‘Greenwashing’ is a phrase that has hit the headlines recently, but many people may be questioning what it actually means. More importantly, businesses will want to know if there are any legal requirements not to greenwash and, if there are, how they can minimise their exposure. This article will explain what is meant by greenwashing, some of the legal issues surrounding greenwashing and what businesses can do to minimise risk.
‘Greenwashing’ is a term used when a company makes an erroneous claim about their products or services (and by extension, the supply chain of their products/services). Common types of greenwashing include making blanket statements on a product being “green” when, in fact, there may be processes used in the supply chain that leave some kind of impact on the environment.
What is ‘greenwashing’?
Alternatively, overestimating or misrepresenting the business’s carbon footprint is another common form of ‘greenwashing’.
Greenwashing is dealt with under both the Consumer Protection from Unfair Trading Regulations 2008 (CPUT) and the Advertising Standards Authority (ASA). The CPUT has a variety of Regulations that may apply to greenwashing, perhaps the most relevant being Regulations 5 and 6, which relate to misleading actions (Regulation 5) or misleading omissions (Regulation 6). Both regulations require that either there is a misleading statement or omission that may cause an average consumer to take a transactional decision that they may not have otherwise taken.
What regulations are in place to combat greenwashing?
Both these regulations can be interpreted quite widely. However, what is important for businesses to note is when they make statements, they must ensure that those statements can be supported/evidenced (for example, if claiming that a product is recyclable it should be clear as to whether the entire product is recyclable, or if only part of a product is recyclable). The consequences of failing to comply with the CPUT can be a criminal prosecution, with a maximum penalty being a fine, two years’ imprisonment or both.
What are the consequences for businesses who make greenwashing claims?
In addition to the CPUT, the ASA also has a range of powers for dealing with greenwashed claims. In addition to being able to refer a matter to Trading Standards to enforce under the CPUT, the ASA may publish details of non-compliance on their rulings, require the offending business to amend their advertising campaign (at the cost of the business) or withdraw benefits. Furthermore, the scope for breaches does not necessarily require that the greenwashed claim causes (or may cause) an average consumer to take a transactional decision that they may not have otherwise taken, so, again, widens the potential application of enforcement against such claims.
More recently, the Competition and Markets Authority (CMA) has indicated that it will be seeking direct enforcement powers against businesses who breach consumer laws, including greenwashing. These powers will include the power to fine businesses without having to first obtain civil judgments against the business. Parliament has supported this, seemingly seeking amendments to the Consumer (Protection from Unfair Regulation) Act to grant the CMA these powers. Whilst not yet in force, it is, nonetheless, a clear indication as to where the law is heading.
Outside of legal consequences, businesses risk damaging their reputation if a claim they have made is found to have been ‘greenwashed’. With environmental issues being a key consideration of many consumers, businesses will want to ensure that any claims about a product or service are accurate in respect of their impact on the environment.
There are, however, options for businesses. A business may look to their supply contracts and seek contractual provisions requiring compliance with relevant environmental regulations from its supply chain so it can comfortably make sure claims. Additionally, a business may wish to use contractual provisions to require periodic reports regarding environmental issues affecting supply arrangements, as well as clauses requiring any statements made to be true.
How can a business ensure they are safe from greenwashing claims?
Alternatively, they may wish to have a ‘Supplier Code of Conduct’ incorporated into their contracts, which might incorporate other general compliance obligations such as modern-slavery, diversity, anti-bribery, etc. The advantage of this approach is that businesses can go beyond simply requiring that the supplier complies with statute and complies with a code of conduct which supports the specific business and supply chain reassurances. This may appeal where a business is looking to promote not only their environmental record, but other socially conscious ventures as well.
If you are looking to update your supply contracts or wish to speak to one of our commercial lawyers, please do not hesitate to contact us.