Reed Smith Client Alerts

Living a green life and buying environmentally sound products has become a priority with consumers, and companies are responding by striving to produce eco-friendly products or services.

The problem is that some companies claim that they are doing more for the environment than they actually are. This practice of making misleading environmental claims (so-called “greenwashing”) carries increasing risk in Europe, as the European Commission (EU Commission) as well as national consumer protection and/or competition authorities (including the UK Competition and Markets Authority) are more committed than ever to fight it.

In terms of consumer protection, certain sectors are more at risk than others. This includes, inter alia, the following sectors, where consumers are most concerned about, and sensitive to, misleading claims: food and beverages, beauty products, cleaning products, garments and household equipment. Under the Unfair Commercial Practices Directive (UCPD), traders should not present environmental claims in ways that are unfair to consumers.1

From a competition perspective, greenwashing can also raise risk, including where a company claims that its products are greener than its competitors’ and in doing so, denigrates competitors’ products, or where competing companies use an environmental claim as a screen to engage in anti-competitive collaboration. Badmouthing a competitor’s products can also lead to denigration claims under comparative advertising standards.

What is an environmental claim?

Environmental claims include claims that suggest that a product or service:

  • Has a positive environmental impact or no impact on the environment
  • Is less damaging to the environment than a previous version of the same product or service
  • Is less damaging to the environment than competing products or services

Environmental claims are part of sustainability claims, and the same principles apply to the latter. Sustainability claims include claims relating to the environment and climate change, biodiversity, animal welfare, workers’ welfare or corporate social responsibility.

Screening of websites for misleading claims

Earlier this year, the EU Commission and national authorities carried out an extensive cross-sector sweep of websites2 to identify instances of greenwashing. Their findings3 revealed just how extensive the practice of greenwashing is:

  • In 42 per cent of cases, the claims were exaggerated, false or deceptive
  • In 37 per cent of cases, claims included vague and general statements, using words such as “eco-friendly” or “sustainable” with no substantiation
  • In 59 per cent of cases, there was no easily accessible evidence to support the claim
  • In more than 50 per cent of cases, the company could not provide sufficient information for consumers to assess the accuracy of the “green” claim

Environmental performance of products and businesses – the importance of substantiating claims

A new EU initiative will require companies to substantiate claims they make about the environmental footprint of their products or services by using standard methods for quantifying them. The aim is to make claims reliable, comparable and verifiable across the EU, thus reducing instances of greenwashing. A proposed regulation is planned for 2021. The aim is to equip consumers with better information on the sustainability of products and to fight greenwashing.4

In the meantime, companies are well advised to follow the practical and comprehensive (draft) guidance recently issued by the UK Competition and Markets Authority (CMA),5 which is open to public consultation until 16 July 2021. If a company is concerned about greenwashing, this is a perfect opportunity to influence the debate and shape policy.6 Although only applicable to instances of greenwashing in the UK, the guidance should resonate with any companies making environmental claims wherever they are located.