New rules relating to making green claims are confusing, which is bad news for food companies and good news for lawyers. David Burrows reports.
“Green, green, it’s green they say”. Two researchers from the Centre for Climate Resilience at the University of Augsburg, Germany, have produced a “conceptual framework” for measuring greenwashing at company level. Using a new greenwashing “indicator” based on the difference between real and apparent green performance, they claim to be able to uncover cases of greenwashing more quickly.
Green fingers. There is of course no shortage of cases to investigate currently. NGOs have ramped up their efforts: in some cases unearthing intentionally misleading marketing; in others it’s hard not to give the company in question the benefit of the doubt (a case of ignorance, in other words). However, it is the regulatory landscape that should be keeping sustainability leaders awake at night.
Bad news. “We are scared,” admitted Dominic Watkins, partner at law firm DWF, during a foodservice industry roundtable on the topic of greenwashing last week, organised in association with Footprint. This wasn’t because we were 31 floors up in London’s ‘Walkie Talkie’ building; it was because of the jump in regulatory intervention on green claims over the past few months.
Excitable. The Competition and Markets Authority (CMA) has got all excited about green claims, it seems. The regulator has been expanding its crack team of eco-claim investigators, publishing a green claims guidance for businesses in 2021 and then launching investigations into specific sectors to see if companies are following the advice. It has become rather “aggressive”, Watkins warned.
First fashion. Consider for example fashion retailers ASOS, Boohoo and George by Asda, who were the first to come under scrutiny. The companies last month signed formal agreements to use only accurate and clear green claims. The commitments “set a benchmark” for how fashion retailers should be marketing their products, said CMA chief executive Sarah Cardell. “We expect the sector as a whole to take note and review their own practices,” she added.
Tears. All three firms must regularly provide the CMA with reports on how they are complying with the commitments they signed – as well as taking steps to improve their internal processes. The so-called ‘undertakings’ have turned heads. Previous, very limited undertakings ran to three or four pages, but Asda’s amounted to 16. The level of detail is eye-watering (though the CMA hasn’t actually detailed what the companies did wrong, which would have been useful for those trying to stay the right side of the thin green line).
And fears. “This is everything, everywhere, all at once,” Watkins explained. The undertakings amount to a national regulator telling a business how to operate, he added: “It’s more akin to a BRC [British Retail Consortium] audit.” This is not the end game, either.
The old bill. Historically, there has been little policing of green claims. A slap on the wrist from the Advertising Standards Authority (ASA…who we will come back to), often a year or more after the offending advert appeared, hasn’t really deterred fervent fakers or incentivised the ignorant to check their facts first (think Tesco’s plant-based burger blunder). The digital markets, competition and consumer bill (DMCC) will change that.
The new bill. The bill, now in its final stages before royal assent, will give the CMA substantial power, including the ability to administer large fines. There have never previously been any fines arising out of claims or pricing or misleading actions or omissions that have exceeded £1m. DMCC proposes penalties of up to 10% of global turnover. So for McDonald’s that’s potentially up to $2.5bn (10% of $25bn); for Nestlé$10bn, and Compass $0.5bn, should they be deemed to have made misleading claims.
Court red-handed. And the enforcement action could be taken without going to court: the CMA argued that lengthy court cases allow companies to “game the system”. Watkins said: “We might never get to 10% but we could still be talking about millions of pounds.”
No fun and games. Whether the CMA is biting off more than it should is a reasonable question. Publicly the regulator says it is working closely with the ASA, but there is little doubt the former is muscling in on this area of marketing. This has led to the rules changing as we go.
Shift. Lawyers like Watkins, and his colleague Katharine Mason, senior associate at DWF, have been baffled by some of the decisions. The shift is subtle but significant. It’s not possible to deal with green claims in the same way as other advertising rules, they warned. Context, for example, is now key – poor environmental performance previously can come back to bite brands, for example.
Waterworks. Consider, they said, the two recent rulings relating to water companies that leave a question over what is or is not going to be considered by the ASA when weighing up complaints about misleading claims. “Time and time again we are seeing the ASA pulling up companies because of the wider context in which the green claim is being made,” Watkins said.
Say what? Companies also need to be wary of the research flowing from the likes of the ASA which is justifying its position and the need to focus on this space (and increasingly using AI to help monitor many more millions of claims). Research last year into consumer understanding of net-zero and carbon neutral claims for example has showed consumers simply don’t understand these terms, Mason explained. ASA guidance has been updated as a result: businesses should not fear making sustainability claims so long as they are clear, the authority said.
Stuck in the muddle. But businesses are afraid. The lack of legal definitions for terms like net-zero were clearly concerning those out of home sector representatives at the roundtable. The controversy surrounding the Science-Based Targets Initiative in recent days and its approval – or not – of carbon credits in net-zero commitments is also undermining confidence. Then there are the new rules in Europe, such as the green claims directive, and potential bans on terms like carbon neutral.
Trendy. Regenerative agriculture is another concept that many are keen to communicate but are cautious to do so because defining it is so difficult. (“It’s a trending term,” said Sodexo director of sustainability Claire Atkins Morris at a recent Footprint event. “We feel it’s not fair on the farming community or our customers to have something in place when it’s not been fully defined.”)
Badvertising. Crude claims on carbon are like catnip for campaigners. There is a sense that some are treating companies as guilty of greenwashing until they prove their innocence. As those academics noted in their paper, “a greenwashing accusation is possible whenever the accusing party shares a different view on what is green”. Can food companies really be confident in making such claims currently? The ground on sustainability communications is shaking but one thing is certain: bad policy and a rippling regulatory landscape is good news for lawyers.
