Avoiding Greenwashing: 

What Companies in the UK, EU Need to Know

The global call for companies to reach the target of being net-zero in their operations (meaning that any carbon emissions are balanced by absorbing an equivalent amount from the atmosphere), and the critical need to transition from business-as-usual, have spawned an ...


September 17, 2024 - By Sandra Seah

TFL THE FASHION LAW

Image : H&M

The global call for companies to reach the target of being net-zero in their operations (meaning that any carbon emissions are balanced by absorbing an equivalent amount from the atmosphere), and the critical need to transition from business-as-usual, have spawned an exponential growth in the number of “green” products all marketing to an audience eager to join the sustainability bandwagon. However, in this fast-growing “green” market, the disturbing trend of greenwashing has diminished consumers’ and businesses’ confidence in sustainable business practices, products, and services even if companies are actually operating in accordance with their green claims.

As António Guterres, UN Secretary-General, famously put it, “We must have zero tolerance for net-zero greenwashing.” It is, therefore, unsurprising, that there is a fast-growing body of rules governing green claims to incentivize genuine sustainability practices, improve the trustworthiness of green claims and to penalize greenwashing. While greenwashing may have started from product-level claims in the retail sector, it has now evolved into firm-level claims that impact every single sector in the world.

This article provides a non-exhaustive outline of the current laws, codes, and guidelines in relation to greenwashing in the European Union and the United Kingdom in order to give a general overview of how global businesses can navigate the current web of greenwashing rules …

European Union

Empowering Consumers Directive

The Empowering Consumers Directive (Directive 2024/825) aims to better protect consumers against unfair practices. The Directive took effect on 26 March 2024. Member states must apply the new rules by September 27, 2026. This Directive amends the Unfair Commercial Practices Directive (Directive 2005/29/EC) and the Consumer Rights Directive (Directive 2011/83/EU), which is currently in force in EU Member States. The Empowering Consumers Directive will apply primarily in the B2C (business-to-consumer) context, with some relevance to the B2B (business-to-business) context as well.

The Empowering Consumers Directive sets a high bar for the use of “generic environmental claims,” with “examples of generic environmental claims includ[ing] ‘environmentally friendly’, ‘eco-friendly’, ‘green’, ‘nature’s friend’, ‘ecological’, ‘environmentally correct’, ‘climate friendly’, ‘gentle on the environment’, ‘carbon friendly’, ‘energy efficient’, ‘biodegradable’, ‘biobased’ or similar statements that suggest or create the impression of excellent environmental performance.

Such generic environmental claims should be prohibited when recognized excellent environmental performance cannot be demonstrated” (Recital 9, Empowering Consumers Directive).

However, whether a term is a generic environmental claim is context specific. If a sufficiently clear and prominent explanation accompanies the claim, it may be considered non-generic. “For example, the claim ‘climate-friendly packaging’ would be a generic claim, whilst claiming that ‘100 percent of energy used to produce this packaging comes from renewable sources’ would be a specific claim, which would not fall under this prohibition, without prejudice to other provisions of Directive 2005/29/EC remaining applicable to those specific claims” (Recital 9, Empowering Consumers Directive).

Green Claims Directive

The Empowering Consumers Directive will be complemented by the proposed Green Claims Directive. The European Parliament adopted its first reading position on the proposed directive on March 12, 2024. The Green Claims Directive seeks to: (i) increase environmental protection and accelerate the green transition; (ii) protect consumers and companies from greenwashing; (iii) improve the legal certainty as regards environmental claims; and (iv) boost the competitiveness of economic operators that make genuine efforts to go green.

The Green Claims Directive aims to regulate the substantiation and communication of green claims as well as regulate the proliferation of environmental labels. This is to ensure that consumers receive trustworthy, comparable, and verifiable environmental information. It will set the minimum requirements for the substantiation and communication of voluntary environmental claims and use of environmental labels in business-to-consumer commercial practices (Article 1, Green Claims Directive). Green claims would have to be independently verified by an officially accredited, third-party verifier.

(1) Communication of environmental claims: The proposed Green Claims Directive sets out that all environmental claims (Article 5): shall only cover environmental impacts, aspects or performance that are assessed in accordance with the substantiation requirements laid down in the directive and are identified as significant for the respective product or trader; shall include information on how consumers may appropriately use the product to decrease environmental impacts (where relevant); and shall be accompanied by information on the substantiation of claims (including information on the product or activities of the trader; aspects, impacts, or performance covered by the claim; other recognized international standards, where relevant; underlying studies and calculations; how improvements that are subject to the claim are achieved; the certificate of conformity and coordinates of the verifier).

Additionally, the Directive proposes that comparative environmental claims relating to an improvement of the environmental impacts/aspects/performance of the product compared to that of another product from the same trader or from a competing trader that is no longer active on the market or from a trader that no longer sells to consumers, must be based on evidence demonstrating that the improvement is significant and achieved in the last five years (Article 6).

(2) Environmental labeling schemes: Building on the Empowering Consumer Directive, which bans environmental labels based on self-certification, the proposed Green Claims Directive provides additional safeguards to improve the quality of eco-labeling schemes. The proposed directive requires environmental labeling schemes to comply with the following requirements (Article 8(2)):

> Information about the ownership and the decision-making bodies of the environmental labeling scheme is transparent, accessible free of charge, easy to understand and sufficiently detailed;

> Information about the objectives of the environmental labeling scheme and the requirements and procedures to monitor compliance of the environmental labeling scheme are transparent, accessible free of charge, easy to understand and sufficiently detailed;

> The conditions for joining the environmental labeling schemes are proportionate to the size and turnover of the companies in order not to exclude small and medium enterprises;

> The requirements for the environmental labeling scheme have been developed by experts that can ensure their scientific robustness and have been submitted for consultation to a heterogeneous group of stakeholders that has reviewed them and ensured their relevance from a societal perspective;

> The environmental labeling scheme has a complaint and dispute resolution mechanism in place; and

> The environmental labeling scheme sets out procedures for dealing with non-compliance and foresees the withdrawal or suspension of the environmental label in case of persistent and flagrant non-compliance with the requirements of the scheme.

Article 8 also introduces additional provisions targeted at the proliferation of labeling schemes, notably:

> A prohibition of the establishment of new national or regional environmental labeling schemes (thereafter environmental labeling schemes may only be established under EU law) (Article 8(3));

> A validation procedure for new schemes established by public authorities in third countries, requiring these schemes to be assessed and approved by the European Commission, to ensure that these schemes add value in terms of their environmental ambition, their coverage of environmental impacts, of product category group or sector, and their ability to support the green transition of SMEs as compared to the existing EU, national or regional schemes (Article 8(4)); and

> A validation procedure for new schemes established by private operators from the EU and third countries, requiring these schemes to be assessed and approved by member states, to ensure that these schemes add value in terms of their environmental ambition, their coverage of environmental impacts, of product category group or sector, and their ability to support the green transition of SMEs as compared to the existing EU, national or regional schemes (Article 8(5)).

(3) Ex-ante verification of environmental claims & labeling schemes: The substantiation and communication of environmental claims and labels will have to be third party verified and certified before the claim is used in a commercial communication (Article 10). The verifier, an officially accredited, independent body, will perform this ex-ante verification of claims submitted by the company wishing to use it. Thereafter, the verifier will decide whether to issue a certificate of conformity.
United Kingdom
Consumer Protection from Unfair Trading Regulations 2008

The Consumer Protection from Unfair Trading Regulations (“CPUT“) governs business-to-consumer advertising and marketing in the UK. Regulation 5 of the CPUT prohibits false and misleading commercial practices and Regulation 6 prohibits hiding or obfuscating material information.

Advertising Guidance, CAP Code & BCAP Code

The Advertising Guidance on The Environment: Misleading Claims and Social Responsibility published by the Committee of Advertising Practice (“CAP”), which offers guidance on interpreting and applying rule 11 of the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (“CAP Code”) and rule 9 of the UK Code of Broadcast Advertising (“BCAP Code”), states that businesses should:

> Not use unqualified “carbon neutral”, “net zero” or similar claims, and clearly explain the basis for such claims (rules 11.1 and 11.2, CAP Code; rules 9.2 and 9.3, BCAP Code);

> Justify absolute claims with a high level of substantiation (rule 1.3, CAP Code; rule 9.4, BCAP Code). This means that businesses must include accurate information about whether (and the degree to which) they are actively reducing their own carbon emissions or relying on carbon offsetting; ensure that claims based on carbon offsetting comply with standards of evidence for objective claims as set out in the Guidance, and include information about any offsetting schemes used; and provide any necessary qualifying information about a claim sufficiently close to the claim for consumers to be able to see and understand the qualifications easily;

> Justify comparative claims with verifiable evidence (rule 11.3, CAP Code; rule 9.4, BCAP Code);

> Ensure that claims based on future projections are clear, based on accurate data, supported by a verifiable strategy to deliver the goal and, if relevant, suitably qualified (rule 11.3, CAP Code; rule 9.4, BCAP Code);

> Base environmental claims on the full life cycle of the advertised product, unless the marketing communication states/qualifies otherwise, and must make clear the limits of the life cycle (rule 11.4, CAP Code; rule 9.5, BCAP Code);

> Not suggest that their claims are universally accepted if there exists a significant division of informed or scientific opinion (rule 11.5, CAP Code; rule 9.6, BCAP Code);

> Not imply in marketing communications that a product’s formulation has changed to improve the product in the way claimed, if the product has never had a demonstrably adverse effect on the environment (rule 11.6, CAP Code; rule 9.7, BCAP Code);

> Not mislead consumers in marketing communications about the environmental benefit that a product offers; for example, by highlighting the absence of an environmentally damaging ingredient if that ingredient is not usually found in competing products or by highlighting an environmental benefit that results from a legal obligation if competing products are subject to that legal obligation (rule 11.7, CAP Code; rule 9.8, BCAP Code);

> Include an indication of the product’s energy efficiency class in marketing communications for specific energy-related products that include energy-related information or disclose price information (rule 11.8, CAP Code and rule 9.9, BCAP Code, read with the EU Directive (EC) No 2010/30/EU and the Energy Information Regulations 2011); and

> Make product fiche information about products that fall under delegated regulations available to consumers before commitment (rule 11.9, CAP Code and rule 9.10, BCAP Code, read with the EU Directive (EC) No 2010/30/EU and the Energy Information Regulations 2011).

The CAP Code applies to environment claims in non-broadcast marketing communications in the UK, including online, via social media, and in print. The BCAP Code, on the other hand, applies to environmental claims in all advertisements (including teleshopping, content on self-promotional television channels, television text and interactive TV advertisements) and program sponsorship credits on radio and television services.
CMA Guidance: Environmental Claims on Goods & Services

The Guidance on Making Environmental Claims on Goods and Services (2021) published by the Competition & Markets Authority (“CMA”) aims to help businesses in the UK understand and comply with their existing obligations under consumer protection law when making environmental claims. The guidance sets out 6 principles to follow when making sustainability claims in the UK: (1) claims must be truthful and accurate; (2) claims must be clear and unambiguous; (3) claims must not omit or hide important information; (4) comparisons should be fair and meaningful; (5) the full life cycle of products/services should be considered; and (6) claims must be substantiated.

Based on these principles, the Green Claims Code Checklist provides useful guidance on the questions that a business should be able to answer for its claims in the affirmative:

> The claim is accurate and clear for all to understand.

> There is up-to-date, credible evidence to show that the green claim is true.

> The claim clearly tells the whole story of a product or service; or relates to one part of the product or service without misleading people about the other parts or the overall impact on the environment.

> The claim does not contain partially correct or incorrect aspects or conditions that apply.

> Where general claims (eco-friendly, green, or sustainable for example) are being made, the claim reflects the whole life cycle of the brand, product, business, or service and is justified by the evidence.

> If conditions (or caveats) apply to the claim, they are clearly set out and can be understood by all.

> The claim will not mislead customers or other suppliers.

> The claim does not exaggerate its positive environmental impact or contain anything untrue – whether clearly stated or implied.

> Durability or disposability information is clearly explained and labelled.

> The claim does not miss out or hide information about the environmental impact that people need to make informed choices.

> Information that really cannot fit into the claim can be easily accessed by customers in another way (QR code, website, etc.).

> Features or benefits that are necessary standard features or legal requirements of that product or service type, are not claimed as environmental benefits.

> If a comparison is being used, the basis of it is fair and accurate, and is clear for all to understand.
What Companies Can Do

In a nutshell, the impending and already-enacted laws and guidelines that center on greenwashing are aimed at addressing unsubstantiated, misleading, and exaggerated “sustainability” claims; unsubstantiated, misleading, and exaggerated claims about future targets; unsubstantiated, misleading, and exaggerated comparative claims; and the use of unaccredited “green” labels. To address these problems, regulations have been – or will be – formulated to prohibit the use of generic, unqualified, and unsubstantiated green claims, to limit the permissible use of comparative claims and claims about future targets, and to regulate the use of green labels and green label schemes.

While there is no substitute for genuine conscionability and accountability in adopting and carrying out a sustainable business and marketing/selling genuinely “green” products or services, regulation is likely to prove a meaningful step in the right direction. At the same time, if business communities can sensibly strategize, measure, verify, report, and continue to track and improve, we think that the specter of greenwashing claims will diminish.

Sandra Seah is a corporate lawyer at Bird & Bird. She has extensive experience in local and cross-border mergers and acquisitions, joint ventures and collaborations, and other general corporate matters.