Living a green life and buying environmentally sound products has become a priority with consumers, and companies are responding by striving to produce eco-friendly products or services. Manufacturers are increasingly paying attention to source raw materials from green suppliers and to ensure that their products are transported by eco-friendly means. In this context, transportation companies and shipping lines are adapting their offering to meet this increasing demand for more environmental-friendly means of transportation.
Some companies have been tempted to claim that they are doing more for the environment than they actually are.
This practice of making misleading environmental claims (so-called “greenwashing”) carries increasing risk in Europe, as the European Commission (EU Commission) as well as national consumer protection and/or competition authorities (including the UK Competition and Markets Authority) are more committed than ever to fight it.
The present alert aims to provide clear and practical guidance on what is allowed in this context.
From a competition perspective, greenwashing can raise risk, including where a company claims that its products / services are greener than its competitors’ and in doing so, denigrates competitors’ products / services, or where competing companies use an environmental claim as a screen to engage in anti-competitive collaboration.
What is an environmental claim?
Environmental claims include claims that suggest that a product or service:
- Has a positive environmental impact or no impact on the environment
- Is less damaging to the environment than a previous version of the same product or service
- Is less damaging to the environment than competing products or services
Environmental claims are part of sustainability claims, and the same principles apply to the latter. Sustainability claims include claims relating to the environment and climate change, biodiversity, animal welfare, workers’ welfare or corporate social responsibility.
Screening of websites for misleading claims
Earlier this year, the EU Commission and national authorities carried out an extensive cross-sector sweep of websites1 to identify instances of greenwashing. Their findings2 revealed just how extensive the practice of greenwashing is:
- In 42 per cent of cases, the claims were exaggerated, false or deceptive
- In 37 per cent of cases, claims included vague and general statements, using words such as “eco-friendly” or “sustainable” with no substantiation
- In 59 per cent of cases, there was no easily accessible evidence to support the claim
- In more than 50 per cent of cases, the company could not provide sufficient information for consumers to assess the accuracy of the “green” claim
Environmental performance of products and businesses – the importance of substantiating claims
A new EU initiative will require companies to substantiate claims they make about the environmental footprint of their products or services by using standard methods for quantifying them. The aim is to make claims reliable, comparable and verifiable across the EU, thus reducing instances of greenwashing. A proposed regulation is planned for 2021. The aim is to equip customers with better information on the sustainability of products and to fight greenwashing.3
In the meantime, companies are well advised to follow the practical and comprehensive (draft) guidance recently issued by the UK Competition and Markets Authority (CMA),4 which is open to public consultation until 16 July 2021. If a company is concerned about greenwashing, this is a perfect opportunity to influence the debate and shape policy.5 Although only applicable to instances of greenwashing in the UK, the guidance should resonate with any companies making environmental claims wherever they are located.
Businesses keen to communicate their products’ green credentials while reducing the risk of misleading customers should respect the following key principles, which are well articulated in the CMA’s draft guidance:6
- Claims must be truthful and accurate: Businesses must live up to the claims they make about their products, services, brands and activities.
- Claims must be clear and unambiguous: The meaning that a customer is likely to take from a product or service’s messaging and the credentials of that product or service should match.
- Claims must not omit or hide important information: Claims must not prevent someone from making an informed choice because of the information they leave out.
- Claims must only make fair and meaningful comparisons: Any products / services compared should meet the same needs or be intended for the same purpose.
- Claims must consider the full life cycle of the product: When making claims, businesses must consider the total impact of a product or service. Claims can be misleading where they do not reflect the overall impact or where they focus on one aspect of it but not another.
- Claims must be substantiated: Businesses should be able to back up their claims with robust, credible and up-to-date evidence.
These principles are in line with earlier guidance from the EU Commission for making and assessing environmental claims under the Unfair Commercial Practices Directive.7 Additional useful criteria and examples can be found in several other national guidance documents on environmental claims, notably the French Practical Guide to Environmental Claims for traders and consumers,8 and the UK Green Claims Guidance.9 The Dutch Authority for Consumers and Markets (ACM) also recently published Guidelines regarding sustainability claims10 that contain similar recommendations to the draft UK guidance. They spell out in equally clear and simple terms the following five rules of thumb:
- Make clear what sustainability benefit the product offers: Sustainability claims are only of use to customers if these are clearly phrased and easy to understand.
- Substantiate sustainability claims with facts, and keep them up to date: It is important to check regularly whether claims still hold up, or whether they need to be revised.
- Comparisons with other products or companies must be fair: Comparisons with other products / services or companies should not lead to any misunderstandings among customers about the sustainability aspects of various products.
- Be honest and specific about your company’s efforts with regard to sustainability: A claim about future goals for marketing purposes should only be used if there is a clear, concrete, and verifiable strategy to realise those goals.
- Make sure that visual claims and labels are useful to consumers, not confusing: It must be clear what a label stands for, and on the basis of what criteria the label has been awarded.
Non-compliance can lead to:
- Costly and time-consuming investigations by consumer and/or competition authorities for unfair commercial practices and/or even, in some instances, for potential violations of competition law rules where a dominant company denigrates competing products, or where competitors use an environmental claim as a screen to engage in anti-competitive collaboration;
- Court proceedings;
- Payment of redress to any customers harmed;
- Fines and periodic penalties;
- A negative impact on supply relationships;
- Reputational damage.
The EU Commission is currently also looking at ways to strengthen the powers of national authorities, to better equip them to deal with greenwashing instances in a coordinated fashion.
Practical compliance tips
Companies should bear the following practical recommendations in mind when they formulate green claims about their products and services.
- DO express claims in a way that is transparent and straightforward. They need to be easily understandable.
- DO openly state any conditions or caveats that apply. These should not contradict the claim.
- DO ensure that claims can be substantiated by evidence that is robust, credible and up to date.
- DO use independent third-party research to support an environmental claim.
- DO make sure claims are up to date in light of new evidence, technological developments and changes to legislation.
- DO base comparisons with competing products / services on clear and objective information.
- DO make comparative claims that can be substantiated by transparent, accurate and easily verifiable evidence.
- DO take into account the total life cycle of a product or service before making an environmental claim.
- DO make sure that where a claim makes reference to a study or survey, the relevant study or survey is publicly available and accessible to customers.
- DO amend claims to ensure they are compliant.
- DO NOT make false or deceptive statements.
- DO NOT overstate or exaggerate the sustainability or positive environmental impact of a product or service.
- DO NOT make vague and/or general statements that are likely to be misleading.
- DO NOT omit or hide information that enables customers to make an informed choice.
- DO NOT cherry-pick beneficial aspects and highlight only those so as to mislead.
- DO NOT imply one product is greener or more environmentally friendly if it is not.
- DO NOT use self-made labels or certificates that are likely to deceive by giving the impression of responding to environmental standards endorsed by an official agency.
As a final recommendation, remember to seek legal advice before formulating green claims and/or if competitors are engaging in greenwashing.