Ethical consumerism, greenwashing and the risk of misleading consumers

Many businesses operating outside the co‑operative movement are looking at how to reduce the environmental impact of their products and services, whilst capitalising on the public’s increased awareness of environmental issues.

For co‑operatives, where ethical business and social responsibly are at the heart of the way they do business, it is important to understand how to stand out from this growing area of competition by demonstrating that this is an issue of substance and key priority for ethically led organisations, not just a marketing gimmick.

Based on its own research and evidence from other enforcers, the Competition and Markets Authority (CMA) is concerned that a surge in demand [1] for environmentally friendly products and services could incentivise some businesses to make misleading, vague or false claims about the sustainability or environmental impact of the things they sell.

The key piece of consumer protection legislation relevant to the CMA’s investigation is the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). The CPRs contain a general prohibition against unfair commercial practices and specific prohibitions against misleading actions or misleading omissions. In particular, the CMA is focusing on:

• How claims about the environmental impact of products and services are made.
• Whether such claims are supported by evidence.
• Whether such claims influence peoples’ behaviour when purchasing such goods and services.

The CMA will also consider whether failing to provide all relevant information about the sustainability of a product or service – for example, whether it’s highly polluting or non‑recyclable – could mislead consumers and therefore break consumer law.

How to avoid 'greenwashing'

If you encourage customers to purchase, consume or invest in your goods or services by promoting them as ‘green’ ,’eco’ or ‘environmentally friendly’, you should ensure that:

• You do not exaggerate the positive environmental impact of a product or service.
• You do not imply that items are eco‑friendly through packaging and logos when this is not true.
• Comparative claims such as 'greener' or 'friendlier' must be justified, for example, if the advertised product provides a total environmental benefit over that of a previous product or competitor product, this must be supported by detailed evidence.
• You do not imply that a product or service has been ‘improved’ if the product or service never had a demonstrably adverse effect on the environment.
• The terms in your marketing communications are clear and easy to understand and avoid complex or jargon‑heavy language.
• Your environmentally‑friendly claims are based on the full life cycle of the product, making any limitations clear.
• You do not suggest that your claims are universally accepted if there is a significant division of informed or scientific opinion.

In short, ensure your marketing is clear, accurate and evidence based. This means giving the full picture and not just highlighting the eco‑friendly elements of your business.

Why is this important?

Failure to get your marketing right can result in permanent damage to your reputation and sales, particularly as consumer awareness increases along with their appetite to challenge corporate claims. The Advertising Standards Agency will act against advertisers who make unsubstantiated environmental claims and the CMA also has the power to enforce consumer law through the civil and criminal courts.

The CMA intends to publish guidance for businesses during the summer (2021) to help them support the transition to a low carbon economy without misleading consumers.

Co-operatives can get ahead of the guidance by taking the time now to evidence the social and environmental benefits supported by the sale of their goods and/or services.

You may find that some of the requirements easier to implement than others and it is worth undertaking some form of internal due diligence to identify where you existing claims may fall short of the recommendations above.

Do you need support on this issue?

If you would like any assistance in carrying out a review or discussing how to prepare for the upcoming changes, please contact get in touch with our advice team.

Footnotes

1. In 2019, UK consumers spent £41 billion a year on ethical goods and services, according to the Co-op Group’s report – Twenty Years of Ethical Consumerism.