In this edition, Dominic Watkins Global Head of Consumer Sector at DWF, looks at how the new consumer protection laws coming into force in 2024 will impact green claims
Given the imperative to do the right thing, it is not surprising that the sector is working increasingly hard to improve sustainability credentials and practices. It is equally not surprising that businesses want to talk about the great work they are doing and steps they are taking to move the dial. While that pattern shows no sign of abating, it is done against an increasingly challenging market for making green claims.
Over the last year, it has become increasingly challenging to make green claims, and that is unlikely to get any better. Gone is the time where the principle that advertising claims must be supported by substantiation is enough: you must do more than just making your claim clear and supporting it with evidence.
2023 has shown the UK regulators have other ideas, and unless there is a last minute change, 2024 will supercharge the associated risk as it will result in the CMA having the power to decide that your claims are misleading and fine you up to 10% of your global turnover – without the need to go to Court.
So while green-hushing is not desirable and there is no reason to stop green actions, the risk associated with advertising it is sky rocketing.
We have previously written about how context has become key (Carbon claims are being neutralised – Footprint) and this year has just shown that this is an ever growing concept. The ASA and its sister body CAP have produced helpful guidance, which has been updated this week and boldly entitled ‘greenspeaking with confidence’. It explains that:
But in today’s world where there is so much riding on these issues, businesses must be realistic and honest with themselves and their customers about where they are on their own sustainability journey. They need to ensure that they are communicating in a way that does not get ahead of that journey, and in doing so, won’t paint a misleading or irresponsible picture.
Accuracy and transparency of communications is therefore key.
Precision, using more limited claims and adding appropriate qualifications to claims, can help.
This next piece of advice is key and topical: if you’re in a high carbon emitting sector, adding balance when making broad aspirational claims really matters.
So, to see how that is being applied in reality, let’s go back to one of the early claims – the HSBC poster campaign from 2022, where HSBC claimed;
“Climate change doesn’t do borders. So in the UK, we’re helping to plant 2 million trees which will lock in 1.25 million tonnes of carbon over their lifetime”
and
“Climate change doesn’t do borders. Neither do rising sea levels. That’s why HSBC is aiming to provide up to $1 trillion in financing and investment globally to help our clients transition to net zero”
In both cases, the claims were factually true. In both cases, they were doing the things that they said they were. In both cases the claims are narrow and specific and did not make claims about the bank as a whole, only these specific activities. Nevertheless, the ASA considered that the ads were misleading by omitting material information that would affect a consumer’s understanding of the overall message. While the ASA ‘acknowledged that the initiatives highlighted in the ads were environmentally beneficial, the advertiser was continuing to significantly finance investments in businesses and industries that emitted notable levels of carbon dioxide and other greenhouse gasses.’ Though, of course, neither ad suggested that they were limiting who they funded more generally, they were just making clear they were able to fund net zero transition.
While we may think that this was a pretty specific ad, the issue can arise when just talking about topics in a general sense. The ASA ruled against Tesco when considering an ad for its plant-based range, which sets out why swapping from meat products to plant-based would be good for the environment. The ad claimed “We’ve lowered the price of dozens of Plant Chef products, because a little swap is good for your pocket and even better for the planet.” It continued with stating: “As a nation, if we swapped beef for a plant-based alternative just 1 out of 5 times, the amount of CO2 emissions we could save would be the equivalent to driving 27 billion fewer miles in a car!” This was found to be misleading, because despite the claims being demonstrably true and accepted science, Tesco had not shown that its plant-based range, as opposed to plant-based food generally, would achieve this objective. Ironically, a similar Sainsbury’s ad, which did not mention its specific ranges, wasn’t found misleading despite using a ‘general message’.
These ads show how even the simplest of claims can go awry. That is before we consider the incredible complexity that comes from conducting effective Life-Cycle Assessment (LCA), assessing different productions methods, or even from agreed terminology around concepts like regenerative agriculture – where the absence of an agreed approach has led to over 200 definitions sprouting up. This can be good as the ambiguity allows business to pick a definition that works for it, but if the regulators disagree, is the gamble worth 10% of your global turnover?
The ASA continues to invest in research in this area and on 28 November released research showing that the consumer understanding of terms like “compostable” and “biodegradable” was confused and relied on oversimplified assumptions. Participant motivation relied on the belief that their actions made a difference and when faced with explanations of the terms, participants expressed surprise or even anger.
Further research will be released in March 2024, which will specifically address consumer perception of meat, dairy and plant-based foods, and will no doubt be of significant impact to the sector. The ASA has indicated that it is also working with DEFRA and other partners on environmental food labelling though no proposals are yet forthcoming.
While bad definitions are bad for all, the lack of workable and consistently applied definitions and research continually showing that consumers are confused by some of the more general claims, leaves risks as businesses do not know how a regulator will interpret any given claim. The EU has chosen to deal with this by pre-market third party verification of claims which, while adding cost to the process, should at least provide certainty. Similarly, it has updated consumer protection law to expressly ban claims like those based on emissions offsetting schemes that a product has neutral, reduced or positive impact on the environment; as well as prohibiting generic environmental claims for which the trader does not provide evidence of the ‘recognised excellent environmental performance’ relevant to it. By contrast, the UK has taken not specific legislative action. This might change, however, the CMA has confirmed it continues to advise government that certain misleading green claims should be added to the list of banned practices in the Digital Markets, Competition and Consumers Bill. While the version of the Bill that is on the second reading in the Lords does not change, it may well do by the time it receives Royal Assent.
Either way, one point that appears unlikely to change is that once the bill secures Royal Assent, the CMA will wield substantial power with large administrative fines of up to 10% of global turnover a very real possibility. To put that in context there have never been any fines arising out of claims or pricing or misleading actions or omissions where the fine has exceeded £1m. Now, you would only need a turnover of £10m to potentially attract that fine, and if your turnover is £1b the fine could be up to £100m – the risk has changed. While we do not advocate managing the risk by sidestepping green or sustainable actions, we do strongly recommend a thorough review of your due diligence systems and advertising approval processes. Ensuring rigorous assessment of high-risk claims is imperative: the jeopardy of risking 10% of your global turnover is significant.
If you would like to discuss how you can manage risk in this area, or want an independent review of your claims, please get in touch: being proactive now could safeguard against significant consequences down the line.
For further insights, please also visit DWF’s Consumer Sustainability in Focus hub here.
