Green consumerism is on the rise and businesses are scrambling to attract the attention of an emerging eco-savvy consumer market. But what are the rules governing “green claims” and how do businesses know what claims are permitted and what are not? In this article, we look at the Green Claims Code, designed to help businesses comply with consumer protection law when making environmental claims.
Consumers are looking for products and services that help them mitigate their impact on the environment. A recent Nielsen study reported that over 80% of global respondents strongly believe companies should help improve the environment — a view shared across gender lines and generations, with older generations just as supportive of green credentials as millennials, Gen Z and Gen X.
Other consumer polls exhibit similar trends or show market share falling for those companies that fail to adapt. A recent Deloitte survey identified ethical and sustainability issues as a key driver for almost a third of consumers, many of whom have stopped purchasing certain brands due to environmental concerns.
Market strategists and a growing number of businesses are aware of the change in consumer behaviour and are starting to rebrand their products or launch new eco-friendly innovations in products, packaging and production systems to retain and expand their customer base.
Problems can arise where companies make claims they cannot substantiate or who falsely take credit for being greener than their business practices demonstrate. This can confuse or mislead consumers into buying products and services that do not live up to their green credentials — a practice often referred to as “greenwashing”. A recent poll of randomly selected websites has so far found that 40% of green claims made online could be misleading consumers.
The Competition and Markets Authority (CMA) is the UK’s primary competition and consumer authority, with powers to tackle market practices that confuse or mislead consumers. Those powers also extend to protecting businesses from misleading marketing claims made by other businesses in the supply chain.
Consumer protection law covers what businesses can say and can’t say about the green credentials of their products, services and other business activities. The CMA’s view is that consumer laws are there to ensure environmental claims made by or on behalf of businesses must be legitimate.
To help businesses make the right decisions about green claims without the risk of misleading shoppers and other businesses, the CMA has recently published a Green Claims Code, highlighting what is acceptable and what might not be permitted.
This guidance focuses on six principles based on existing consumer law.
For businesses this means ensuring claims contain correct information and do not overstate or exaggerate the positive environmental impact of a product, service, process or brand. For example, a business that claims a particular product is “recyclable” when only parts of it can be recycled is misleading their customers.
The CMA guidance states that if a business wants to use terms like “green”, “sustainable” or “eco-friendly”, they need to prove that a product, service, process or brand “as a whole” has a positive environmental impact, or it risks falling short of its legal obligations.
An example might be that a hospitality business brands itself as a “trusted eco holiday provider” but doesn’t explain whether this relates to travel, accommodation, food, or something else. One way around this is for businesses to join an independent certification scheme. For the hospitality sector, this might be the Green Dragon Environment Standard; for other industry sectors, it could be ISO 14001 or more specifically an ecolabelling scheme such as ISO 14020 and ISO 14021. Certification schemes such as Fair Trade and Forest Stewardship Council (FSC) are also valued by consumers.
Businesses should also avoid suggesting their products, services etc provide environmental benefits when in fact those features are standard practice anyway or are required under law. Claims that go beyond legal requirements are more acceptable.
Vague statements of environmental benefit that are difficult to substantiate can be misleading and make it difficult for consumers to make informed decisions. Claims should be worded in ways that are transparent and straightforward so as not to confuse consumers or to give the impression that a product, service, brand or business is better for the environment than it really is.
Most businesses recognise the added value of improving the environmental performance of their products, services and practices and claims about a business’ environmental ambitions and aspirations are less likely to be misleading when these are based on specific and measurable targets and public policy.
Consumers are becoming more aware of terms such as “carbon emissions” and “organic waste” and increasingly sensitive to issues such as climate change, but technical and scientific terms such as “biodegradable” and “carbon neutral” may sometimes be confusing and should be avoided or explained.
Terms with multiple meanings should relate to the claim itself to ensure they are not misinterpreted. For example, a product labelled “recyclable” might only relate to the packaging and not the product itself, which can be confusing. A better option in this case would be to state the packaging is recyclable.
Businesses need to make clear what their claims apply to and whether they are presented in a way consumers understand.
Most consumers are aware that whatever environmental attributes a particular product or service might offer, there will likely be some environmental impacts. These might include impacts in the supply chain, during the production process or downstream in the packaging, transportation, use and disposal of products.
Businesses should avoid “cherry-picking” their green credentials and should only omit information where it is impossible for them to include it. Where there are omissions, businesses should provide directions to where consumers can find further information. Examples might include access to a website or via QR codes.
Scientific evidence about the range of environmental impacts associated with products and services is regularly updated and it is important for businesses to review all new evidence about the environmental impacts of their products and change their marketing claims where necessary.
The CMA’s guidance says: “Before making claims, you should ask yourself: What environmental impacts does my product, service, process, brand, or business have (positive and negative, taking account of its whole life cycle)?”
Businesses regularly compete for market share and with the rise in greener consumerism the temptation is for one business to claim their product or service is greener than their competitors’.
Consumers regularly compare products from different suppliers, and claims about whether one product is “greener” or “more energy efficient” than others even when this is not the case are an important marketing issue.
The CMA’s advice states that comparative claims should compare like with like. That means:
- any products compared should meet the same needs or be intended for the same purpose, with a sufficient degree of interchangeability
- the comparison should be between important, verifiable and representative features or aspects of the relevant products
- the basis of the comparison, and the way it is presented, should allow consumers to make an informed decision about the relevant merits of one product over another.
CMA guidance asks: “Is the like for like comparison a fair and representative one?”
Environmental impacts occur across the whole life cycle of a product or service, from raw materials and component parts in the supply chain, through to production and product use and disposal.
It would not be practical to list all the impacts (positive and negative) of a product’s life cycle in a marketing strategy, but businesses should consider these impacts to determine how they might affect the accuracy of their green claims.
The CMA argues that consumers are likely to be as concerned about how easily a product can be recycled or disposed of as they are about the performance of the product itself. On this basis, green claims should relate to the specific aspects of a product, process or business activity that is being marketed.
As an example, when considering purchasing an item of “sustainable” clothing, a consumer may well be interested not only in whether fibres in a garment are natural or synthetic, but also how those fibres are sourced and processed.
The CMA guidance says: “By making a claim about one element of the product’s life cycle, does the claim mislead the consumer about other aspects?”
Further details of how to undertake a life cycle assessment (LCA) are available here.
Claims related to environmental impacts are more likely to be objective or factual and capable of being tested against scientific or other evidence that businesses can use to support those claims.
By contrast, subjective or vague advertising claims are likely to be problematic for a business on a number of levels. For example, consumers can often spot bogus green claims so reputations could be at risk. Similarly, where there are complaints the CMA or another enforcer will want to see evidence to support the claims and failure to provide this could leave a business vulnerable to prosecution.
For example, claiming a product is “environment friendly” suggests the product has a positive overall effect on the environment (or no negative one), but the claim may only refer to one or two “aspects”, such as “organic” or “recyclable”. The CMA argues that it would require “strong evidence” to substantiate vague environmental claims.
In January, the CMA opened a compliance review of environmental claims in the fashion retail sector. Similar compliance reviews are expected across further 17 other industry sectors in due course.
CMA guidance asks if the claim you are making is subjective or objective and do you have appropriate evidence to support your claim?
The Green Claims Code draws on enforcement under the Consumer Protection from Unfair Trading Regulations 2008 and Business Protection from Misleading Marketing Regulations 2008.
The CMA and other bodies — such as sector regulators — can seek evidence from businesses when investigating potentially misleading claims. Businesses that fail to comply with consumer protection law over misleading green claims may result in court proceedings from bodies such as the CMA, the Advertising Standards Authority (ASA) or Trading Standards Services.
For the growing number of consumers wanting to do their bit for the environment, buying eco-friendly products and services is a good start. And businesses too are realising that capturing this emerging green market requires more than a change of branding, but a more substantial shift towards products and services that are aligned to the principles of sustainability.
Government advice is that businesses should check their green claims against the Code and seek legal advice if they are unsure whether their claims comply with the law.