Out-Law / Your Daily Need-To-Know

Out-Law Analysis 2 min. read

Greenwashing under regulatory scrutiny

Sales of “environmentally friendly” goods and services exceeded £41 billion in the UK in 2019, and the incentive to promote eco credentials has never been greater.

Last year the Competition and Markets Authority (CMA) launched a consultation on the impact of "eco-friendly" claims in the promotion of goods and services. The call for information closed at the end of the year. Although the full outcome of the review is unlikely to be known until summer 2021, it seems likely that eco claims will be the subject of increased regulation and scrutiny to avoid misleading consumers increasingly influenced by environmental credentials.

Consumers are increasingly seeking out eco-friendly goods for which they are willing to pay a premium. With that premium comes the temptation by the manufacturer or retailer to 'greenwash' the product with overstated and exaggerated claims that the product is environmentally friendly. Greenwashing, involving the provision of misleading, vague or false claims disseminated to promote an environmentally responsible public image is not a new phenomenon, but awareness and scrutiny of such claims is growing and likely to lead to increased regulation and, in turn, liability for those tempted to promote goods with claims that cannot be substantiated.

The CMA investigation was prompted by the UK government’s focus on achieving net zero carbon emissions and transition to a low carbon economy. CMA chief executive Andrea Coscelli said: “Our role is to make sure that consumers can trust the claims they see on products for sale and don’t fork out extra for items falsely presented as eco-friendly.”

The CMA does not just have misleading claims in its sights. It is also examining the omission of information. Failure to provide information, such as the inability to recycle, might also be considered misleading.

The CMA is looking at a range of sectors including fashion, travel and transport, and fast-moving consumer goods such as food and beverages, beauty products and cleaning products. Investment and banking services will also be reviewed.

Impact of the review

The consultation was not prompted by consumer complaints but the CMA’s focus on the issue is likely to bring increased consumer focus and awareness of the issue and rights to challenge and seek redress where false claims are identified. Although stronger more specific regulation might emerge from the review there is also legislation currently in force which would cover misleading greenwashing practices in certain circumstances. The Consumer Protection from Unfair Trading Regulations 2008 prohibits unfair commercial practices which materially distort the economic behaviour of consumers. It creates criminal sanctions and direct consumer redress for breaches. While that has not so far been directed to eco claims, an increased focus on the issue might do so although such focus is likely also to create the impetus to targeted regulation. What seems clear is that if false or misleading claims about environmental credentials are exposed, increased regulation coupled with increased consumer awareness of the issue is likely to mean an increase in both regulator scrutiny and consumer action. Both will bring significant reputational risk and the risk of both prosecution and civil claims.

Further, while in the past, the potential low value of individual claims would frequently have been a sufficient barrier to prevent such issues becoming the subject of litigation, the growing availability of collective redress processes is likely to provide a vehicle for large scale redress claims to be pursued.

Whatever the outcome of the CMA investigation it seems clear that this is an area about to come under increasing scrutiny from regulators and consumers. Those who promote goods and services on eco credentials should be well informed as to the obligations already imposed on them and alert to further developments. They will need to be ready to substantiate and evidence their credentials and eco claims or risk both regulatory and consumer action.

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