Greenwashing Claims Face the Regulatory Catwalk

Where greenwashing claims are concerned, transparency is now in vogue and misleading omissions are the season’s faux pas. Coinciding with the September catwalk season, based on its Green Claims Code, the CMA published new guidance to the fashion retail sector on how to comply with consumer law when making environmental claims (the “Guidance”).

As consumers become more environmentally conscious and greenwashing (and other related practices, such as “greenhushing” and “greenwishing”) become increasingly common, the CMA is taking steps to protect those same consumers.

Who does the Guidance apply to?

The Guidance is relevant to all businesses in the fashion supply chain (retailers, manufactures, suppliers, wholesalers and distributors) and related services (such as packaging, delivery and returns). It is divided into three areas of advice for businesses:

1. Presenting green claims in store and online;
2. Product descriptions and marketing; and
3. Substantiating claims.

Principles-based

The Guidance is principles-based and provides several worked examples aimed at ensuring businesses understand when the CMA will consider a greenwashing claim to be ‘misleading’. It is based on the six principles set out in the Green Claims Code. Namely, claims must be:

1. Truthful and accurate
2. Clear and unambiguous;
3. Not omitting relevant information;
4. Considering the full life cycle of the product;
5. Substantiated; and
6. Meaningful (in the context of comparisons).

The Guidance makes clear that broader, more general or absolute claims and terms (e.g., “green” or “sustainable”) are more likely to be inaccurate or misleading. The Guidance, therefore, encourages specificity and emphasises that all environmental claims should be supported by robust, credible and up-to-date evidence. For instance, if certain caveats apply in order that a green claim is true, those qualifications should be stated. Similarly, the Guidance discourages ‘cherry picking’ and encourages businesses to use factual claims that are presented to consumers in a clear and objective manner. Accordingly, the CMA advises against using subjective or ambiguous descriptions (e.g., “responsible cotton”) and instead favours specific terms reflecting how a product has been designed and/or manufactured.

The clarity provided by the Guidance is likely to be welcomed by businesses, particularly in light of the significant consequences of non-compliance with consumer laws under the DMCC Bill (see below).

Wider backdrop

The introduction of the Guidance and the enforcement powers within the DMCC Bill (as defined below) suggest that the UK Government and regulators are now adopting a more 'hands-on' approach to tackling greenwashing. On the same day as the Guidance was published, the CMA advised 17 (unnamed) fashion brands to review their business practices. The letter highlighted the CMA's concerns regarding the use of broad or general claims and the incorrect labelling of products and is perhaps an early indication of the more substantive action that the CMA may take.

"The millions of people who shop with these well-known businesses can now have confidence in the green claims they see." ~ CMA CEO, Sarah Cardwell

The Guidance follows voluntary commitments made by ASOS, Boohoo, and Asda, who signed agreements with the CMA committing to change the way they display, describe and promote their green credentials.

Risks of non-compliance

Whilst the Guidance is voluntary, it provides a good indication of the CMA's likely position in relation to greenwashing in the fashion sector -- and we have seen that the CMA is not afraid to use its regulatory powers in this space. For instance, its investigation of ASOS, Boohoo, and Asda, as well as the CMA's investigation into Unilever for green claims associated with its products.

Global regulators are taking a similar approach. In May this year, Canada's Competition Bureau announced that it would be investigating Lululemon in relation to its "Be Planet" sustainability campaign. Therefore, it is important for brands to act with caution and consider the Guidance within the wider regulatory context when making "green" claims.

Other Notable Legislation and Regulations:

• The Digital Markets, Competition, and Consumer Act 2024 (the "DMCC Act"), which will come into effect in January 2025, gives the CMA new powers to act against businesses with unfair commercial practices, including fining businesses up to 10% of their global turnover.

• The unfair commercial practices proscribed by the bill include: (a) misleading actions; or (b) misleading omissions, both of which may include greenwashing. Therefore, businesses may wish to consider compliance prior to the DMCC Act coming into force, and this should include consideration of the Guidance.

• One of the first pieces of legislation introduced by the new Labour Government was the Product Regulation and Metrology Bill ("PRMB"). The PRMB enables the Government to introduce regulation aimed at reducing or mitigating the environmental impact of products (in connection with their marketing and/or use).

• The Committee of Advertising Practice Code and Code of Broadcast Advertising which govern non-broadcast and broadcast advertising, respectively, consolidate the ASA's position on misleading environmental claims (including greenwashing). The ASA has the power to enforce non-compliance in relation to these Codes.

Timeline and key dates