The announcement follows the publication of the CMA’s Green Claims Code (the “Code”) in September 2021 (see here). The Code aims to help businesses comply with existing consumer protection laws when making environmental and sustainability claims in the course of selling or promoting goods and services. It sets out six principles:
- Claims must be truthful and accurate;
- Claims must be clear and unambiguous;
- Claims must not omit or hide important relevant information;
- Comparisons must be fair and meaningful;
- Claims must consider the full life cycle of the product or service; and
- Claims must be substantiated.
The fashion retail sector is the first sector to be subject to a review by the CMA, given that their work so far, according to Cecilia Parker Aranha, the CMA’s director of consumer protection, indicates that there could be issues with greenwashing in the sector. This is of particular importance given its size and impact on the environment - according to the CMA’s estimates, UK consumers spend £54 billion annually on clothing and footwear and the fashion sector is responsible for between 2% and 8% of all global carbon emissions.
The CMA has set out the types of claims it will be investigating, including items of clothing labelled “sustainable” and the use of “recycled materials” in new clothes. They have said appropriate action will be taken where businesses are found to be “greenwashing”, i.e. making misleading claims about the environmental impact or “greenness” of their products. Appropriate action could include seeking a court enforcement order to rectify breaches. Alternatively they may accept an undertaking to stop breaches of Consumer Protection Law.
Both of these measures can include "enhanced consumer measures", such as the requirement to pay redress to consumers who have suffered a loss by the failure to comply (which could be significant subject to the number of consumers affected), and measures to prevent similar breaches occurring in the future. Misleading claims can also attract legal proceedings from consumers in response to a business’s conduct, or to seek redress for certain breaches of Consumer Protection Law. Perhaps most damaging, however, would be the publicity of such a breach. The CMA can seek an order requiring a business to advertise its breach on its website or in the press. It is also likely the CMA would decide to publicise any breach on their own website. Such findings are likely to damage consumer trust and confidence in a business, especially given the rising prominence of sustainability in consumer decision making.
Cecilia Parker Aranha said recently that “Now is the time for the fashion industry to take a fresh look at what they’re telling customers and make any changes needed to comply with the law. Businesses that can’t back up their claims risk action from the CMA and damage to their reputation in the long-run.”
At the time the CMA published the Code, it warned businesses (a) to make sure their environmental claims complied with the law, and (b) that the CMA would be carrying out a full review of misleading green claims, both on and offline, at the beginning of 2022. Alongside fashion, the CMA listed travel and transport, and fast-moving consumer goods (food and beverages, beauty products and cleaning products) as sectors which the CMA was likely to prioritise. However, the Code applies to all businesses (manufacturers, wholesalers and retailers), so those in other sectors also need to take care with respect to the environmental claims they make. The CMA is expected to expand on the scope of their review in due course, and they have also made it clear that where there is evidence of breaches of consumer law outside of the fashion retail sector, they may take action before the review of fashion retail has completed.
The investigation is a wakeup call to companies to ensure that any green claims they make are not misleading. The CMA is one of a number of regulators alive to the issue of greenwashing, and we expect to see further steps taken to clamp down on greenwashing in the future.