Greenwashing – what does it mean and why does it matter?

Greenwashing – what does it mean and why does it matter?

Being environmentally friendly and sustainable has been a hot topic within businesses for some time now and with the Competition and Markets Authority’s (CMA) recent introduction of its Green Claims Code it is more important than ever for businesses to understand the effects of “greenwashing”.

What is greenwashing?

This is when a business creates the impression through marketing strategies that they are eco-friendly or sustainable when they are not (or at least, not to the extent implied). Greenwashing can relate to claims that are deceptive or, in some cases, even false.  For example, a fashion brand that promotes a sustainable line of clothing when their other lines are in fact unsustainably or even harmfully produced.

With the recent COP26 summit and increasing government focus on climate change there is no surprise that people are increasingly aware of greenwashing and are willing to challenge businesses who attempt to deceive consumers about their eco-credentials.

Do I need to take action?

Clearly, it is more important than ever for businesses to carefully consider the environmental claims they make to avoid being accused of greenwashing. The CMA published the Green Claims Code (“GCC”) in September 2021 to help businesses who wish to make environmental claims. The GCC states that environmental claims must:

  • Be truthful and accurate
  • Be clear and unambiguous
  • Not omit or hide important information
  • Only make fair and meaningful comparisons
  • Consider the full life cycle of the product
  • Be substantiated

The guidance notes that terms such as “eco-friendly”, “sustainable” and “green” are unclear and are more likely to mislead consumers. Businesses should avoid using these terms unless they have sufficient evidence to support the claims.

The Advertising Standards Authority (ASA) enforce the UK Code of Non-Broadcast Advertising, Sales Promotion and Direct Marketing and the UK Code of Broadcast Advertising (the CAP and BCAP Codes). They have made it clear that they plan to crack down on greenwashing online or in stores following an increase in complaints from consumers. Accordingly, there are risks of civil, criminal and regulatory sanctions for companies and directors.

Investors are also becoming increasing more environmentally-conscious and are pushing businesses to set clear green targets. The Financial Conduct Authority (“FCA”) has promised to challenge businesses it deems to be greenwashing to protect investors from being misled over the sustainability of their investments. Further, the UK Government’s Green Taxonomy Advisory Group was established to advise on standards for green investment and aims to make it easier for investors and consumers to make informed decisions about the sustainability characteristics of businesses.

What does this mean for my business?

There is no doubt that now is the time for businesses to take urgent action. The CMA has warned businesses they have until early 2022 to make sure their environmental claims comply with the law. The CMA will carry out a full review of misleading claims and take necessary action against offending businesses.

Not only can greenwashing attract sanctions from the CMA but longer term reputational damage or loss of investment is also a real risk.

Should any of the issues outlined affect you or your business, please get in touch with Douglas McLachlan or James McMillan. Our specialist corporate team can provide tailored advice to ensure you do not fall foul of “greenwashing”.

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