Insights on UK efforts to combat greenwashing claims

As U.K. regulators seek to take a tougher stance to combat greenwashing claims in the consumer retail sector, the question of how consumers understand sustainability claims made by companies is coming into sharp focus.

Regulators are taking active steps to combat greenwashing claims in the consumer retail sector. Companies are more frequently facing decisions from advertising and consumer protection regulators who find that their sustainability claims are misleading the average consumer as to the green credentials of their products or services.

In this article, we discuss recent decisions and guidance issued by the U.K.'s advertising and consumer protection regulators, which provide a useful insight into how these bodies view the understanding of the average consumer of sustainability claims in the consumer retail sector. This provides key learnings and practical takeaways that can inform a company's promotion of sustainability claims to its consumers in the future.¹

The average consumer's alleged understanding of sustainability claims has become a key point of contention between companies and regulators. Companies argue that the average consumer is able to interpret sustainability claims in the relevant context of the advert.

However, regulators have disagreed, holding that the average consumer can only take sustainability claims at face value with the information presented. These claims, therefore, must be fully substantiated or qualified within the confines of the advert.

Advertising Standards Authority

Shell, Repsol and Petronas Decisions

On June 7, the Advertising Standards Authority censured Shell PLC, Repsol SA and Petroliam Nasional Berhad — known as Petronas² in relation to adverts which the regulator held misled consumers as to the companies' green credentials.

The ASA took aim at a television promotion for Petronas, an online ad for Repsol and poster and television and YouTube advertisements for Shell. It claimed that the adverts had "omitted material information" by promoting their green offers and plans without any mention of their larger polluting operations, and as such were "misleading."

Each of the companies maintained that consumers were well aware of their environmentally detrimental operations and products. The adverts were instead aimed at promoting their alternative sustainable product offerings, of which consumers were far less aware.

On that basis, the companies concluded that consumers would realize that the adverts did not cover, and were not intended to cover, the full scope of the companies' operations and therefore were not making a general statement regarding the overall environmental impact of their operations.

The ASA accepted that consumers:

• Were likely to understand that energy products derived from fossil fuels were environmentally detrimental; and
• Would closely associate the companies with petrol sales and with oil and gas investment and extraction, and would therefore understand that any sustainable activities would only form part of their activities.

However, the ASA assessed the adverts on the basis that consumers would be concerned about the extent to which these companies were making "meaningful progress towards transitioning away from higher-carbon products and services."

Therefore, the ASA held that adverts would be misleading if they misrepresented the proportion of the companies' overall activities that comprised sustainable or fossil fuel activities.

Applying this test to the companies, the ASA found that the vast majority of the companies' operations were focussed on fossil fuels and nonsustainable energy sources.

In addition, it found that the companies were at a nascent stage of their transitions to low-carbon alternatives, and in the case of Repsol, found that a number of the biofuel and synthetic fuel products that were being promoted were not yet available.

As a result of the focus that the adverts placed on the companies' sustainable activities with little to no mention of the rest of their activities, the ASA found that consumers would be misled as to the progress each of the companies was making in their transition journeys, and therefore the adverts were misleading.

Etihad and Lufthansa Decisions

The Advertising Standards Authority adopted a similar approach in the aviation industry. On April 12, it censured Etihad Airways over advertising that sought to highlight the carrier's green credentials and sustainable aviation practices.³

The ASA ruled that the adverts misled consumers over the environmental impact of flying with the airline.

The ASA took exception to two adverts on Facebook that promoted Etihad's "louder, bolder approach to sustainable aviation," pushed the theory that choosing Etihad was a "conscious choice for the planet," and promoted Etihad's green initiatives such as cutting back on single-use plastic cutlery. The adverts also referred to Etihad as "Environmental airline of the year 2022."

Etihad raised numerous examples of the work it was doing to reduce the environmental impact of its business. It said that the sustainable aviation claim was not intended to be understood by the average consumer as an absolute and immediate solution to the environmental impact from aviation.

In contrast, Etihad said the claim would be widely understood as a long-term and
multifaceted process in which it had included an aspiration to reach net-zero carbon emissions by 2050.

The ASA acknowledged Etihad's comments, although it concluded that the consumer would not have appreciated the long-term and multifaceted nature of Etihad's sustainable targets. Instead, the ASA held that consumers would have understood the adverts as promoting a solution to the environmental impacts of the aviation industry.

On this basis, the ASA concluded that there were currently no initiatives or commercially viable technologies in operation within the aviation industry that would adequately substantiate an absolute green claim such as sustainable aviation, as it held that consumers would interpret it. As a result, it held that the adverts breached U.K. advertising standards by exaggerating the impact that flying with Etihad would have on the environment.

Etihad is not the first airline to be caught out over greenwashing by the ASA. In March, the ASA reached a similar conclusion when it censured German carrier Lufthansa⁴ over adverts that claimed its green initiatives were protecting the world's future.

Other ASA Decisions

Outside the world of aviation, the ASA also found that Tesco PLC had misled customers over the environmental claims of certain of its meat-free products. Tesco's adverts promoted its Plant Chef range, claiming that "a little swap can make a difference to the planet.⁵

In response to complaints, Tesco said that the claims were not intended to be "absolute environmental claims," i.e., that its Plant Chef range was completely environmentally friendly, but rather were drawing a general comparison between the different impacts of plant and meat-based products.

However, the ASA held that the consumer would understand the adverts to be promoting a swap from meat-based products to its Plant Chef range as better for the planet. The ASA acknowledged the scientific consensus that plant-based diets had less of an environmental impact than those that included meat.

It held that Tesco did not hold or present evidence that related to the full life cycle of the specific products in its Plant Chef range to substantiate its response to the complaints that these products had a lower carbon or environmental impact than comparative meat-based products.

The ASA's overriding message from these decisions is that the consumer will take at face value claims made by companies seeking to promote their green credentials through advertising. In its updated guidance on environmental claims released in February, the ASA made clear that where general claims could be interpreted as absolute claims, additional information is required to make the meaning of the claim clear.⁶

Advertisers should also not "assume a high level of understanding, particularly if ads are untargeted." As a result, according to the ASA, the consumer should not be expected to consider the context of the advert, such as the relevant industry or the generality of the advertiser's claims.

The CMA

The Competition and Markets Authority has already indicated its intention to crack down on the greenwashing of sustainability claims in the consumer retail space.

In September 2021, the CMA published what it describes as a green claims code: "Green claims code: making environmental claims,⁷ which sets out six key requirements for the promotion of sustainable claims. Each of these requirements are aimed at ensuring that the consumer is provided with comprehensive information within the advert to make an informed decision about the green credentials of the product or service.

Since then, the CMA has focused its work on tackling greenwashing with this aim in mind. In July 2022 it opened investigations into ASOS PLC, Boohoo.com U.K. Ltd., and George at Asda Stores Ltd. to scrutinize their sustainability claims and in January 2023, it announced that it was also examining the accuracy of sustainability claims made about household essentials as well as further probes into the energy, retail banking and travel and aviation sectors.

The primary aim of these actions is to target the more obvious signs of greenwashing, i.e., where there is little evidence to back up the sustainability claims made or that customers are paying an unwarranted premium for the sustainability of a product or service. However, the CMA will also be looking at the amount of information provided to consumers regarding sustainability claims and whether companies are expecting consumers to understand such claims in the context in which they are made.

Getting this right may soon become a costly issue as the CMA is looking to equip itself with fining powers in respect of its consumer protection responsibilities. The long-awaited U.K. Digital Markets, Competition and Consumers Bill was introduced to Parliament on April 25.

If passed, the CMA would be able to impose fines for breach of consumer protection offenses, which could extend to greenwashing, i.e., making unsubstantiated or misleading sustainability claims.⁸

Lessons for Companies

As regulators' efforts to tackle greenwashing of sustainability claims in the consumer retail sector gathers pace, we can see a clear disparity in the assumed level of knowledge held by the average consumer as asserted by companies and regulators.

As regulatory regimes become more entrenched, it is increasingly unlikely that companies will be able to move the dial in their direction. As a result, companies will have to adapt to the regulators' view of the average consumer's understanding of sustainability claims. A few practical takeaways result from this.

First, companies should avoid making general sustainability claims about the product or service. These are often difficult to substantiate as almost all activities have some negative impact on the environment.

Second, when making a qualified sustainability claim, companies should ensure that the consumer is presented with the qualifying information in clear language in close proximity to the claim.

Qualifying information which is contained in other places, such as the company's website is often missed by the consumer, or at least will not be accessed at the same time as the consumer views the relevant advert.

Finally, when making aspirational claims regarding the sustainability targets of the company or its products or services, companies should clearly communicate the relevant timelines, targets and any relevant evidence to demonstrate the likelihood of success.As the ASA sets out in its
guidance, "claims based on future goals relating to reaching net-zero or achieving carbon neutrality should be based on a verifiable strategy to deliver them."

We have certainly not had the last word on this debate. The level of understanding of the average consumer is still a hotly contested issue that is still being refined as regulators continue their efforts to combat greenwashing in the consumer retail sector.

¹ ASA Ruling on Etihad Airways, complaint reference A22-1174208 Etihad Airways
² ASA Ruling on Shell UK Ltd, complaint reference G22-1170842 Shell UK Ltd; ASA Ruling on Repsol SA, complaint reference A23-1185942 Repsol SA; ASA Ruling on Petroliam Nasional Berhad t/a PETRONAS, complaint reference A22-1169312 Petroliam Nasional Berhad
³ ASA Ruling on Deutsche Lufthansa AG, complaint reference A22-1169419 Deutsche Lufthansa AG
⁴ https://www.simmons-simmons.com/en/publications/clfux8rwr017yu7roj087rhcd/esg-view---march-2023
⁵ ASA Ruling on Tesco Stores Ltd, complaint reference G21-1128264 Tesco Stores Ltd
⁶ https://www.asa.org.uk/static/d819e399-3cf9-44ea-942b82d5ecd6dff3/a79e0147-5417-4f7c-9fdce878078a7ffe/CAP-guidance-on-misleading-environmental-claims-and-social-responsibility.pdf
⁷ https://www.gov.uk/government/publications/green-claims-code-making-environmental-claims
⁸ https://www.simmons-simmons.com/en/publications/clh6emsph0096trj87gw055vi/enhanced-consumer-protection-laws-coming-soon