There has been a rapid increase in the application and use of eco-labels and claims by businesses that they or their products are environmentally friendly. This has occurred because the environment is becoming increasingly important to the general public, particularly the younger generation, who are starting to choose products based on how good they are for the environment in comparison to other products or businesses.
However, where there is a potential unique selling point or premium to be added to a product, there will be a temptation for businesses to add environmental claims to products which perhaps are less than accurate. This is known as ‘greenwashing’. The very worst of such claims will simply be untrue, whilst some will merely be misleading.
To add a label to a product which refers to it’s or the business’ environmental credentials is currently voluntary rather than mandatory. There are no current prospects for eco-labelling becoming mandatory in the UK, although it appears that the EU may take that step in the future. The UK Government have published guidance on the use of ‘green’ claims in the Competition and Marketing Authority’s ‘Green Claim Code’.
The Competition and Marketing Authority, along with the local weights and measures authority and trading standards, have the power to investigate businesses and traders who make claims about their business or products where they have a reasonable suspicion that those claims are misleading or false. It is a criminal offence to make a misleading claim about a product, so a prosecution can be brought in relation to such breaches. The CMA also has the power to go to the Court and apply for an enforcement order which would prevent that business from continuing to make the claim. The CMA does not currently have the power to impose financial penalties itself, or to serve enforcement notices.
The investigations the CMA carries out and the decisions it makes about products or businesses will be done in accordance with consumer law and the CMA’s own guidance. For ‘green’ claims, that will be the ‘Green Claim Code’. This Code requires that all environmental claims must be accurate, clear, up-to-date, be fully backed up by credible and up to date evidence, reflect the entire life cycle of the product, brand, business or service, be easily accessible to consumers and do not mislead, make omissions or exaggerate.
Complying with these requirements is onerous. For example, a minor change in wording on a product could be the difference between something being “clear” or “misleading”.
The situation is likely to soon become more concerning for businesses who wish to make environmental claims – or indeed make any statement at all about their brands, businesses, products or services – as the Digital Marketing, Competition and Consumers Bill is currently making its way through Parliament.
As the Bill is currently drafted, the CMA would be granted much more wide ranging powers to enforce breaches of consumer law, including environmental claims. These include the power to issue monetary penalties and enforcement notices. As the CMA follows the guidance when investigating, the Green Claim Code will essentially be enforced using the new powers in addition to the CMA’s current powers. The most significant of the powers is the new monetary penalties, as the CMA will no longer have to apply to the Court for an order. The CMA will be able to impose penalties of up to £300,000 or 10% of the total turnover value, whichever is higher.
It will be possible to appeal against decisions of the CMA and the CMA will have the power to accept an undertaking before any monetary penalty and final notice is served, which is essentially where the person being investigated promises to discontinue acting in a way which was a breach of consumer law.
There is still some way to go before the Bill is passed, so there is scope that further amendments and changes maybe made to it before it becomes law.
If you are making, or thinking about making, environmental claims in relation to your business, products or services, make sure you are following the ‘Green Claims Code’. If you have any concerns about how to accurately make such claims, or if you are being investigated by the CMA or any other body in relation to labelling or claims about your products, please contact our Regulatory Team, who will be happy to help.