‘Real risk’ of reputational damage to retailers amid fashion industry ‘greenwashing’ probe

Out-Law News | 27 Jan 2022 | 2:53 pm | 2 min. read

A review launched by the Competition and Markets Authority (CMA) into ‘greenwashing’ in the UK fashion industry has highlighted the need for companies to take the issue seriously in light of the “real risk” of reputational damage from CMA sanctions, according to one expert.

It comes after the watchdog announced a crackdown on retail fashion firms that make misleading claims about their environmental credentials, known as ‘greenwashing’, and warned that brands could face enforcement action if they are found to have breached consumer protection law.

Cecilia Parker Aranha, a CMA director, said: “Many shoppers are actively looking for brands which are doing good things for the environment,” adding, “businesses that can’t back up their claims risk action from the CMA and damage to their reputation in the long-run.”

But Gill Dennis, advertising law expert at Pinsent Masons, said there were doubts about how much action the regulator can currently take against non-compliant companies. “The CMA is clear that it will take action where greenwashing is identified, but that raises the ongoing question of whether the CMA really has teeth,” she said.

“There are proposals to significantly strengthen the CMA’s enforcement powers to enable it to tackle consumer law breaches with more impact and we are awaiting an announcement on the implementation of those,” Dennis added. “However, in the meantime, at the very least the real risk of reputational damage that could result from being sanctioned by the CMA for misleading consumers cannot be underestimated, so companies must take greenwashing issues seriously.”

The fashion industry is thought to be responsible for between 2% and 8% of global carbon emissions - more than the aeronautical and shipping industries combined. Experts suggest that the industry could account for a quarter of the world’s carbon budget by 2050.

A 2020 CMA co-ordinated global review found that up to 40% of environmental claims made by firms online could be misleading consumers. It gave companies making inaccurate claims about their environmental credentials until the end of last year to correct the record.

Dennis said: “The CMA is unlikely to be receptive to any attempts by fashion retailers to excuse or justify misleading green claims. When the Green Claims Code was published, businesses were given a three-month grace period to review their advertising for compliance and the CMA will expect fashion retailers to have used that time wisely”.

The CMA said it had chosen to prioritise the fashion industry because of the size of the market and the scale of consumer concerns – but other sectors, including transport, food and drink, and beauty are also expected to face investigation over spurious environmental claims.

Dennis said: “Although the fashion sector is in the crosshairs right now, the CMA has indicated that it may take action in other sectors before the review of the fashion sector is complete where there is evidence of greenwashing. Businesses in other sectors cannot rest easy and if they have not yet audited their advertising strategy for compliance then they should do so without delay”.

The CMA’s investigation follows action taken in November 2021 by the Dutch Consumer and Market Authority (ACM) against six clothing companies. The ACM said the companies had used vague or general terms such as “sustainable” or “ethical” on labels or on their websites, without explaining the sustainability benefit of a product.