CMA: code introduced to force firms to prove green claims

Businesses across all industries will have to be able to support any green claims they make.

One of the undeniable trends seen over the last few years has been that most of us are a little more environmentally-focused in the way that we behave, and the businesses that we support.

Businesses are well aware of this trend too, trumpeting how they have changed the way they work in order to be more ‘green’, from ditching single-use plastic to using more sustainable and renewable ingredients in their products.

However, can we actually trust those businesses and the claims they make?

A new code introduced by the competition regulator is aimed at ensuring that in the future, firms have to be able to prove their green credentials.

The Green Claims Code

The Competition and Markets Authority (CMA) has published the Green Claims Code, essentially a set of principles based on existing consumer law designed to help businesses to highlight their green credentials without misleading shoppers.

The code makes clear that any green claims must:

• Be truthful and accurate;
• Be clear and unambiguous;
• Not omit or hide important information;
• Only make fair and meaningful comparisons;
• Consider the full life cycle of the product;
• Be substantiated.

There’s a pretty clear message that comes through from all of these principles. Whenever a firm makes a claim about its environmental credentials or those of its products and services, then it needs to be able to back them up.

The claims themselves have to be clear, and not open to interpretation, with any relevant information included.

Evidently, the gauntlet is being thrown down to businesses of all kinds with this code ‒ you need to be able to back up your claims.

It follows an investigation by the CMA last year, alongside other authorities, which suggested that as many as 40% of green claims made by firms were potentially misleading.

Meeting expectations

The CMA said that the code had been designed due to concerns that shoppers are being misled by iffy environmental claims being made by retailers, while it also reckons that the code will help businesses to be more confident in how they navigate the laws covering green claims.

It has confirmed it’s going to carry out a full review of potentially misleading claims, both on and offline, at the start of next year.

Obviously, there are an awful lot of industries where claims about how environmentally friendly the products and services are made, so certain industries are going to be prioritised.

The CMA said these may centre on areas where people appear to be most concerned about misleading green claims, such as textiles and fashion, travel and transport, and ‘fast-moving consumer goods’ which covers the likes of food, drink, beauty and cleaning products.

Where the CMA finds clear evidence that consumer law has been broken, it has said it will take legal action.

Going green with my energy

It’s notable that the Government is reviewing the claims made by energy firms about their supposedly green energy tariffs.

This is an area that’s particularly vulnerable to greenwashing, where firms are able to get away with the most ridiculous of misleading claims, without technically breaking any rules. 

As we’ve highlighted before, energy suppliers can label their tariff as being green even if none of the energy they provide comes from green sources.

Renewable energy suppliers are awarded Renewable Energy Guarantees of Origin based on the green energy they generate but can sell on excess certificates to other suppliers.

In effect, the idea is that non-renewable suppliers are offsetting the energy they sell which comes from fossil fuels by financially supporting renewable energy firms.

The problem is that these certificates cost mere pennies to purchase. As a result, suppliers have to only pay a small amount in order to basically pretend that their tariffs are environmentally friendly.

It's a good example of how innocent consumers, who want to do the right thing, are being conned.

Forcing firms to clean up their act

One of the issues the CMA often faces is the fact that it has little power to directly punish the firms which it finds have broken the rules. However, while it has to instead pursue transgressors through the courts, there’s no question that it can be incredibly effective.

A perfect example is the travel firms which have been found to have broken the rules over refunds for package holidays cancelled as a result of the pandemic.

It has secured millions of pounds in refunds from the likes of Teletext Holidays, Virgin Holidays, and lastminute.com, among others.

Obviously, it would be better for the CMA to have the power to force firms to rectify their poor behaviour directly.

But it’s a good sign that the CMA has been so efficient at making use of the routes open to it, which is a cause for optimism that it will be able to force firms across all sorts of different industries to back up their green claims.