Greenwashing — a valuable insight into consumer understanding

Key developments have been:

• The ASA banning two adverts run by HSBC for misleading consumers by not mentioning that HSBC also finances businesses which significantly contribute to greenhouse gas emissions
• The three European Supervisory Authorities publishing a call for evidence on better understanding greenwashing
• the Financial Conduct Authority proposing a package of new measures including investment product sustainability labels and restrictions on how terms like ‘ESG’, ‘green’ or ‘sustainable’ can be used.
• An ASA ruling banning tweets from an artificial grass supplier which referred to its product as recyclable when no such option was available at the time of the claim

The growth of environmental claims in respect of products and services is in large part a response to the impact that they have on consumer purchasing choices; a competitive advantage there to be gained.

The importance of their regulation has been the subject of much debate, brought into sharp focus by recent ASA research into consumer understanding of commonly used environmental terms, including carbon neutral and net zero claims.

Are these terms encountered in/used by your business? For many, the answer is yes — the ASA research providing an important insight into how these environmental claims are received.

What does the report say?

The research report highlights some of the many potential pitfalls when making environmental claims. Key findings are:

• There is a broad spectrum of consumer engagement on environmental issues (consumers being categorised in the report as detached, mainstream or engaged). A consumer’s level of engagement influences their understanding of, and reaction to, environmental claims.

Think who your audience is and how the claim will be received.

• Carbon neutral and net zero were the most commonly encountered claims, but there was little consensus as to their meaning. 

Take care how you use these terms. What is the basis upon which you use them and can they be substantiated?

• Reflecting our own experience in this area, offsetting was found to be the primary source of confusion and misunderstanding when it comes to carbon neutrality and net zero. There can be an assumption that the claims of offsetting refer to a direct reduction of carbon emissions. This left people feeling misled when they learned that companies were often relying on offsetting, either partially or wholly, rather than directly reducing carbon emissions.

Particular care should be taken when offsetting is involved. When presented with the facts, could a consumer be left feeling misled?

• Claims in air travel, energy and automotive advertising tended to attract more consumer attention, with the suggestion of a greater need for transparency in those sectors.

A greater degree of transparency is required when making environmental claims in certain sectors/industries.

What to take from the research

The research report provides important understanding for businesses making environmental claims in respect of products and services.

Always consider the impact of your environmental claims upon the target consumer. There are widespread calls for greater clarity and consistency in environment-based terminology. These have been around for some time, the complexity of doing so meaning that there is unlikely to be a panacea to this issue. In the meantime, continue to consider our guidance on what to be aware of when making environmental claims, with the added insight of how these will be received. Focus has always been on consumers’ interpretation of these claims and now we have a greater understanding of what that might be.

The ASA research also provides a toolkit for considering the impact of environmental claims made by competitors in the marketplace. Does the research provide an evidence-based justification for your assertion that consumers are being misled?

This is a continuously evolving issue and area of regulation. Further understanding of the impact upon consumers/their behaviours can only be a positive development.