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Recent large-scale surveys indicate that global consumers are united in their concerns over environmental issues. The Accenture Global Consumer Pulse survey (2021) found that consumers are demanding that companies take more responsibility to align with consumer values on environmental and social issues. Consumers want to buy from companies that are genuinely working towards sustainability.

Alongside consumer pressures, investors, NGOs and advertising watchdogs are bringing companies to court over environmental statements or claims (e.g., recyclability or biodegradability). Similarly, environmental (or ‘green’) claims are increasingly being targeted by legislators, who seek to mandate transparency and verification procedures.

Misleading consumers about the environmental benefits of your products and services is often referred to as ‘greenwashing’. Greenwashing creates an unfair playing field, erodes consumer trust, and undermines genuine sustainability efforts. In this article, we will explore the global fight against corporate greenwashing by summarising the key regulatory developments around the world.

Green Claims in the European Union

A 2020 study by the European Commission found that 53% of examined environmental claims on the European Union (EU) market were vague, misleading or unfounded. The absence of common rules for voluntary green claims is one of the identified causes. Currently, environmental (or ‘green’) claims are only subject to general consumer protection and advertising laws such as the Directive on Unfair Business-to-Consumer Practices (2005/29/EC) and Comparative Advertising (2006/114/EC). In order to strengthen regulations in this area, the EU has proposed new measures as part of the European Green Deal package.

“53% of examined environmental claims on the EU market give vague, misleading or unfounded information”

In March 2022, the European Commission adopted a proposal for a Directive on Empowering Consumers for the Green Transition. The law, once enacted, will amend the EU’s existing consumer protection rules and ban the use of commonly misused or vague terms, such as “eco-friendly” and “climate neutral”. Furthermore, a second proposal for the Directive on Green Claims published in March 2023, stipulates how companies must substantiate voluntary environmental claims to consumers, seeks to ban the use of self-certification, and introduces penalties for violators. Both proposals are currently being considered by decision-makers, and they will be debated and amended by the European Parliament and Council before being written into law. When launched, these regulations will not apply to claims covered by other EU rules (e.g., energy labelling and ecodesign) and will consider existing EU-approved schemes (e.g., EU Ecolabel). The timeline for implementation is uncertain, however, the Commission expects implementation within four years (c. 2027) as Member States will first need to transpose the directive into national law.

Greenwashing in the United Kingdom

Greenwashing has also become a recent focus for UK regulators, such as the Competition & Markets Authority (CMA). Like the EU, environmental claims are currently only subject to general consumer protection laws (i.e., Consumer Protection from Unfair Trading Regulations (CPRs)), which state that businesses cannot ‘mislead’ consumers. However, in September 2021, the CMA released the Green Claims Code to provide additional guidance for UK businesses on the use of environmental claims. It sets out six principles to help businesses understand their obligations under consumer law, which require that all claims must:

1. be truthful and accurate

2. be clear and unambiguous

3. not omit or hide important relevant information

4. be fair and meaningful

5. be substantiated

6. consider the full life cycle of the product or service

Life Cycle Assessment (LCA) is explicitly mentioned by the CMA as a tool for demonstrating compliance with the sixth principle as it considers all stages of the supply chain, from raw material acquisition to final disposal. However, the results from an LCA study also allow businesses to comply with the other five principles, particularly when performed by an independent third party, where conflict of interest and unintended bias are avoided.

In January 2022, the CMA opened an investigation into environmental claims made by the fashion industry, which resulted in several high-profile fashion companies being called out for their misleading claims and potentially liable for any harm caused. This investigation has since been expanded to include consumer products, including food and drink, toiletries, and cleaning products as part of its first coordinated review of the Green Claims Code. The Digital Markets, Competition and Consumer Bill is currently progressing through parliament and is due to be introduced in 2023. The Bill will replace CPRs (with general prohibitions carried over) and give new, targeted powers to protect consumers from misleading claims, including the ability for the CMA to impose fixed penalties (up to 10% of annual global turnover) on companies found to be in violation.

Green Claims in the United States

In the United States (US), environmental claims are governed by the Federal Trade Commission’s (FTC) Green Guides. The Green Guides emphasise the need for businesses to consider ‘consumer impressions’ — that is how a reasonable consumer would interpret any claims made — and ensure that marketing claims are not unfair or deceptive. Deceptive practices are defined in Section 5 of the FTC Act (consumer protection law) as those involving a material representation, omission or practice that is likely to mislead a consumer acting reasonably in the circumstances. In the Green Guides, an example of deception is provided; a product that contains ozone-depleting substances marketed as “ozone-friendly” would be considered an act of deception. It is important to note that the guides themselves are not enforceable although some states have incorporated all or parts of the text into their state laws. Furthermore, the FTC can launch investigations if they consider claims to be a violation of consumer protection legislation (i.e., misleading, unfair or deceptive). Regulators assess deception by way of three-step process:

The FTC is currently revising its Green Guides to strengthen consumer protections against misleading environmental claims. Although the revision is in its early stages (out for public comment), decision-makers are looking to provide additional guidance in line with other laws and standards (e.g., EU, UK, US states) and are considering the inclusion of enforcement mechanisms including civil penalties or preemption.

Greenwashing in the Rest of the World

Many other countries are also developing or strengthening regulations to combat greenwashing. Canada has proposed updates to its Competition Act (RSC 1985, c C-34) to address deceptive marketing practices, while countries including Australia, Brazil, Singapore and China are exploring additional measures to tackle greenwashing.

What should you do to prepare

The global fight against misleading green claims is gaining momentum with an increasingly consumer-focused risk prevention landscape. As new regulations are implemented worldwide, businesses will face increasing scrutiny and must demonstrate that their environmental claims are authentic and verifiable. In light of upcoming regulatory changes, businesses operating in these jurisdictions should take action before coming under the spotlight by regulators.

Take away message

Don’t delay. Prepare now! There isn’t much time for businesses to ensure alignment of their portfolios. Get ahead of your competitors by starting the review process today. To ensure compliance, we recommend following this three-step process:

Get in touch with us today to learn how we can help your business achieve its sustainability goals. To learn more about our services, visit our website. You can also sign up for our newsletter for industry updates and insightful tips on meeting your regulatory obligations.