Where there is a potential unique selling point or premium to be added to a product, businesses will want to take advantage. The temptation to include claims around a product’s environmental credentials may be one such way to drive sales, but, as most will know, when these are either misleading or untrue it’s greenwashing.
According to a report published in 2023 by the Changing Markets Foundation, ‘greenwashing’ is rampant across the food sector – and the aforementioned ‘allure’ may be one of the main reasons why.
What is the green claims code?
Adding a label to a product that refers to its own or the business’ environmental credentials is currently voluntary and there are no plans for eco-labelling to become mandatory in the UK, although it appears that the EU may take that step in the future.
The UK Government has published guidance on the use of green claims in the Competition and Markets Authority’s (CMA) green claims code. Closely related to the general requirements of any advertising and marketing for any type of claim, the green claims code requires businesses to be transparent, open and accurate about claims they make about environmental credentials. There are 13 statements within the code that businesses must comply with, but one that I believe is of particular importance is that there is up-to-date and credible evidence to show that a green claim is true.
This requirement is not fully defined and comprehensive because there is currently no defined methodology for gathering and presenting evidence, and there is a range of environmental accreditations in existence that all have different requirements.
The Food Data Transparency Partnership, a collaboration between the private sector and government, is working towards standardising the methodology and data sources for reporting Scope 3 emissions in the food industry and, crucially, establishing a mandatory methodology for voluntary eco-labels. It is likely that if the latter is published and implemented then it will feed into the green claims code and CMA decision making – increasing certainty for consumers, businesses and the CMA itself.
The Digital Marketing, Competition and Consumers Bill explained
As it stands, complying with the green claims code is onerous. For example, a minor change in wording on a product could be the difference between something being clear, misleading or untrue. This is particularly important considering that untrue claims face more serious penalties than misleading claims. The CMA, along with the local weights and measures authority and Trading Standards, has the power to investigate businesses and traders who make claims about their business or products where they have a reasonable suspicion that those claims are misleading or false. It is a criminal offence to make a misleading claim about a product, so a prosecution can be brought in relation to such breaches. The CMA also has the power to go to the court and apply for an enforcement order that would prevent that business from continuing to make the claim. The CMA does not currently have the power to impose financial penalties itself, or to serve enforcement notices.
The investigations the CMA carries out and the decisions it makes are in accordance with consumer law and its own guidance. The proposed Digital Marketing, Competition and Consumers Bill, which is currently making its way through Parliament, will dramatically alter this legal landscape.
As the Bill is currently drafted, the CMA would be granted wide-ranging powers to enforce breaches of consumer law, including environmental claims. These include the power to issue monetary penalties and enforcement notices. As the CMA follows the guidance when investigating, the green claims code will essentially be enforced using the new powers in addition to the CMA’s current powers. The most significant of the powers is the new monetary penalties, as the CMA will no longer have to apply to the court for an order. The CMA will be able to impose penalties of up to £300,000 or 10% of the total turnover value, whichever is higher.
The CMA will have the power to accept an undertaking before any monetary penalty and final notice is served, which is when the business being investigated promises to discontinue acting in a way which breaches consumer law.
There is still some way to go before the proposed bill is passed, so there is scope for further amendments and changes to be made before it becomes law. However, the proposed penalties under the bill are significant and could prove to be a strong deterrent against businesses making unsubstantiated green claims, or from making green claims at all.
Giving a regulatory body power to issue penalties, which are so large they are usually only seen and handed down by the court in other contexts, will create a system which is open to abuse. This should be mitigated by making the appeal process a genuine tribunal – as is currently proposed – with the ability to recover costs if successful.
The most serious offences involving untrue or misleading claims are likely to be prosecuted. Those cases where a premium has been charged because of the green claim may be subject to the Proceeds of Crime Act. This could mean that all the money made as a result of the unlawful labels and untrue claims may have to be surrendered upon sentencing, in addition to any fine handed down by the court.
Essentials to remember
Given these impending changes to the law it would be prudent for businesses to review any environmental claims that they are currently making.
There are two common mistakes to avoid. One is making generic statements about being ‘carbon neutral’ or ‘more sustainable than others on the market’, as these are very difficult things to prove. The second mistake is not having clear, detailed and up to date evidence to back up claims.
Ultimately, when making, or thinking about making, environmental claims follow the green claims code and if in doubt contact a food regulatory expert who can help.