Is 2023 the year for a green claims revolution?

The fight against ‘greenwashing’ has moved up a league with green claims, also known as ‘environmental’ or ‘eco-friendly’ claims, facing more scrutiny in the UK and beyond. But what does this mean for business? Whilst the focus on sustainability, net zero and purpose in business strategies and communications is a positive step, the inclusion of unmeasurable and sometimes unfounded claims has led to a problem with trust among customers and authorities alike.??

Both the Competition and Markets Authority (CMA) and Advertising Standards Authority (ASA) are increasing their enforcement of green claim penalties as well as launching new investigations. Likewise, the Financial Conduct Authority has consulted on its own package of measures aimed at ‘clamping down on greenwashing’. It proposes restrictions on how certain terms such as ‘green’, ‘Net Zero’ or ‘sustainable’ can be used in investment product names and for marketing.?

In January this year, the CMA announced it will be expanding its focus to the FMCG sector, notably ‘household items’, after launching its sector-by-sector review of misleading environmental claims starting with the fashion industry. These investigations seek to get to the bottom of whether products and services that claim to be green or eco-friendly are being marketed to shoppers accurately. The CMA’s review is the first concerted application of the Green Claims Code, published in September 2021, which gives guidance for any business making environmental claims in the UK.?

?Where is legislation going??

• Crucially, new powers are being given to the CMA to impose direct civil penalties on companies which will likely extend to greenwashing. Under the Digital Markets, Competition and Consumer Bill, big companies will be subject to penalties of up to 10% of global turnover for breaches of consumer law. Individuals who breach these laws will face fines of up to ￡300,000.??
• ?The ASA has also announced it will begin stricter enforcement on use of terms such as ‘carbon neutral’ amid concerns over carbon offsetting schemes. Gucci is the latest brand to run into trouble with carbon claims based on off-setting, having deleted the claim that they were ‘entirely carbon neutral’, in part using rainforest offsets. The offsetting scheme in question was found to have little to no impact after an investigation by The Guardian.??
• ?The UK isn’t alone in this shift – In March the European Union announced its proposal for a Green Claims Directive, a new and strict framework applicable to all companies operating in the EU, to harmonize the rules on the substantiation of voluntary green claims. The proposal was successfully voted in last week and will particularly clamp down on ‘generic’ terms and claims based on carbon offsetting.???
• ?Meanwhile in the US, The Federal Trade Commission is soliciting public comments on its ‘Green Guides’ which seek to prevent companies from making deceptive environmental claims. Following this, it plans to revise them for the first time in a decade, with updates likely setting additional guideposts for claims about climate change, guidance on carbon offsets, and more.??

?How can businesses prepare??

Fundamentally, businesses must strengthen their sustainability strategies and look to back claims up with robust and credible plans that reflect a businesses’ material issues and prioritise where the business can have the biggest impact on society and environment.??

?With regulation being refined and developed, it’s also important for businesses to get up to speed and upskill colleagues on how to communicate green claims effectively and honestly. However, there appears to be a skills gap between business segments. The World Federation of Advertisers published the findings of a global survey which found that the marketing profession is lagging behind other areas of the business when it comes to understanding and embracing the broad agenda of sustainability. In total, 39% of respondents claimed they had only just started out on their sustainability journeys, with many citing a knowledge and skills gap as barriers.??

?Can businesses afford to wait for legislation to force their hand or risk inaction for fear of greenwashing? According to IBM, 77% of consumers say it’s at least moderately important that brands are sustainable and environmentally responsible. Further to this, McKinsey found that investors will pay a 10% premium for a company with a positive ESG record. However, not just external stakeholders care about businesses showcasing efforts to becoming more sustainable, a Unily report found 2 in 3 employees are more likely to work for a company with strong environmental policies.??

?From a reputation and customer trust perspective, it has never been more important to ensure that we are clear, accurate and transparent about our green plans, products and activities. If you have questions about how to navigate green claims, or would like support with upskilling your colleagues to develop robust and honest communications, reach out to our Responsible Business team at [email protected].??

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