October 23, 2021

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UK business is on notice for ‘greenwashing’ claims

Retail & Consumer industry updates

It is, as a wise amphibian once said, not easy being green.

It’s certainly not easy figuring out what is green. As consensus on the importance of environmental issues has grown, so has confusion over claims to be addressing them.

Businesses’ disclosures around environmental, social and governance issues used a baffling 14 different frameworks, according to one study by Duff & Phelps. New EU rules on what constitutes a sustainable investment fund resulted in a shrinkage in the number being marketed as such.

Now UK regulators are homing in on green claims made for consumer products. Businesses should be paying attention.

This week the government launched an investigation into the deals branded “green” or 100 per cent renewable by energy suppliers, amid concerns that consumers are being misled.

That’s just the start. The Competition and Markets Authority is expected to publish guidance in September, after an investigation into “eco-friendly” marketing.

The suspicion (indeed, the likelihood) is that products are being branded as green and then sold at a premium to consumers who don’t have information to vet those claims. 

Half of UK consumers take environmental considerations into account when buying products, says the CMA, citing a 2014 study. Research last year from the Institute of Customer Service found that nearly 70 per cent of consumers cited the environment as a factor in their decision making, and a similar number would consider or would be likely to pay a premium for products they believed were sustainable.

Unsurprisingly, environmental claims on products have proliferated. The 2014 study found that 76 per cent of non-food products contained an explicit or implicit environmental claim, with some categories as high as 100 per cent. Mintel found in 2019 that nearly half of new UK beauty and personal care launches had an ethical or environmental claim, up from about a quarter four years earlier. 

It’s tempting to think that the competition regulator is doing a bit of greenwashing of its own — especially when the draft guidelines include bombshells such as that claims should be “truthful and accurate”. 

But it is worth paying attention to for two reasons. First, even the basics ask more of companies in terms of making specific claims that are backed up by evidence. 

A toiletry promoted as “micro bead free” probably suggests a misleading benefit over other products given that micro beads are banned in the UK, notes the CMA. Broad, vague claims to be eco-friendly are likely out, unless a product as a whole can be shown to qualify, not simply one element. 

Omission of negative information is specified as potentially misleading. And the guidelines are likely to put the onus on companies to consider the full “life cycle” of products: in other words, you better be very clear on what’s going on in your supply chain.

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Second, the CMA itself is under pressure, particularly when it comes to consumer protection. Former chair Andrew Tyrie, who stood down last year and has yet to be replaced, has argued that the regulator spends too much time talking to competition lawyers and not enough engaged with its end customer — consumers, only 19 per cent of whom have heard of it.

The regulator, says Tyrie, needs to gather far more data, have a higher public profile and be much bolder about going after areas of consumer harm using its soft powers — letter writing, or naming and shaming — as it did in the pandemic around travel refunds. 

The idea of a beefed-up consumer regulator has got a government nod with the launch of a consultation last month giving it more powers, including the ability to impose fines for breaches of consumer protection law or simply for not complying with regulatory requests.

That is likely to embolden the CMA as it gets more involved in aspects of rip-off culture. As Ben Chivers, partner at Travers Smith, puts it: “Having published the guidelines [the CMA] could well be looking for a ‘scalp’ in terms of egregious examples of greenwashing”.

A regulator under pressure, a high-profile issue which resonates with consumers and politicians and a marketplace that seems to offer ample scope for action?

To paraphrase another Kermit-ism: you can write your own ending.

helen.thomas@ft.com
@helentbiz

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