Greenwashing in company policy
What amounts to a green claim and what do you need to be aware of when making such claims?
Several recent matters reported by the Advertising Standards Agency (ASA) have shown that many businesses are getting it wrong when it comes to green advertising. That is also borne out in statistics available from the EU — a 2021 study found that 42% of green claims were false, exaggerated or deceptive.
So, what amounts to a green claim and what do you need to be aware of when making such claims?
According to the Competition and Markets Authority (CMA), an environmental or ‘green’ claim is one that suggest a product, service, process, brand or business is better for the environment. Included are claims that suggest or create the impression that a product or a 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; or
- is less damaging to the environment than competing goods or services.
The general guidance is that any advertising should be legal, decent, honest, truthful and fair. In relation to green claims, more specific guidance provides that:
- the basis for any claim must be clear (so you need evidence/data to support your claim) and should not omit key information;
- it is especially important to be clear as to whether any claims relate to all or just part of a product or services lifecycle. If only part, then this must be set out clearly;
- the meaning of terms used must also be clear (avoid any ambiguity). They should be transparent, straightforward and easily understood — would the person on the street know what you mean?;
- do not exclude or hide any relevant information which is relevant to the decision-making process of the buyer;
- absolute claims are hard to make and must be supported by very clear evidence e.g. ‘greenest’, ‘friendliest’, ‘no environmental impact’, ‘completely recyclable’ or the use of terms ‘most’ or ‘best’;
- businesses need to be especially careful when making comparisons with a competitor’s products — such claims are often very hard to substantiate as the business making such a claim will not have access to all the information they need about a competitor’s product or service to enable them to properly substantiate the claim being made. That is opposed to a business using the terms ‘greener’ or ‘friendlier’ when making comparisons with its own products;
- it is important to be aware of accepted scientific opinion — do not claim that something is universally accepted if the science is not conclusive;
- you cannot suggest that a product against which a comparison is being made was in fact more harmful to the environment than it was to artificially enhance the perception of the new product or service;
- you must be careful when making claims about the benefit of a product or service — for example, product X does not include ingredient Y, when ingredient Y would not normally be present anyway, or if it cannot be used because of a legal obligation that prevents its use; and
- note that there are specific legal requirements that apply to the labelling of certain products, e.g., products that consume energy.
Common descriptive terms which risk falling into the greenwashing trap include:
- ‘Natural’ — can all of it be said to be natural — the product, its packaging?
- ‘Organic’ — is the whole product organic or just part of it?
- ‘compostable’ — can it be composted at home, or does it need to undergo an industrial composting process?
- ‘Recyclable’ — is it the whole product or part of it?
- ‘Eco-friendly’ with no further information — on what basis? In comparison to what?
- ‘Zero-carbon’ — is the product carbon neutral? What is the scope of the statement? Is any offsetting involved?
If an advert amounts to ‘greenwashing’, it comes with several risks:
- the ASA might intervene and publish their findings;
- the ASA can request that the advert is withdrawn or changed;
- a reference to Ofcom in relation to broadcast media.
Intervention by trading standards and enforcement action which can result in civil sanctions and prosecution for continued breaches pursuant to consumer legislation.
The CMA can also investigate and take enforcement action.
Third party legal claims
Businesses can also face legal claims from competitors and customers.
Reputational damage with stakeholders and supply chain.
Businesses can avoid the risk of greenwashing claims by:
- following the guidance above and applying a common sense approach to any environmental claims — if you are not sure and it does not feel right, do not say it;
- ensuring any claims are properly substantiated — keep a paper trail and maintain any supporting evidence;
- keeping any claims under constant review — the environmental landscape is constantly changing and an accurate claim one day might not be accurate the next; and
- seek expert technical and legal advice if you are unsure.
We have a team who can help you navigate through the challenges that are presented by ESG. For advice on greenwashing, contact our ESG solicitors.