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Greenwashing and the consequences if your business is found guilty

A Guest contributor: Jon Munnery, Insolvency & Restructuring Expert, UK Liquidators (part of Begbies Traynor Group)

If an organisation falsely bolsters its environmental track record for commercial benefit and glosses over unsubstantial sustainability efforts, it could be found guilty of greenwashing tactics.

If there’s little or no evidence to back up marketing claims, the repercussions of fictitious marketing can imperil customer trust, damage brand reputation, and detract attention from true environmental clean-up efforts.

If an organisation is found guilty of fronting its campaigns with baseless environmental claims, it could face dire repercussions and lead to public outcry. ?

Summary

  • ‘Greenwashing’ – the term was coined to address the act of misleading customers by making false or unsubstantiated claims about an environmental benefit.
  • A CMA global review found that 40% of online green claims could be misleading consumers
  • In response to this, the CMA introduced the Green Claims Code to govern how businesses use green claims in advertising
  • This is in addition to existing consumer law and guidelines set out by the Trading Standards Service, Advertising Standards Authority, and sector bodies

Greenwashing – distinguishing between marketing lures and true claims

As businesses and individuals around the world embark on a collective mission to protect the environment, preserve natural resources, and drive down carbon emissions, ingenuine commitments to save the planet can be detrimental to global targets and contradict the eco-conscious beliefs of customers.

Using environmental promises as a marketing ploy and cherry-picking ‘green’ marketing messages, while excluding truths that could undermine the brand image, is an example of greenwashing.

For example, you may launch a campaign in which you ambitiously pledge to remove ocean plastics, although you omit the fact that you’ve increased the production of single-use plastics to make your products appear more desirable.

This cheats customers that actively make a purchase according to sustainability standards which is grossly unethical and contravenes consumer law.

What are the legal repercussions of greenwashing?

The greenwashing limelight is currently on key industries of serious concern to consumers, which include textiles and fashion, travel and transport, and fast-moving consumer goods (food and beverages, beauty products and cleaning products), according to the Competition and Markets Authority (CMA).

As shoppers spend more money on eco-friendly and sustainable goods, more must be done to govern greenwashing and double down on false environmental claims.

In Autumn 2021, the CMA published the Green Claims Code to help businesses understand how to communicate their green credentials better without misleading shoppers, in addition to abiding by existing obligations under consumer protection and advertising fraud legislation.

Green Claims Code

The Green Claims Code lays out a 13-step checklist that all businesses must follow when they make a ‘green claim’, also known as an environmental or eco-friendly claim.

Andrea Coscelli, CMA’s Chief Executive, said: “The Green Claims Code has been written for all businesses – from fashion giants and supermarket chains to local shops.

“Any business that fails to comply with the law risks damaging its reputation with customers and could face action from the CMA.”

Here’s the Green Claim Code:

  1. The claim is accurate and clear for all to understand
  2. There’s up-to-date, credible evidence to show that the green claim is true
  3. The claim clearly tells the whole story of a product or service; or relates to one part of the product or service without misleading people about the other parts or the overall impact on the environment
  4. The claim doesn’t contain partially correct or incorrect aspects or conditions that apply
  5. Where general claims (eco-friendly, green or sustainable for example) are being made, the claim reflects the whole life cycle of the brand, product, business or service and is justified by the evidence
  6. If conditions (or caveats) apply to the claim, they’re clearly set out and can be understood by all
  7. The claim won’t mislead customers or other suppliers
  8. The claim doesn’t exaggerate its positive environmental impact, or contain anything untrue – whether clearly stated or implied
  9. Durability or disposability information is clearly explained and labelled
  10. The claim doesn’t miss out or hide information about the environmental impact that people need to make informed choices
  11. Information that really can’t fit into the claim can be easily accessed by customers in another way (QR code, website, etc.)
  12. Features or benefits that are necessary standard features or legal requirements of that product or service type, aren’t claimed as environmental benefits
  13. If a comparison is being used, the basis of it is fair and accurate, and is clear for all to understand

If you fail to comply with consumer protection law, the CMA and other sector bodies, such as the Trading Standards Service, Advertising Standards Authority or respective sector regulators may seek legal action.

If you are in suspicion of greenwashing, the governing body can request for changes to be made to a claim, provide recommendations towards future advertising, or even ban the advert. The repercussions of greenwashing can vary, such as:

  • Amend claim: You may be instructed to make a claim clearer by providing sufficient evidence, wider context, or a disclaimer
  • Discontinue use of claim: If an investigation into a claim proves it to be inaccurate or false, you may be instructed to discontinue the use of the claim
  • Ban advert: If the advert is a subject of greenwashing, it may be banned and prohibited from distribution
  • Customer redress: If customers are affected by false claims, you may be instructed to provide compensation
  • Recommendations for future advertising: You may be provided with guidance on how to use green claims in a responsible fashion

In addition to this, social change campaigners are hot on their heels to weed out false claims and bring corporates that embrace environmentalism solely as a trend, without the physical commitment, to question. Legal consequences aside, this could annihilate brand reputation and customer trust which could lead to serious financial loss.

Conclusion

While there is set guidance for businesses that choose to strengthen their brand image, marketing campaigns and advertisements with environmental claims, both conscious and subconscious greenwashing practices are prevalent in the UK.

The CMA have chosen 2022 as the year of action as they crackdown on greenwashing tactics and conduct extensive investigations into complaints as they found that 40% of online green claims could mislead customers following a global review.

Jon Munnery is an insolvency and restructuring expert at UK Liquidators, part of Begbies Traynor Group. UK Liquidators provides company liquidation advice to company directors in financial distress, including those at financial risk due to reputational damage.

If you are in suspicion of greenwashing or marketing fraud, please do not hesitate to get in touch at hello@tenetlaw.co.uk

Published on June 29, 2022

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