How to should about sustainability without risking fines in the new year

Everyone is looking to make green claims, and to shout about their ambitious ESG targets. However, come spring 2025 the regulator will have the power to impose significant fines on any business found to be making misleading environmental claims. Freeths’ experts Iona Silverman and Emma Bacon expect to see the regulator clamp down on greenwashing in the UK. They explain what to watch out for and give some simple tips to help you avoid being seen to be greenwashing.  

The regulators are getting greater powers 

Until now, the main consequence of greenwashing has been negative publicity: if an ad was found to be misleading, the Advertising Standards Agency (ASA) had the power to ban it, which in turn could lead to reputational damage, particularly if the story was picked up by the press (as many are). However, from April 2025 the Competition and Marketing Authority (CMA) will have the power to impose fines for breach of consumer law. The Digital Markets, Competition and Consumers (DMCC) Act will give the CMA the power to impose fines of up to 10% of a company’s global turnover, or £300,000, whichever is greater, for breaches of consumer law. Given the far-reaching consequences of climate change, it is paramount that companies make a real effort to reduce their environmental impact. Misleading green claims adversely affect not only consumers, but the physical world at large. This is a huge topic on the political agenda, and with the world watching, we predict that the CMA will use its new powers to impose significant fines on companies found to be greenwashing. 

Even companies that think they are making watertight claims have been found to be greenwashing, for failing to communicate the bigger picture to consumers. Now is the time to start getting it right.

Greenwashing could become an “unfair commercial practice”

Currently greenwashing is regulated by the CMA’s Green Claims Code, in addition to the ASA’s requirement that advertising must not mislead consumers, and the Consumer Protection from Unfair Trading Regulations 2008 (the CPUTR) prohibition of content containing materially inaccurate claims. We can expect to see more specific anti-greenwashing regulation in the UK in the near future, which will most likely be implemented by way of the DMCC Act allowing easier addition to the list of 31 blacklisted practices.

AI is increasing the number of ASA investigations

The ASA is already using AI to proactively search online for ads that might break the rules. Green claims are definitely a focus for them; they regularly ban ads for greenwashing and no business should expect to be safe from scrutiny.

What does this mean for you?

First, make sure you have got the basics covered: your claims need to be clear and unambiguous. Vague terminology like “green”, “eco” or “sustainable” is at best unhelpful and at worst misleading. Of course, you need hold the data to substantiate the claims you are making, but you also need to ensure those claims reflect the true picture. Don’t zoom in on one area where your business is doing well, hoping to divert attention from other areas. 

Once your marketing team understands the basics (and the risks of getting it wrong), turn your attention to what’s on the horizon. We predict regulators will seek to address companies that are backtracking from green targets, using carbon offsetting to their advantage, not sufficiently transparent as to their supply chains, or giving mixed messaging in relation to regenerative farming.

Backtracking from green targets

Has your business set ambitious targets, around net zero and scope 2 and 3 emissions? If you realise that you're not going to reach your targets it can be tempting to amend the time line, however backtracking from green targets could be seen as misleading consumers. 
The easy win here is to ensure your targets are achievable. However, if you do need to backtrack, don’t try to do so under the radar. Instead, tell your consumers why you are making the change, and what you will do to ensure you meet your new amended targets. 

Expect scrutiny of carbon offsetting 

Many businesses rely on carbon credits to offset their emissions (helping them reach those all-important targets). It is important to remember however that carbon offsetting schemes are unregulated. Do you really understand how the company you are buying from offsets carbon? For instance, if it plants trees you should understand where it is doing that, as well as how long do the trees take to grow, and whether they are the right species for that particular environment. We expect to see litigation against those guilty of mis-selling carbon offsets, as well as regulators clamping down on businesses making green claims off the back of those schemes.

Supply chain transparency

As a business, you need to really know your supply chain. If your business relies on goods or services from a country which doesn't subscribe to the same ESG standards as we do in the UK, you will need to ensure those minimum standards are met. This is an area that has attracted high profile investigations, and the reputational damage on a brand found lacking is hard to come back from. 

A focus on regenerative farming

The term “regenerative farming” is increasingly popular, but it isn’t clear to most what it really means. To address this concern, the ASA has published guidance on how to communicate regenerative farming initiatives. This is a clear signal that we can expect the ASA to investigate claims made in relation to foods originating from “regenerative farming”. If your business is making this claim you should get up to speed on the guidance, and ensure you are clear as to what your claims really mean (and of course be able to substantiate them too). 

Top tips to mitigate risks: 

This is a complex, multi-faceted area. We recommend that you implement clear internal processes to manage green claims. We suggest that you:

Don’t

• use green imagery without good cause
• use buzzwords such as “green”, “eco” or “sustainable”
• make assumptions – they trip us all up occasionally!
• make comparative claims that don’t compare – if you are going to say
• that something is “better”, or “kinder” to the environment, we clear what you are comparing with.

Do

• always hold data to substantiate your claims
• agree your business’ approach to risk – this is a C-suite level issue
• have processes in place to ensure high risk claims make their way to legal
• train your people, in particular your marketing team, on your process, but also on the law
• add detail to your website to explain the claims you make
• always look at the overall impact of your business when making a claim
• address any ASA claims head on and get advice if you need it
• stay up to date.