Greenwashing: what do you need to know?

There is currently no legal definition of ‘greenwashing’ in the UK.

Broadly, the term is used to describe untrue or misleading statements made about the environmental performance or impact of a business, product or service.

This can include misleading statements made in:

• marketing materials
• companies’ annual reports and filings
• communications to clients or other public statements

In advertising and marketing, greenwashing occurs where an environmental claim made about a business, product or service is untrue or misleading.

Environmental claims can be implicit or explicit. They can include words/statements, symbols, logos, graphics, product names or colours (usually green).

For most businesses, greenwashing is inadvertent and is due to a misunderstanding of how to promote their genuine sustainability achievements in line with consumer protection rules.

The regulatory rules applicable to environmental claims attempt to:

• level the playing field by enabling businesses to make genuine environmental claims with confidence, and
• address greenwashing by businesses who are not

Environmental claims that are found to be untrue, misleading or unsubstantiated risk breaching consumer protection laws and are typically considered ‘greenwashing’.

What does the law say about greenwashing?

In the UK, environmental claims made to consumers are governed by the Consumer Protection from Unfair Trading Regulations 2008 (CPRs).

(This is soon to be relocated to the Digital Markets, Competition and Consumers Act 2023.)

The CPRs make it unlawful for a business to engage in "unfair commercial practices".

These are defined broadly but include making misleading statements about a product or service (including by omitting material information) if it is likely to affect consumers’ purchasing decisions.

Similar rules exist for business-to-business environmental claims under the Business Protection from Misleading Marketing Regulations 2008 (BPRs).

The BPRs prohibit "misleading advertising". This is defined as advertising likely to deceive another business and affect its economic behaviour or which, for those reasons, is likely to injure a competitor (regulation 3).

"Advertising" is defined broadly to include any form of representation used to promote products or services (regulation 2).

Environmental claims are also governed by regulatory codes, in particular the Competition and Markets Authority's (CMA) Green Claims Code (GCC) and the Advertising Standards Authority's (ASA) CAP Code (rule 11).

The GCC is based on six overarching principles. Environmental claims must:

1. be truthful and accurate
2. be clear and unambiguous
3. not omit or hide important information
4. be substantiated,
5. consider the product or service's full life cycle, and
6. comparisons must be fair and meaningful

The ASA's CAP Code and its related guidance on environmental claims also broadly reflect these principles.

Key issues to look out for

Litigation and regulatory activity around environmental claims are on the increase.

Businesses – and the solicitors advising them – will need to review environmental claims carefully to check they comply with consumer protection law.

There are three key issues/types of claims to look out for.

1. Broad claims and ‘buzzwords’

Broad claims such as 'green', 'sustainable', 'environmentally friendly' and 'eco' are generally interpreted as absolute claims that indicate a business, product or service has no negative environmental impact across its full lifecycle (from manufacture to disposal).

These absolute claims require a high level of substantiation.

Unless a business has robust documentary evidence to substantiate a claim of this kind across its full lifecycle, it is likely to be misleading.

For example, a recent ASA ruling against Etihad Airways found the claim “sustainable aviation” was misleading, because it would likely be interpreted by consumers as an absolute claim relating to Etihad’s whole business.

Etihad's initiatives, such as reducing single-use plastics and using more efficient planes, were insufficient to substantiate this.

Similarly, an advert indicating that TIER’s electric scooters were “environmentally friendly” was found to be misleading.

TIER could not evidence that the scooter caused no environmental damage across its full lifecycle.

The lifecycle assessment in fact indicated the scooter caused significant greenhouse gas (GHG) emissions due to transportation and the use of aluminium parts.

Where broad claims cannot be substantiated, businesses may need to consider:

• making them more specific, and
• limiting them to only those elements of the product or service where it has sufficient evidence to support the claim

However, businesses must ensure that specific claims do not give a misleading overall impression of the business's total environmental impact.

A wave of ASA decisions against Shell, Anglian Water and others has made clear that businesses will breach consumer protection law if they focus solely on their positive sustainability initiatives without including balancing information about the business's ongoing contribution to emissions or other environmental harm.

Transparency is therefore crucial.

All claims must also be substantiated. Substantiation will be considered more robust where it:

• is based on accepted scientific methodologies, and
• has been independently verified/certified

This evidence must be available when the claim is made.

2. ‘Net zero’ and ‘carbon neutral’ claims

Claims that a product, service or business is ‘net zero’ or ‘carbon neutral’ are potentially misleading if they don't include additional information to help consumers understand the claim being made.

This follows market research conducted by the ASA, which found high levels of consumer confusion about the scope of these claims.

Claims must not ‘cherry-pick’ information to give the impression that a business’s climate impact is better than it is.

A recent ASA ruling against HSBC found the bank’s claim it was “aiming to provide up to $1 trillion in financing and investment to helps [its] clients transition to net zero” was misleading because it omitted significant information about HSBC’s contribution to CO₂ and GHG emissions through its financing of oil and gas production.

Further, where ‘net zero’ and ‘carbon neutral’ claims are based on offsetting, this should be made clear to consumers including by providing details of the offsetting scheme used.

Any supporting information must be sufficiently close to the main claim so consumers can easily see it before they make a purchasing decision.

Finally, ‘net zero’ and ‘carbon neutral’ claims should be substantiated with robust documentary evidence calculated in accordance with recognised scientific frameworks.

Businesses may want to consider partnering with independent carbon accountants to support with this process.

3. Future environmental commitments

Claims relating to future environmental goals (such as net zero or biodiversity targets) should only be made where they are based on a clear, verifiable and internally documented strategy to deliver them.

Such claims will be less likely to mislead if they are based on specific, short-term and measurable commitments and are in proportion to the business’ actual efforts.

Claims about future climate goals should also make it clear whether they are based on the business’s own active reduction of GHG emissions or whether they are based on offsetting.

When setting future environmental goals, businesses should consider using one of the various frameworks available for setting science-based targets, such as the Science Based Targets Initiative (SBTi).

Application to law firms

Law firms are increasingly making statements about their own green credentials as part of their efforts to transition to net zero.

However, firms should apply the same scrutiny and be aware of the risks when making such statements.

The rules in the GCC and CAP Code apply to all businesses making environmental claims, including law firms.

Before making any environmental claims, firms should carefully review the regulatory guidance and underlying consumer protection law to ensure they do not breach the relevant rules and expose themselves to regulatory, litigation and reputational risk.