In an era where environmental consciousness is at an all-time high, companies are increasingly eager to present themselves as eco-friendly. As a result, environmental claims are becoming a key part of many companies’ marketing strategies. There is a risk that this leads to companies greenwashing.
Greenwashing refers to the act of misleading third parties by overstating the positive environmental impact of a product, service, brand or business.
For a summary on the legal landscape of advertising, see our article on navigating advertising laws in the food and beverage industry here.
Why is it important?
The Advertising Standards Authority (ASA) has made greenwashing an increased focus of their attention in recent years. Between July 2024 and December 2024, the ASA handed down six rulings against companies for misleading environmental claims.
We are also seeing a trend away from complaints brought by consumers and towards a greater number of complaints brought directly by the ASA itself. This could be due to the ASA now using an AI tool to capture adverts which may be in breach of advertising codes. At the end of 2023, the ASA stated that their new AI tool was processing more than 500,000 adverts per month, allowing them to review more adverts than ever before (see the ASA’s Annual Report. This also means it is more likely that the ASA will review an advert that might have slipped through the net before.
If the ASA finds an advert is in breach of advertising codes, it can have adverse effects on a company, including:
- Reputational damage: the ASA publishes its rulings, which then have the potential to attract adverse media coverage and negatively affect the company’s image in the eyes of customers, shareholders and investors; and
- Wasted costs: the ASA usually requests that the company withdraws or amends the breaching advert. This could be costly if large scale marketing campaigns have been launched.
However, greenwashing may not just breach advertising codes but may also breach consumer law. From April 2025, the Competition and Markets Authority (CMA) will have significant new powers to investigate and enforce consumer law under the Digital Markets, Competition & Consumers Act 2024, including unfair commercial practices (that could apply to environmental claims).
If the CMA finds an advert is in breach of consumer law, the CMA may impose fines of up to 10% of global annual turnover and award compensation to consumers. Individuals associated with the breach could also be sanctioned.
Should companies still make environmental claims?
Given the risks involved, companies may be tempted to avoid making any environmental claims at all. There is a risk that this leads to companies greenhushing.
Greenhushing refers to downgrading, downplaying, or staying silent on the environmental credentials of a product, service, brand or business.
Companies should also avoid greenhushing because not making legitimate environmental claims is a missed opportunity for companies to build trust with consumers and staying silent may also cause reputational damage. The ASA has made it clear that there is not a binary choice between greenwashing and greenhushing (see ASA Blog on greenspeaking with confidence. The ASA encourages companies to make impactful and informative environmental claims, noting that these claims benefit consumers because they enable them to make more responsible choices.
If a company wishes to make an environmental claim, amongst other things, generally it should consider:
- maintaining up-to-date evidence for any claims made (internal evidence is good, but independent evidence is even better);
- thoroughly reviewing and assessing the accuracy of any claims before making them and regularly after making them to ensure they remain accurate;
- running training sessions for marketing staff and others involved;
- making sure any qualifying information is prominently displayed in the advert; and
- avoiding terms that are not generally understood by the target audience and clarifying anything which could potentially be misinterpreted.
There are also other context specific things to consider, for example, if the environmental claim relies on a company’s supply chain, a company should consider how its statements can be supported by its suppliers.
The CMA has also produced a useful checklist for companies making green claims.
The Birketts view
It is likely that the scrutiny on environmental claims is only going to increase as technological advances and customer awareness grow. AI is enabling regulators to scan more adverts for potential breaches. In addition, the CMA will shortly have further powers to enforce consumer regulation and has identified sustainability as an important objective (it has already issued guidance on greenwashing for fashion brands). Whilst it is important that companies avoid greenhushing, companies must ensure they follow the relevant regulations and guidance when making any environmental claims.
If you have any queries or would like any assistance in relation to advertising regulation and/or consumer regulation please do not hesitate to get in touch with your main contact at Birketts or contact Joseph Thompson on [email protected] or Samantha Woodley on [email protected].
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2025.