The situation in making ‘green’ and ‘sustainability’ claims as a food company is in a state of flux across the world. America have green activists starting litigation Greenwashing Class Action Litigation is An Emerging Risk for Comp (natlawreview.com), Europe has a plethora of legislation trundling down the pipeline and the UK has the Competition and Markets Authority (CMA) taking on the form of an enforcing behemoth. The UK and Europe and their increasingly diverging positions on green claims are assessed below.
If your company is making some environmental claims or wants to – what are the risks and requirements?
The CMA has set out 6 principles that should guide any claims that are made. The key aspects of which are to ensure each claim is appropriately substantiated, is not exaggerated and it transparent, not omitting any relevant information.
The Advertising Standards Authority (ASA) has admittedly less teeth than the CMA but none the less has focussed on scrutinising claims made in adverts and marketing and applied the same stringent standards for substantiation with adverse reporting repercussions and associated costs of changing ad campaigns. They have successfully found against companies as diverse as HSBC to Innocent Drinks and Persil.
A summary of the 6 principles of green claims set out by the CMA are as follows, green claims MUST:
- Be truthful and accurate: Businesses must live up to the claims they make about their products, services, brands and activities
- Be clear and unambiguous: The meaning that a consumer is likely to take from a product’s messaging and the credentials of that product should match
- Not omit or hide important information: Claims must not prevent someone from making an informed choice because of the information they leave out
- Only make fair and meaningful comparisons: Any products compared should meet the same needs or be intended for the same purpose
- Consider the full life cycle of the product: When making claims, businesses must consider the total impact of a product or service. Claims can be misleading where they don’t reflect the overall impact or where they focus on one aspect of it but not another
- Be substantiated: Businesses should be able to back up their claims with robust, credible and up to date evidence
Where claims could be viewed as ‘vague’ the CMA will have you in their sights.
Unilever is currently under investigation for alleged failure to comply with UK consumer protection law by way of the use of vague and broad eco-statements in relation to some of their products in the fast-moving consumer goods (FMCG) category. Examples provided by the CMA included "packaging or marketing a product as ‘sustainable’ or ‘better’ for the environment with no evidence; misleading claims about the use of recycled or natural materials in a product and how recyclable it is; and entire ranges being incorrectly branded as ‘sustainable’."
Under the current regime, the CMA can only enforce consumer protection indirectly – by threatening or making a Court application and clearly a sort of trial by media via the reporting of an investigation. The incoming Digital Markets, Competition and Consumer Protection Bill (DMCCP) that is expected to become law this year will, most significantly for most companies, give the CMA the direct power to establish consumer law breaches and to impose significant fines of up to 10% of global turnover.
The DMCCP will evoke the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) (retained EU law) and recreate their effect, with minor amendments, prohibiting unfair commercial practices in business to consumer relationships. The CPR contain a list of specific banned practices, which are automatically considered unfair. The Bill would largely replicate this list and, importantly, create a power to make regulations that could add to it.
With their investigation of Unilever the CMA has already indicated green claims will be on the front line of their support for consumer protection.
The CMAs working assumption is that the Parliamentary process will conclude in Spring 2024 and that their new responsibilities will commence in Autumn 2024.
Europe seemed to be applying the same approach as the UK however there are two very similar sounding directives that will be coming into force in the next couple of years that will put very specific restrictions around the making of any green claim.
The Greenwashing and Green Claims directive will cover (i) the sort of claims that may be made and (ii) the level of verification required to make them in a business-to-consumer (“B2C”) context
On 17 January 2024, the European Parliament gave its approval to the Proposal for a Directive on empowering consumers for the green transition through better protection against unfair practices and better information. The ‘Greenwashing Directive’.
The Greenwashing Directive covers all sustainability claims that relate to a product, a brand, a company, or a service. It amends the Unfair Commercial Practices Directive (UCPD) and the Consumer Rights Directive (CRD).
A summary illustration for what this may mean for green claims in the food sector is as follows:
- Generic environmental claims which are not substantiated by a certification or heavy documentation, such as ‘eco-friendly’, ‘green’, ‘climate friendly’, ‘carbon neutral’, ‘energy efficient’, ‘biodegradable’, ‘biobased’, ‘conscious’, ‘responsible’, ‘fair’, ‘fairer’, ‘just’, and similar.
- Claims about the whole product or its parts, such as recyclable (referring to the packaging), less packaging, less plastic, better new formula, its natural origin, etc.
- Claims on durability, such as messages inducing consumers to replace the product earlier than technically required
- Any unsubstantiated claim, message, logo as a whole
- Sustainability labels based on certification schemes, or established by public authorities
- Environmental claims with clear objectives, and easily verifiable commitments, targets, and independent monitoring systems
The Directive needs to be approved by the Council. After that, the Directive will enter into force on the 20th day following its publication in the Official Journal of the EU, Member States will then have 24 months to implement the new rules into their national law.
‘Green Claims’ Directive
The Greenwashing Directive is meant to work together with the proposal for a Directive on substantiation and communication of explicit environmental claims (the ‘Green Claims Directive’).
The Green Claims Directive will provide for more details by setting minimum requirements on the substantiation and communication of voluntary specific environmental claims (non-generic) and their verification in a business-to-consumer (“B2C”) context.
- Non-Generic - The rules would apply to explicit environmental claims.
- Sustainability labels
- Comparative claims and Future environmental performance claims
These claims would need to be assessed, substantiated and verified by a national third-party verifier. All this information and substantiation must be made available to the consumer.
This is being discussed at committee stage in Parliament.
What should companies do?
It is recommended that companies put in place a plan of action now:
- Where do you market your products?
- What do you say about your products? Review and assess the claims being made and the evidence or substantiation you have for making them.
- Consider the obligations in each market and the timing and extent of any incoming requirements.
- Consider what steps have been made and can still be made to substantiate any claims / revision to any wording, packaging etc
- Get legal advice
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