Who: The UK Competition and Markets Authority (CMA), the Council of the European Union (Council), the European Parliament, and the European Supervisory Authorities (ESAs)
Where: United Kingdom and the European Union
When: May and June 2023
Law stated as at: 12 June 2023
What happened:
Climate change and environmental issues are front of mind for regulators and legislators worldwide, including in the UK and the EU.
CMA’s report on the green heating and insulation sector
On 31 May 2023, the CMA published its final report on consumer protection in the green heating and insulation sector. The CMA’s report, follows its call for information on the sector. As part of its investigations, the CMA reviewed a random sample of over 1,000 business websites, marketing materials and online advertising.
In terms of marketing-related issues, the CMA identified potentially misleading business practices in the sector, including in relation to how businesses promote green heating and insulation products and services. The CMA pointed to several practices of concern, particularly in terms of misleading claims about product benefits, greenwashing messaging about hydrogen use in boilers, and shortcomings with the provision of upfront price information.
Overall, the CMA concluded that green heating and insulation products are increasingly important in the context of the rising cost of living and in meeting the UK’s net-zero ambitions. While there is evidence of a positive consumer experience, the CMA also identified several areas of concern in each of the above themes. The CMA has indicated it will continue to engage closely with stakeholders to share its findings and may carry out further investigative and enforcement work focusing on greenwashing claims made by businesses about their products.
Progress on EU directive proposing new rules for sustainable, durable products and no greenwashing
In May 2023, the Council and the European Parliament each adopted their respective positions on the proposal for a directive to strengthen consumer protection against false environmental claims and greenwashing.
The proposed directive would amend:
- The Unfair Commercial Practices Directive to introduce prohibitions aimed at greenwashing, durability and reparability. This includes banning the use of generic environmental claims such as “eco-friendly”, “green”, or “climate neutral” if the claims cannot be substantiated by publicly accessible certification scheme. The list of “blacklist” unfair commercial practices would also be expanded to include durability and reparability related practices (such as presenting goods as allowing repair when they do not).
- The Consumer Rights Directive to introduce information requirements aimed at helping consumers to choose longer lasting and repairable goods. These measures include requiring traders to inform consumers about any repair restrictions as part of the pre-purchase journey.
Negotiations between the European Parliament and member states on the final content and wording of the directive will commence shortly. More information about the proposed directive is available in our Insight.
ESAs publish progress reports on greenwashing in the financial sector
On 1 June 2023, the ESAs published their progress reports on greenwashing in the financial sectors (see the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority reports). In these reports, the ESAs proposed a common, high-level understanding of greenwashing applicable to market participants in the banking, insurance and pensions, and financial markets sectors, that is: “a practice where sustainability-related statements, declarations, actions, or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, a financial product, or financial services. This practice may be misleading to consumers, investors, or other market participants.”
The progress reports provide initial views on the impact of greenwashing in the ESAs’ sectors as well as gaps and limitations in the current EU sustainable finance regulatory framework. From a marketing perspective, some of the issues identified in the progress report include cherry-picking, omission, ambiguity, empty claims and misleading use of environmental, social, and governance terminology.
The ESAs are due to publish final reports in May 2024, which will include recommended changes to the EU regulatory framework.
Why this matters:
The updates are just some of the most recent efforts of UK and EU regulators to tackle greenwashing in advertising. But the remit of regulators and legislators extends further than misleading advertising claims – the focus has shifted to a range of environmental-related issues aimed at protecting consumers seeking to make environmentally-conscious purchasing decisions. Industries beyond the traditional consumer retail sectors are also on the radar of regulators.
This means that – while greenwashing risks should continue to be placed front of mind – businesses should also consider matters like the repairability of the goods they offer consumers and the information they provide to consumers about the durability of goods. Traders that have previously considered greenwashing to be a less important issue for their business may need to reassess their marketing materials (particularly those operating in the finance and insurance sectors).
