Severe UK fines could now be imposed for misleading greenwashing claims
Companies found guilty of greenwashing now face severe repercussions. Recent legislation may allow the Competition and Markets Authority (CMA) to impose fines of up to tens of millions of pounds for claims found to be unsubstantiated and misleading.
Greenwashing has become increasingly prevalent in recent years as companies adapt to changes in consumer behaviour, causing consumer mistrust and further environmental degradation due to the spread of inaccurate information. Prime Minister Rishi Sunak has said that passing this bill is a priority for the government.
Greenwashing conveys a false impression or provides misleading information when a company attempts to emphasise the sustainable aspects of a product or overshadow the organisation’s involvement in environmentally damaging practices.
The phrase is a play on the term “whitewashing” and was coined in 1986 by the environmentalist Jay Westerveld in reference to the “save the towel” energy-saving movement in hotels that had an insignificant impact beyond saving hotels money on laundry costs.
Demand for environmentally friendly products has surged; according to GreenPrint’s 2021 Business of Sustainability Index, 64% of Gen X consumers would spend more on a product if it came from a sustainable brand. This figure jumps to 75% among millennials.
Greenwashing is a technique that has been used by companies for decades and can take on many forms. Famous examples include:
- Chevron’s infamous “People Do” campaign aired in the mid ’80s and broadcasted the company’s environmental dedication. However, whilst this campaign ran, the company violated the Clean Air and Clean Water Act and spilt oil into wildlife refuges.
- When the chemical company DuPont announced its double-hulled oil tankers in 1991, they used ads featuring marine animals dancing to Beethoven. The company was the largest corporate polluter in the U.S. that year.
- Volkswagen was caught cheating on emissions tests by fitting vehicles with a propriety device designed to detect emissions tests and alter the car’s performance reducing the emissions level. This was whilst advertising the low emissions features of the product in marketing campaigns.
The Digital Markets, Competition and Consumer Bill may come into force in October this year. Giving the CMA the power to impose fines of up to 10% of global turnover for a range of consumer law offences.
Stuart Ponting, a partner in regulatory and compliance at the legal firm Walker Morris, said: “The CMA is limited in consumer protection matters, and this will widen their powers. It’s a bigger stick, and they will be more willing to use it if necessary.”
The offences covered by the bill could include misleading green claims deemed severe enough to breach the Consumer Protection Regulations (CPRs).
Richard Reichman, a regulatory investigations and enforcement specialist at BCL Solicitors, said: “Greenwashing is in the crosshairs of the regulators, and I think we will almost certainly see large fines against corporations if they ignore the warnings.”
The new bill is aligned with an international trend to address the increasing prominence of greenwashing.
France has already introduced laws in January requiring firms claiming a product is carbon-neutral to report on all the greenhouse emissions of that product for its entire lifecycle.
The Financial Conduct Authority has also consulted its package of measures aimed at “clamping down on greenwashing”. It proposes restrictions on how certain terms such as “green” or “sustainable” can be used in investment product names and for marketing.
The European Union will also table a new law proposing fines for companies making unsubstantiated environmental claims in the next few weeks.