When might a sustainability claim be misleading? The UK Competition and Markets Authority publishes draft guidance

The growing importance of how businesses approach sustainability presents itself in many different ways.  In terms of our spending decisions, consumers are increasingly demanding products and services which minimise harm to, or have a positive effect on, the environment. But how can they really trust what is being communicated to them about the products and services they are being offered?

In February 2021, we highlighted that consumer protection regulators across Europe were looking into the growing prevalence of “green-washing” – making potentially misleading claims about the environmental impact of products and services being offered for sale.  The Netherlands Consumer and Markets Authority (Autoriteit Consument & Markt– ACM) was first out of the blocks and now its UK counterpart, the UK Competition and Markets Authority (the CMA), has published its own draft guidance for businesses making environmental claims.

The draft guidance was published on 21 May 2021 and sets out how businesses can ensure they are complying with existing consumer protection obligations when making statements about the environmental benefits of their products, services, brands and businesses.

The CMA’s guidance sets out six principles which businesses must follow, with examples of misleading claims which the CMA considers will fall short of consumer protection legislation:

1. Claims must be truthful and accurate: businesses must live up to the claims they make and not mislead consumers by giving them an inaccurate impression, even if those claims are factually correct. An example of a claim which will fall short of this principle is a yoghurt pot which has ‘reduced plastic packaging’ with a large green leaf on the front of the pot when the amount of plastic has only been reduced by 5% by removing the lid. This entailed the business switching production facilities and transporting the yoghurts further and therefore, the change has had little, if any, overall reduction in environmental impact.
2. Claims must be clear and unambiguous: the meaning that a consumer is likely to take from a product’s messaging and the credentials of that product should match. Businesses are less likely to mislead consumers about their environmental goals if statements are based on specific, shorter term and measurable commitments which the business is actively working towards. Vague statements are more likely to be misleading. A claim that a product is ‘recyclable’ will be misleading if it doesn’t make clear whether this relates to the whole product or not, or its packaging.
3. Claims must not omit or hide important information: claims must not prevent someone from making an informed choice because of information which is left out. For example, the environmental impact of products is likely to be affected by the provenance and sourcing of materials, the production processes and practices, and the packaging, transportation, use and disposal of products. Consumers can also be misled where claims do not say anything about environmental impacts. A misleading claim that does not follow this principle is a carton of organic soup which has ‘Nature’s Friend – organic and sustainably farmed’ written on it because the claim is true about the product but not the packaging which contains non-recyclable plastic and has a negative environmental impact.
4. Claims must only make fair and meaningful comparisons: any products which are compared should meet the same needs or be intended for the same purpose. For example, a claim which compares two similar products’ CO2 emissions should calculate these measurements in the same way for each product. Businesses should make the basis for the comparison clear and easy for consumers to follow. The statement that a clothing line is now ‘greener’ would not be in line with this principle because it does not make clear the basis for the comparison.  It is not clear if the comparison is with a previous or competing clothing range, nor what measure is being used to assess whether the clothing range is ‘greener’.
5. Claims must consider the full life cycle of the product: when making claims, businesses must consider the total impact of a product or service. Claims can be misleading where they don’t reflect the overall impact or where they focus on one aspect of it but not another. If businesses want to make claims about part of the life cycle, they should make it clear which part the claim relates to. An example of a misleading claim is a statement that an improved product has a ‘lower carbon impact’ but with the small print ‘excluding transportation’. This claim is liable to mislead consumers if the business has excluded transport because an external transport company has been used but the largest proportion of the product’s carbon impact comes from transportation.
6. Claims must be substantiated: businesses should be able to back up their claims with robust, credible and up-to-date evidence. Even claims which turn out to be true are likely to be problematic if businesses do not know there is the evidence to support them. The CMA (and even the courts) may require evidence to support environmental claims from businesses. For example, a cleaning company’s claim that it is the ‘UK’s most sustainable cleaning solution’ is absolute and must be robustly substantiated by evidence relating to its products and services and others across the market to prove that the company's practices are more environmentally friendly than any other cleaning company on the market.

The guidance also provides a list of questions that businesses should consider in order to ensure they are following each principle (for example: is what I say liable to deceive consumers, even if it is literally true or factually correct?).

The CMA’s draft guidance forms part of its wider examination, launched in November 2020, into how products and services claiming to be ‘eco-friendly’ are being marketed, and whether consumers could be misled when purchasing such goods and services (see more here). The backdrop to this project is the CMA’s commitment to support the UK’s transition to a low carbon economy in its Annual Plan for 2020 to 2021. The CMA aims to help businesses adapt to climate change, promote sustainable competition and to help create a level playing field for those businesses which are genuinely environmentally friendly.

The CMA has also published a literature review which sets how environmental claims are made, whether they are supported by evidence and how they influence consumer behaviour. It includes the finding that more than half of UK consumers take environmental considerations into account and are increasingly seeking to buy sustainable goods and services.

The CMA has invited interested parties to participate in a consultation on the draft guidance – with a particular call for “eco-friendly” respondents.  The consultation is open until 16 July 2021 and the CMA aims to publish its final guidance by the end of September 2021.