'Greenwashing' gets the regulatory red light
Regulators across Europe have recognised the need to clamp down on misleading claims about the environmental benefit of services and products
As consumers seek to pursue a more sustainable existence by purchasing goods and services from brands that are – or appear to be – "environmentally friendly", businesses are keen to showcase their green credentials. Terms such as "climate neutral", "sustainable" and "green" have now become a staple of marketing for many seeking to appeal to the environmentally conscious consumer. However, according to recent regulatory guidance in this area, there is a fine line between what is known as "greenwashing" and "green" marketing.
Greenwashing describes the practice of companies, often through their marketing materials, making false, misleading, vague or unqualified claims about the environmental benefits of their products or services, as opposed to valid claims about their green credentials and aims. As with all communications that could be considered advertising claims, green claims must be truthful, not contain false information and be presented in a clear, specific, accurate and unambiguous manner so as not to mislead consumers. Furthermore, businesses must have robust evidence to substantiate green claims.
The increased regulatory focus on green claims is relevant to multiple business types, impacts on many sectors and throughout the value chain. Recently, many advertising agencies have indicated the environmental creds of an advertiser could determine whether they join a pitch process or not for their work and there have been many sector initiatives creating "green calculators" to assess the environmental impact of activities and campaigns. Moving a business more online does not automatically mean there is no harmful environmental impact. Google Cloud provides its users with the option of custom carbon footprint reports detailing the carbon emissions their cloud usage generates. Anyone wanting to talk to business customers or consumers about their green credentials or plans to improve the environmental impact of their products or services will need to ensure their communications do not veer into the remit of greenwashing.
Developments
Separate investigations in 2020 by both the European Commission, in conjunction with the European Consumer Protection Cooperation Network (CPC), and the UK's Competition and Markets Authority (CMA) highlighted the prevalence of greenwashing on websites operating across a diverse range of industries.
Both investigations identified various types of misleading claims being made about the environmental impact (or lack thereof) of a product or service with the CPC concluding that 42% of 344 sustainability claims assessed contained misleading statements.
In December 2021, the European Commission issued more detailed guidance on sustainability and environmental claims (which forms part of the updated guidance on the Unfair Commercial Practice Directive as a result of the New Deal for Consumers). The additional guidance includes some important new developments including the suggestion that "highly polluting industries" may be required to make it clear to the consumer in their environmental claims that a product has an overall negative impact on the environment. The Commission also recognises that traders distort claims about the composition of a product or its manufacturing process by unduly emphasising the positive aspects, which are in reality only marginal or where the overall environmental impact resulting from the product’s life cycle is negative. It is clear that such exaggerations of a trader's green credentials will no longer be tolerated.
Regulators have acknowledged that greenwashing is widespread and is a "dirty" business. Measures are being introduced across Europe that aim to give greenwashing the red light and demonstrate that greenwashing is now firmly on the political and regulatory agenda. Due to the increase in the risk profile for communications regarding green credentials and aims, the involvement of compliance teams in a range of messaging about this topic is therefore important.
The Advertising Standards Authority, the UK's advertising regulator and long-term regulator of environmental claims, has also launched its Climate Change and the Environment project. This will include more proactive enforcement of the advertising codes where environmental claims are concerned, research into consumer understanding of common claims such as "carbon neutral" and "net zero", and the creation of new guidance regarding green claims.
France
In July 2021, the French government adopted specific regulations governing the use of certain "green" terms, including an outright ban on using the terms "biodegradable" and "environmentally friendly" on a product, its packaging or advertising and the requirement for criteria to be met in order to use terms such as "compostable" and "carbon neutral." The French government has also introduced specific sanctions to tackle greenwashing, including fines of up to 80% of the cost of the false promotional campaign, a correction on billboards or in the media, and a 30-day clarification on the offending company's website.
UK
In the UK, the CMA published its Green Claims Code in September 2021 to assist businesses in understanding and complying with their existing obligations under consumer protection law when making environmental claims. The CMA gave a clear message that it was giving businesses a few months to get their house in order where their use of green claims was concerned, before, from January 2022, it intended to conduct more detailed reviews into misleading green claims and consider what enforcement action was necessary.
Germany
In Germany, the courts are taking a very strict approach regarding claims like "sustainable" or "climate neutral", requiring a business to not only prove that its respective claim is correct from every possible perspective, but also adding further information about how the alleged "sustainability" was achieved, or how "climate neutrality" has been calculated. Accordingly, eco-labelling and advertising contain a number of pitfalls under German law and, as a result, companies are casting a keen eye on their competitors' activities in this sector.
Connect with one of our experts
Sharon D'Silva, Lead author Associate, UK sharon.dsilva@osborneclarke.com +44 20 7105 7894
Claire Bouchenard Partner, France claire.bouchenard@osborneclarke.com +33 1 84 82 45 30
Anna Williams Partner, UK anna.williams@osborneclarke.com +44 20 7105 7174
Alice Vigne Associate, France alice.vigne@osborneclarke.com +33 1 84 82 41 24
Dr. Martin Soppe Partner, Germany martin.soppe@osborneclarke.com +49 40 55436 4050
Marie-Laure Pidoux Senior Associate, France marie-laure.pidoux@osborneclarke.com +33 1 84 82 41 02
Christoph Fuchs Associate, Germany christoph.fuchs@osborneclarke.com +49 40 55436 4238