UK authorities are taking more of an interest in the ‘green’ claims that businesses are making about their products and services.
Greenwashing, the practice of making exaggerated claims about a business’ environmental credentials and the sustainability of its products, services, and environmental impact, can expose it to breaches of consumer protection legislation. The Competition and Markets Authority (CMA) is undertaking reviews of various sectors, especially those in retail and consumer-facing environments, to examine the issue.
And a search of the web shows the extent of the problem and how automotive has been affected.
The Irish Times ran in July 2021 a story headlining, “car industry accused of ‘greenwashing’ as we wait for electric revolution.” It quoted Julia Poliscanova, senior director for vehicles and e-mobility at think tank T&E as saying that “car-makers are desperate to show off their green credentials, but the reality is most of them are miles away from where they need to be. Even those that are ambitious lack a suitable strategy to get there. Car-makers have failed to deliver on their promises before, who says this time will be different?”
In October 2022, Car Dealer Magazine noted that “the boss of Lamborghini says the firm needs to become more sustainable and warned against a ‘greenwash’ as it looks to go all-electric in the coming years.” It reported that Lamborghini “could not afford to convey the impression of helping the environment while not actually making any real sustainable efforts.”
And in March 2023, electrek wrote that “through its joint project, MaterialLoop, Audi is proving you can turn old cars into new ones. The project aims to ‘close the loop’ on materials, such as steel, aluminium, plastic, and glass, recycling them to build new cars and significantly reduce emissions and waste.”
Understand the rules
To help businesses and duty holders understand how existing consumer protection law is enforced in this area, the CMA published guidance in 2021 for businesses, in the form of the Green Claims Code, which centres on six principles.
This code says that green claims made must be truthful and accurate; should be clear and unambiguous; claims should not omit or hide important information; comparative claims made should be fair and meaningful; claims made should consider the full life cycle of what is being discussed; and claims must be substantiated.
Aside from consumer protection from greenwashing in relation to goods, the topic is also a priority for the Financial Conduct Authority (FCA) and the Advertising Standards Authority (ASA) too – see panel. The ASA, in June 2023, commented that it “recognises that business anxiety around the risk of making ad claims that get banned for so-called greenwashing has been growing in recent months. It also said, “that our sustained and on-going regulatory scrutiny is driving debate about how businesses should respond.” The ASA has listed guides on how to advertise green credentials via a page on its site, Greenspeaking with confidence.
The ‘green net’ has widened
But as well as the shift in regulatory focus, Stuart Ponting, a Regulatory Compliance Partner at Walker Morris, says that “pressure is mounting on businesses in all sectors to clean up their act by virtue of the trend towards ‘green litigation’ – that is, complaints and claims brought for a range of environmental or climate-related reasons.”
In his view, for a whole host of reasons, businesses should “take action to ensure that green claims made in any and all sales, marketing, promotional, pre-contractual and contractual materials, and communications are accurate and can be substantiated.”
He points to the CMA’s Green Claims Code and the FCA’s Guiding principles on design, delivery and disclosure of ESG and sustainable investment funds that was published in July 2021 which he recommends businesses read and understand. Further, at the end of October 2022, the FCA proposed new rules to tackle greenwashing in relation to the provision of financial services in a document CP22/20.
The direction of travel for all sectors, whether or not they’re under the microscope at present is clear; regulators have green claims in their sights.
Minimise the potential for challenge
With the background set out, there are some practical pointers that Ponting thinks should help firms minimise the risk of inadvertent greenwashing or committing consumer protection breaches generally.
“First,” he says, “businesses should take care that all information, online and in all other forms, that is gathered and presented to consumers – potential and actual – is accurate, fair, not deceptive, or misleading and does not leave out material facts.” This, for him, means “introducing and implementing specific safeguarding procedures” as to the currency, accuracy, and security of all such information. Before publication, he highly recommends stepping back, evaluating, looking at the evidence, and being satisfied that any claims can be backed-up.
Next, he explains that firms should note that broad-brush green claims are more likely to be misleading, inaccurate, or unsubstantiated than narrow, product- or service-specific assertions; Ponting says firms ought to “create a culture that focuses on integrity and clearly demonstrable claims.”
Allied to this Ponting emphasises that it’s important to tell only the truth. By extension, he says that “organisations should ensure that green claims do not contain partially correct or incorrect aspects and ensure that any applicable conditions or caveats are clearly and prominently explained.”
Similarly, claims should accurately represent the entire life cycle of a product or service. For Ponting, this is likely to involve organisations “proactively and regularly undertaking appropriate enquiries of other parties throughout the supply chain, as well as keeping their own house in order.” This also means considering whether systems and processes are adequate to manage this monitoring requirement.
And it shouldn’t be forgotten that features or benefits that are necessary standards or legal requirements of a given product or service type should not be claimed as environmental benefits either.
But it’s not all about the written word. As Ponting points out, “green claims can also be made via visual graphics.” He adds that the FCA has previously pointed out “that logos, medals, or other visual ‘rating’ assertions carry significant weight with consumers and can therefore carry a particularly significant risk of greenwashing where apparent quality and credibility cannot be substantiated.” As a result, he says that firms should ensure that both written green claims and any visual graphics or symbols used “are critically assessed from the perspective of what a consumer will take them to mean – businesses need to consider the whole picture.”
Of course, information is everything. And this is why Ponting’s next tip for compliance is for organisations to “signpost consumers to any additional information which might affect their decision to purchase.” By way of example, Ponting says that “where green claims are made, say, on packaging or within media with limited space, additional, comprehensive information via website links or QR codes should be included.”
Another solution toward compliance is to train to all staff involved, directly or indirectly, with sales and marketing – including production of hard and soft copy materials – of any services, products, or brand. It follows that records and evidence of training should be retained. At the same time, Ponting recommends introducing and implementing policies and procedures regarding the review, maintenance, correction and updating of marketing material and other customer-facing information. Here too an audit trail of all these efforts should be maintained.
Ponting’s final recommendation is that if or when any greenwashing complaint or allegation is made immediate specialist legal advice should be sought. He says this because “depending on the circumstances, there are usually a number of dispute resolution tools that can be deployed in defence or settlement of any complaint.”
It’s patently clear that customers – personal and corporate – are taking greater time to choose and buy products and services that are causing less harm – or even promoting positive benefits – to the environment. However, when false claims are made the law gives customers protection while, at the same time, protects businesses from unfair competition. From the CMA’s recent activity and that too of the FCA and ASA, it seems that authorities won’t hesitate to act if there are concerns that consumer protection is being threatened.
The ASA acts on Greenwashing
The ASA’s Statement on the regulation of environmental claims and issues in advertising published in September 2021 detailed a review on the subject that ended with three actions: Adverts must not mislead over environmental claims; the ASA will further examine carbon-reduction related sectors that includes aviation, cars, waste and heating; and that the ASA will commission research into consumer understanding of carbon neutral, net zero, and hybrid claims in the electric vehicle market.
And a search of the ASA’s website shows, through a number of rulings relating to green claims and the automotive and transport sectors, that it’s proactively taking action.
Upheld rulings include BMW (UK) Ltd in 2017 (that the statement “the i3 really is a clean car and helps to give back to the environment” breached the rules); Hyundai Motor UK Ltd in 2021 (A website ad for Hyundai was banned for implying that no impurities caused by driving the Hyundai NEXO would remain in the air without having adequate substantiation to prove this was true); and Hyundai Motor UK Ltd in 2023 (text that stated, “10% to 80% charge in 18 minutes using 350kw charger” when there were significant limitations to achieving the advertised charging rate).