CMA issues new guidance in greenwashing crackdown

The Competition and Markets Authority (CMA) has published its latest consumer protection law guidance on environmental claims, taking a broader holistic approach across the entire supply chain process.

The new guidance builds on the CMA's existing Green Claims Code and its guidance on environmental claims by the fashion sector to explain how accountability will be held for ensuring claims are not misleading when multiple businesses contribute to a product’s journey.

Under the new guidance, verification and substantiation are emphasised with a need for green claims to be backed by evidence, even if the supporting information sits with another firm in the supply chain.

Angelique Bret, a competition and consumer law expert with Pinsent Masons, said the new guidance showed how business throughout all stages of a supply chain can bear responsibility for green claims.

“The CMA is clear the obligation falls not just on the brand advertising its product or the retailer, but manufacturers, suppliers and distributors may also face legal exposure,” she explained.

"This highlights that due diligence and internal processes by businesses across a supply chain are not optional extras for achieving consumer law compliance but are instead expected by the CMA and are essential to mitigating businesses' risk exposure in relation to environmental claims - and likewise in other areas of consumer protection law."  

Under the new guidance, the CMA takes the view that action may be brought against more than one party in a supply chain if consumers have been misled about the green credentials of a product or service – with not only what a business says, but how the message is communicated and what is left unsaid also areas of consideration.

Also under scrutiny will be packaging, logos and imagery suggesting an environmental benefit, along with omitted information which would impact on consumer understanding, such as taking into account the disposal conditions for a product, which may be key to whether the stated environmental benefit can be realised.

Tadeusz Gielas, competition and consumer law expert at Pinsent Masons, explained that businesses need to closely consider the new green claims guidance when developing their internal compliance and verification procedures.

“This latest CMA guidance features useful practical checklists for retailers, brands, suppliers and manufacturers, which should help business structure their compliance systems in line with the CMA's expectations,” he added
Gielas said: "Importantly the CMA also references its competition law guidance in relation to green agreements, making an important link between collaboration involving businesses at the same level of the supply chain - where competition law risk is most likely to surface - and how the fruits of such 'green' collaboration may then be promoted to consumers via product claims.

“This illustrates how the CMA's focus on greenwashing relates not only to consumer protection law but also to competition law enforcement, and underscores the regulatory complexity that businesses may face in relation to environmental sustainability initiatives", said Gielas.

Retailers will also risk liability if they stock a product with false or misleading green claims alongside the manufacturer, with the authority warning some businesses may need to reconsider a trading relationship for a product if there is insufficient information in the supply chain, given the legal risk they could face for non-compliance. 
While genuine attempts by businesses to comply may mitigate penalties, the CMA warned it would look at who engaged in false claims and who made or repeated them, and which business is best placed to rectify harm and prevent recurrence.

"Under the DMCC Act, the CMA can now determine whether consumer law has been breached, direct businesses to change their behaviour, order redress in the form of compensation to consumers, and impose monetary fines, all without going to court,” said Bret.

“The CMA has already commenced eight investigations under the new DMCC Act regime last year. Whilst none of those CMA enforcement actions involve misleading green claims, ‘greenwashing’ continues to be a key focus area for CMA enforcement and businesses need to be vigilant to avoid infringement."