Following the publication of its guidance on environmental claims in September 2021, the Competition & Markets Authority (CMA) will start reviewing potentially misleading claims in January 2022. Enforcement action may follow if claims breach consumer law.
The CMA’s guidance on environmental claims on goods and services and its related Green Claims Code checklist aim to help businesses comply with their consumer protection law obligations when making environmental claims about their products and services. The guidance recognises that there has been a proliferation of products, services and businesses which claim to minimise harm to, or have a positive effect on, the environment.
What are environmental claims?
These are claims suggesting that a product, service, process, brand or business is better for the environment. They may suggest or create the impression that the product or service:
- has a positive effect or no effect on the environment;
- is less damaging to the environment than a previous version of the good or service; or
- is less damaging to the environment than that of its competitors.
Environmental claims can be implicit as well as explicit. All aspects of a claim may be relevant, including information that is not included or hidden; colours, pictures and logos used - and the overall presentation.
Although the guidance applies primarily to environmental claims, it is also relevant to the wider category of ‘sustainability claims’, which it describes as ‘claims which suggest that a product is made, a service delivered or a business run in accordance with principles of sustainability, sustainable consumption or sustainable development. This could include claims relating to the environment and climate change, biodiversity, animal welfare, workers’ welfare or corporate social responsibility’. Businesses keen to advertise their ESG credentials should take note.
When are environmental claims considered misleading?
An environmental claim may be misleading if it contains or omits information to form the impression that a product, service, brand or operation as a whole is less harmful or more beneficial to the environment than it actually is. Although the claim pre-dated the CMA’s guidance, in October 2021 the Advertising Standards Authority (ASA) upheld a complaint that the claim ‘good for the planet’ made in October 2020 on a poster for milk was misleading and could not be substantiated.
What does consumer protection law require businesses to do?
Whilst consumer protection law does not set out specific rules on environmental claims, it covers what businesses say or fail to say, and how they present the environmental impacts of their goods, services, brands and activities. The three provisions most relevant to environmental claims are:
- a list of specific banned practices (such as displaying a trust mark or quality mark without having obtained the necessary authorisation);
- a prohibition on misleading acts and omissions (such as making false claims about the characteristics of a product); and
- a general prohibition on unfair practices.
What does the CMA’s guidance require?
The guidance sets out 6 principles that businesses must follow when making environmental claims:
1. Claims must be truthful and accurate
Claims must not mislead consumers by giving them an inaccurate impression, even if the claim is factually correct. For example, a product cannot be claimed to be ‘recyclable’ if only parts of it are and others are not. Businesses should also not focus claims on a minor part of what they do, if their main business activity produces significant negative effects.
2. Claims must be clear and unambiguous
Claims should be worded unambiguously and transparently, so that consumers can easily understand them. Businesses should distinguish their wider environmental goals from product-specific claims. If benefits are to accumulate over a longer duration, that must be expressly stated, to mitigate the risk of consumers being misled that the benefit is immediate.
3. Claims must not omit or hide important relevant information
Although there may be limitations on the amount of information that can be included (for example, printed on a product or packaging), that does not justify omitting or hiding information about environmental impacts. Such information can be provided by a QR code or link to a website containing it.
4. Comparisons must be fair and meaningful
Comparisons should be based on up to date and objective information. They should not benefit one brand or product to the detriment of another if the comparison is false or inaccurate.
5. Claims must consider the full life cycle of the product or service
Businesses should consider what elements of a product’s or service’s life cycle are most likely to be of interest to consumers when making an environmental claim. Claims may be based on a specific part of an advertised product’s life cycle, but should make it clear which aspect they are referring to and the total environmental impact must not be misleading.
6. Claims must be substantiated
Businesses should be able to back up their claims, having credible and relevant evidence to support them.
Who does the guidance apply to?
The guidance affects all businesses making environmental claims, whether they are manufacturers, wholesalers, distributors or retailers, even if they do not have direct contact with a consumer.
Online marketplaces can also be liable in relation to misleading environmental claims if they fail to take adequate steps to ensure products being sold on their platforms are compliant, or if they market themselves as being a marketplace specialising in the sale of environmentally-friendly products.
What are the consequences of non-compliance?
The CMA has announced that it will start reviewing potentially misleading environmental claims in January 2022. Textiles and fashion, travel and transport, and fast-moving consumer goods (food and beverages, beauty products and cleaning products) have been prioritised for review.
If claims are found to breach consumer protection law, then the CMA and other regulators, such as local authority trading standards, may take enforcement action, which may involve civil proceedings, prosecution, enforcement orders and undertakings.
Enforcement orders and undertakings can include ‘enhanced consumer measures’ requiring businesses to take additional steps to protect consumers, including paying compensation to any consumers harmed by their breach and implementing measures to ensure similar breaches do not occur in the future.
The ASA can also take action against misleading advertisements contravening the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code) or the UK Code of Broadcast Advertising (BCAP Code).
Given the CMA’s impending review, all businesses that make environmental claims would be well advised to audit those claims against the guidance and take legal advice where necessary.