Green Claims: Evolving Regulation in the EU and UK

Earlier this year, the European Union adopted a proposal for a Green Claims Directive. There are no proposals for equivalent regulation in the UK although, of course, UK-based businesses marketing their products or services in any EU Member State will have to comply with the EU regime. So what does the EU Directive do, and how are green claims being regulated in the UK?

The EU Green Claims Directive (https://environment.ec.europa.eu/topics/circular-economy/green-claims_en) targets claims made voluntarily by businesses and aimed at consumers covering the environmental impacts, aspects or performance of a product or the trader itself.

The Directive provides that green claims must be underpinned by an assessment which, among other things:

• relies on recognised scientific evidence and state of the art technical knowledge;

• demonstrates the significance of impacts, aspects or performance from a life cycle perspective;

• takes into account all significant aspects and impacts to assess performance;

• identifies whether a positive achievement leads to a significant worsening of another impact; and

• provides information as to whether a product performs environmentally significantly better than standard practice.

There are further requirements for comparative claims – such as claims of being “greener” or “friendlier” than other products.

Green claims are required to be checked by an independent, accredited verifier and the Directive sets out the requirements for accreditation. There are provisions for a “Certificate of Conformity”, issued by a verifier to confirm that a claim meets the legal requirements, to be recognised across the EU.

As Member States generally have to enact their own legislation to implement any EU Directives, there may be some variation between the detailed requirements in different countries. However, the key principles summarised above are unlikely to change. Member States will define their own penalties for breach, though, taking into account principles set out in the Directive – including that the penalty must depend on the nature, gravity, extent and duration of the breach – and any penalties already imposed by other Member States for the same infringement.

By focussing on claims aimed at consumers, the Directive wouldn’t apply to claims made in business-to-business transactions – such as those made during a tender process, or in supply chain due diligence. As the Directive targets voluntary claims, it also would not cover compulsory disclosures in, say, company reports, financial statements or listing particulars and prospectuses.

In the UK, green claims aimed at consumers are largely regulated by consumer protection legislation and advertising standards such as the CAP Code (for non-broadcast advertising, sales promotions and direct marketing communications) and the BCAP Code (for broadcast advertising): (https://www.asa.org.uk/codes-and-rulings/advertising-codes.html).

The Competition and Markets Authority has issued a Green Claims Code, intended to help businesses comply with consumer protection laws when making green claims (https://www.gov.uk/government/publications/green-claims-code-making-environmental-claims) and, in recent months, the CAP and BCAP Codes have been complemented with guidance on Misleading Environmental Claims and Social Responsibly (23rd June 2023) and on specific topics such as environmental claims in travel marketing, in motoring and for hybrid and electric vehicles (all 3rd May 2023) (https://www.asa.org.uk/resource/advertising-guidance-misleading-environmental-claims-and-social-responsibility.html).

The Competition and Markets Authority is currently investigating environmental claims in the fashion retail sector and in the sale of household “essentials” such as food and drink, toiletries and cleaning products. We have also seen the Advertising Standards Authority uphold complaints against businesses like Anglian Water (https://www.asa.org.uk/rulings/anglian-water-services-ltd-g22-1171967-anglian-water-services-ltd.html), Shell UK (https://www.asa.org.uk/rulings/shell-uk-ltd-g22-1170842-shell-uk-ltd.html), Repsol (https://www.asa.org.uk/rulings/repsol-sa-a23-1185942-repsol-sa.html) and Petronas (https://www.asa.org.uk/rulings/petroliam-nasional-berhad-a22-1169312-petroliam-nasional-berhad.html), banning individual advertisements that were misleading (Anglian Water, Petronas) or likely to be misleading (Shell, Repsol) because they omitted material information about business activities or environmental impacts.

Aside from the obligations and penalties set out in existing consumer protection legislation, the Digital Markets, Competition and Consumers Bill, which is currently at report stage in the House of Commons, includes a power for the Competition and Markets Authority to impose on businesses a monetary penalty of up to £300,000 or 10% of global turnover, if higher, for infringements of consumer protection laws - including breach of the Consumer Protection from Unfair Trading Regulations 2008, the main legislation regulating business to consumer advertising. This is a direct enforcement power, enabling the CMA to take action without securing a conviction in court.

The Bill also creates new offences – enforceable through the courts - relating to “unfair commercial practices”, which are defined to include omitting material information when promoting or supplying a product to a consumer.

While there may not be any plans to adopt a domestic equivalent to the proposed EU Green Claims Directive, given the level of official and public scrutiny of green claims – and the potential for regulatory powers to be extended - it may well be advisable to seek independent verification of any green claim before it is published. It is certainly crucial to get good advice and to prepare comprehensive evidence to substantiate the claim, in case of challenge by a consumer or regulator.