing) is more sustainable than it really is.
• Hide or omit important information - consumers must be given the full picture to help them make informed choices.
• Make inaccurate or false comparisons to entice consumers - comparisons must be made with clear, accurate and objective information to evidence it
• Assume that no one is watching!

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.