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Taming the green claim machine

IF a poll were run to select the words of the century, both ‘green’ and ‘sustainable’ are bound to be top of the list. They’re everywhere. On packaging, documents, the media and on our lips.

But just because the concepts are in vogue it doesn’t necessarily follow that they’re followed through with action.

Societies and economies are increasingly demanding sustainability and environmental responsibility from product and service providers. And naturally, with the climate in mind, organisations seeking to deploy and assert their green credentials need to do so properly. But this isn’t always the case.

The problem of ‘greenwashing’
‘Greenwashing’ is defined by Investopia as ‘the process of conveying a false impression or providing misleading information about how a company’s products are more environmentally sound. Greenwashing is considered an unsubstantiated claim to deceive consumers into believing a company’s products are environmentally friendly’.

Its misuse is a growing problem that’s being recognised by the authorities says Jeanette Burgess, a partner and head of regulatory and compliance at Walker Morris. She highlights an investigation into ‘greenwashing’ by a UK regulator, the Competition and Markets Authority (CMA): ‘At the end of 2020 the CMA… co-ordinated a global review of randomly selected websites and discovered about 40% of green claims made by businesses could be misleading customers.’

She says the CMA published finalised guidance, in the form of the Green Claims Code, which centres on six principles.

These are that green claims made must be truthful and accurate; should be clear and unambiguous; shouldn’t omit or hide important information; any comparative claims made should be fair and meaningful – that is, comparisons with other businesses, products, or services must compare like with like, and the basis and measure or metrics of any comparison should be made clear; claims made should consider the full lifecycle of a product, service or business; and lastly, that any claims must be substantiated.

All quite logical
Burgess notes that the code is underpinned by consumer protection legislation: the Consumer Protection from Unfair Trading Regulations 2008 (CPRs).

She explains that ‘it’s important for businesses to note that the CMA has significant enforcement powers, and that breach of the CPRs can attract both civil and criminal liability’. Beyond that Burgess says that reputational consequences can be devastating, as can the risk of litigation being brought by or on behalf of consumers individually or as a collective action.

It also needs to be pointed out that the CMA commenced, mid-January 2022, a full review of misleading claims, made both on- and off-line, and will act against offending businesses. Burgess explains that the CMA considers which sectors to prioritise, but has looked at textiles and fashion, and is now looking at fast-moving consumer goods. Other sectors are bound to follow.

It’s entirely clear, then, that with a distinct shift in regulatory focus, pressure is mounting on businesses in all industries and sectors to clean up their act as a result of the trend towards ‘green litigation’ – that is, complaints and claims brought for any one of a range of environmental and climate-related reasons.

A perfect example of this is the 2021 Royal Dutch Shell (RDS) case. Granted it’s a Netherlands matter, but it’s one that has attracted a great deal of international attention. And as Burgess points out, ‘it’s arguably the most significant climate change-related decision to date because it’s the first time a private company has been ordered to align its policies with the Paris Agreement’.

She also cites other environment-related litigation, heard in the UK’s Supreme Court – the Lungowe and Okpabi UK Supreme Court decisions – that confirmed a UK parent company’s duty of care may extend to foreign subsidiaries: ‘That litigation opened the door for claimants wishing to target UK parent companies for the ESG failings of subsidiaries nationally and even internationally.’

Naturally, greater levels of action in this sphere become a self-fulling prophecy which is likely to encourage increasing numbers of ‘green’ actions to be brought against states and corporates around the world. It’s not beyond the realms of possibility that it will also encourage shareholders, investors, employees, customers and other stakeholders to demand more climate-friendly changes in policies and strategies throughout organisations and businesses globally. As Burgess points out, ‘while RDS is an energy company, green litigation is no longer just an issue for ‘Big Oil’.’

With the scene set, it’s reasonable that organisations and businesses – in any, and all, sectors – take action to ensure that any green claims they make in sales, marketing, promotional, pre-contractual and contractual materials and communications are both accurate and able to be substantiated.

What practical advice arises?
As to how businesses and organisations can protect themselves from regulatory action and public rebuke, it’s clear they need to urgently familiarise themselves with the CMA’s Green Claims Code. In addition, Burgess says ‘there are some practical pointers which should help businesses minimise the risk of greenwashing or committing consumer protection breaches generally’.

First, she advises that organisations should take care that all information, online and in all other forms, that is gathered and presented to consumers – potential and actual – is accurate, fair, not deceptive or misleading and doesn’t leave out material facts. In particular, she says ‘it’s recommended that organisations introduce and implement specific safeguarding procedures as to the currency, accuracy and security of all such information’.

It should also be remembered that any broad-brush green claims are more likely to be misleading, inaccurate or unsubstantiated than narrow, product- or service-specific statements.

Indeed, common sense says to tell the truth and nothing else. In other words, it’s central to winning the debate that organisations ensure green claims don’t contain partially correct or incorrect aspects and that any applicable conditions or caveats are clearly and prominently explained.

But for Burgess, another key to staying out of trouble is to ‘ensure claims accurately represent the entire lifecycle of a product or service’. However, she adds that ‘that is likely to involve businesses proactively and regularly undertaking appropriate enquiries of other parties throughout the supply chain, as well as keeping their own house in order’.

Similarly, it’s essential to remember features or benefits that are necessary standards or legal requirements of a product or service type should not be claimed as environmental benefits.

Another point to remember is that green claims can be made via visual graphics, not just through the written word. In fact, as Burgess tells, ‘recent research suggests that logos, medals or other visual ‘rating’ assertions carry significant weight with consumers and can therefore carry a particularly significant risk of greenwashing where apparent quality and credibility cannot be substantiated’.

This means, in simple terms, it’s important to ensure written green claims and any visual graphics or symbols used are critically assessed from the perspective of what a consumer will take them to mean.

Another option is to signpost consumers to any additional information which might affect their decision to purchase. For example, where green claims are made, say, on packaging or within media with limited space, include additional, comprehensive information via website links or QR codes.

But for Burgess, from a legal perspective, one way of reducing the risk of greenwashing is to provide training to all staff involved, directly or indirectly, with the sales and marketing – including production of hard and soft copy materials – of the business’ services, products or brand; records and evidence of such training should be retained.

Similarly, she says that ‘organisations should introduce and implement policies and procedures regarding the review, maintenance, correction and updating of marketing material and other consumer-facing information where necessary.’ She adds that there should be an audit trail of all these efforts.

And finally, if or when any greenwashing complaint or allegation is made, Burgess recommends that immediate legal advice be sought. She says this because ‘depending on the circumstances, there may be dispute resolution tools that can be deployed in defence or settlement of any complaint.’

In summary
Greenwashing isn’t going to disappear off corporate agendas. While situations may arise that aren’t the result of deliberate actions, the net result could still be just as damaging to the organisation concerned. Fundamentally, good policies and proactive are central to staying out of trouble and the media.

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