2022 and 2023 may be remembered as pivotal years for efforts against so-called “greenwashing.” In this article, we look at some recent developments in the regulation of “green claims” in the UK, the US, and the EU that corporates should be aware of. We provide a broad summary and comparison snapshot of the UK, US and EU regimes to help companies navigate these rules. Now is a critical time for companies to get up to speed: authorities in all three jurisdictions are focusing more and more intently on this issue; company reputations will increasingly rise and fall with the strength of their green claims, and national regulators are set to get new powers (including the power to levy significant fines) to tackle companies found in breach.
I. Summary of recent developments: What’s new in greenwashing?
In January 2022, the UK’s Competition & Markets Authority (“CMA”) launched a sector‑by‑sector review of misleading environmental claims. The CMA started with the fashion sector, and called out a number of high‑profile, fast‑fashion companies for their practices. Twelve months later, the CMA announced that it was expanding the investigation to greenwashing around “household essentials”, including food, drink, toiletries and cleaning products. The CMA’s review is the first concerted application of the CMA’s new Green Claims Code, published in September 2021, which gives guidance for any business (wherever based) making environmental claims in the UK.
Meanwhile, in December 2022, the US Federal Trade Commission’s (“FTC”) launched a review of the “Guides for the Use of Environmental Claims” (“Green Guides”), which was last updated in 2012. The initial comment period closed on April 24, 2023. The FTC plans to update the Green Guides to reflect developments in consumers’ perception of environmental marketing claims. As a part of its ongoing review, the FTC also announced a workshop to examine recyclable claims. The workshop is scheduled for May 23, 2023 and the public can submit comments on the subject of recyclable claims through June 13, 2023. For more detail on the review, please see our dedicated blog post, here.
Finally, the EU has proposed two Directives to modernize and harmonize the rules on green claims across the bloc (together, the “EU Green Claims Proposals”). Currently, EU law does not specifically regulate environmental claims. Instead, environmental claims are subject only to general consumer protection and advertising rules (set out in Directive 2005/29 on Unfair Business-to-Consumer Practices and Directive 2006/114 on Comparative Advertising). Admittedly, the EU has published guidance on interpreting and applying the general rules in the context of green claims (see the guidance here, and see our previous blog post discussing the guidance here). However, in practice, EU Member States approach interpretation and enforcement in a variety of different ways. On March 3, 2022, the European Commission published a Proposal for a Directive Empowering Consumers for the Green Transition, also known as the “Greenwashing Directive.” The Greenwashing Directive amends the EU’s existing consumer protection rules, and bans a number of general green claims, such as “climate neutral” or “eco-friendly.” It also imposes some rules on the use of non-environmental sustainability claims or “social impact” claims, such as “locally produced” or “fair labour.” One year later, on March 22, 2023, the European Commission presented a Proposal for a Directive on Green Claims (“Green Claims Directive”), which we discussed here. The Green Claims Directive proposes a new and strict framework, applicable to all companies operating in the EU/EEA, to harmonize the rules on the substantiation of voluntary green claims.
Below, we outline the key aspects of the different legislative frameworks.
II. Summary of UK, US and EU greenwashing regimes
III. Next steps
In the UK, we expect the CMA to publish more information on its ongoing investigations some time in 2023. Whatever the CMA reports will likely provide more guidance — either explicitly or implicitly — on how the CMA will approach green claims and enforcement against greenwashing moving forward. Businesses should note that the CMA is not the only big player in greenwashing in the UK: the UK’s advertising self‑regulatory body, the ASA, also takes a keen interest in green claims and regularly rules that green claims breach the UK’s self‑regulatory advertising codes.
In the US, companies should consider engaging with the different phases of the FTC’s Green Guides regulatory review process. The period is a once-per-decade opportunity to contribute to the shape of green marketing guidance in the US for years to come.
In the EU, the timelines are a little longer and more uncertain. The Greenwashing Directive is nearing the end of the legislative process, and we expect significant progress during 2023. The Green Claims Directive will now be considered, debated and amended by the European Parliament and Council. In principle, this process should last 18 months, but we expect it to be expedited ahead of the European Parliament elections of May 2024. During that time, businesses can track the changes in the text, and might consider lobbying on relevant aspects. In both cases, EU Member States will need to implement the Directives into local law, which will typically occur within 18 months of the adoption of each Directive. Businesses operating in any of the three jurisdictions should take the time to review their claims — and their processes for formulating and substantiating claims — and make sure they get a “green light” under the relevant rules.
