“Greenwashing” is the marketing practice where a company tries to convince consumers that it is doing more to protect the environment than it really is.
As awareness of environmental issues grows, consumers are becoming more enthusiastic about “going green” and scrutinising the environmental impact of their spending. As a result, companies want to capitalise on consumers’ emerging awareness and are upping the promotion of their products’ environmental credentials. Claims using “green”, “sustainable”, “eco-friendly”, “zero-waste” and other similar phrases are on the rise. In an increasingly embattled retail environment, making the consumer feel better about their purchase is an attractive marketing strategy.
Advertising Standards Agency
The ASA has launched its “Climate Change and the Environment” project, which will consider how effective its rules are in governing environmental claims. Currently, the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (known as the “CAP Code”) and the UK Code of Broadcast Advertising (the “BCAP Code”) include rules about making “green” claims for products or services. For example, under rule 11 of the CAP Code:
- the basis of environmental claims must be clear, and unqualified claims could mislead if they omit significant information;
- absolute claims must be supported by a high level of substantiation (e.g. comparative claims such as “greener” or “friendlier” can be justified if the advertised product provides a total environmental benefit over that of the marketer’s previous product or competitors’ products, and the basis of the comparison is clear); and
- marketers must base environmental claims on the full life cycle of the advertised product (unless it is made clear otherwise), and any limits of the life cycle must be made clear.
The ASA’s project will consider how national and international regulators and legislators are advancing their efforts in the environmental space. The advice and guidance currently offered will be developed to assist advertisers in making responsible and accurate environmental claims.
Competition and Markets Authority
The CMA will be working in partnership with the ASA in its review of “greenwashing”. On 2 November 2020 the CMA announced its own investigation into “eco-friendly” claims and whether consumers are being misled as a result.
The CMA investigation was prompted by an increasing number of products and services that are being advertised as environmentally friendly. According to the CMA’s press release, UK consumers spent £41 billion on ethical goods and services in 2019. There is concern that the demand for sustainable and low-environmental-impact products and services may encourage companies to make misleading, vague or false claims. The CMA cited the following examples of misleading behaviour:
- exaggerating the positive environmental impact of a product or service;
- using complex or jargon-heavy language; or
- implying that items are eco-friendly through packaging and logos when that is not the case.
Following its investigation, the CMA proposes to publish guidance to help and support businesses with the transition to a low-carbon economy without misleading consumers.
In a similar vein, in August 2020, the European Commission also launched a public consultation on a proposed Regulation that would require companies to substantiate their green claims. The Regulation would make it necessary for companies to substantiate their claims about the environmental footprint of their products and services by setting out a standard by which green claims can be measured and assessed.
In its consultation brief, the Commission explained that “greenwashing misleads market actors and does not give due advantage to those companies that are making the effort to green their products and activities”, adding that it “ultimately leads to a less green economy.”
The initiative aims to reduce “greenwashing” by ensuring that green claims are reliable, comparable and verifiable across the European Union. Adoption of the Regulation is planned for the second quarter of 2021. Despite the impact of Brexit, and although the Regulation will not directly apply to the UK, it will still affect UK-based companies if they are intending to advertise and/or distribute their products and services throughout the EU.
“Greenwashing” has caught the attention of consumers and regulators, and it is likely to be a trending topic in 2021. As a result, companies should take care not to push the boundaries too far when making green claims in advertising.
In the UK, the ASA is likely to be proactive in tackling misleading claims. So the relevant CAP and BCAP rules should be followed closely, and advertisers should keep on top of the ASA and CMA guidance that is due to be produced later this year.
Ultimately the issue comes down to a matter of consumer trust. If a company is found to have “greenwashed” its advertising or labelling, then aside from the regulatory sanctions, it may well have a negative effect on sales and, perhaps more importantly, brand reputation. It is, as it were, a matter of corporate social responsibility.