By Joanna Conway and Emma Dunnill from Kemp Little LLP.
Over recent years there has been an increased focus on the environmental and ethical impact of our actions and buying decisions, often termed as “conscious consumerism”.
The Competition and Markets Authority (CMA) claims that in 2019 UK consumers spent £41 billion a year on ethical goods and services – almost 4 times as much as people spent two decades ago. As a result, many businesses have committed to reducing or off-setting their carbon-footprint and embracing ethical ways of providing their goods and services.
For the businesses leading the charge in this area, they have been rewarded with increased profits, positive publicity and consumer loyalty. However, given that eco-friendly and ethical products are in high demand, the CMA is concerned that some businesses may be incentivised to make “misleading, vague or false claims about the sustainability or environmental impact of the things they sell”.
Therefore, the CMA announced earlier this month that it is investigating descriptions and labels used to promote ‘eco-friendly’ products and services, to determine whether they have the potential to mislead consumers. The investigation covers a variety of sectors including fashion, travel, transport, food and beverages, beauty products and cleaning products.
The examples provided by the CMA of misleading behaviour include:
- exaggerating the positive environmental impact of a product or service;
- using complex or jargon-heavy language;
- implying that items are eco-friendly through packaging and logos when this is not true; and/or
- failing to provide relevant information about the sustainability of a product or service, e.g. whether it is highly polluting or non-recyclable.
The CMA is currently gathering information from the public, charities, businesses and other organisations to determine the impact of eco-friendly marketing on consumers and their buying decisions in the UK and around the world. The consultation is open until 14 December.
Once information has been gathered, the CMA intends to publish guidance for businesses in the Summer of 2021 on how they can market the environmental credentials of their goods and services fairly and transparently in the UK.
The CMA’s investigation focuses on eco-claims in descriptions and on labels, and consumer protection laws. The Advertising Standards Agency (ASA) has rules governing eco-claims made in broadcast and non-broadcast advertising. The ASA rules essentially require eco-claims to be clear, substantiated, not misleading and not omit significant information. A failure to comply with the ASA rules can result in negative PR, the need to amend or withdraw the advert in question and even fines and loss of broadcasting licences for repeat offenders.
What businesses should do now
While we await the new guidance from the CMA, and an indication on how robustly the CMA intends to enforce it, the spotlight is on businesses and information is already being gathered from the public.
Immediate action: Businesses should review currently used eco-friendly claims and ensure those are clear and supportable, do not breach the ASA rules or fall within any of the CMA’s examples of misleading behaviour.
The CMA is not pre-judging whether consumer protection law has been broken but warns: “if it finds evidence that businesses are misleading consumers, then it will take appropriate action”.
Enforcement action can include civil enforcement or criminal actions. There is also the right for consumers to bring civil actions.
Strategy review: Businesses should also review their brand strategies, including use of “green” trade marks and related logos.
Eco-claims will face increased scrutiny by the regulators going forward and the importance of this issue for consumers means the risk of reputational harm is high. Now is the time for businesses to review eco-claims, green credentials and brand strategies, in order to protect their reputation and brand.
Joanna Conway is a Partner and Emma Dunnill an Associate at Kemp Little LLP, a London law firm.