Penningtons Manches Cooper has previously advised of the investigation launched in November 2020 by the UK's Competition and Markets Authority (CMA) into potential greenwashing by businesses. Fast forward almost two years and the CMA is making good on its promise to interrogate organisations whose green credentials may not be quite what they seem.
The regulator confirmed in July that it is in the process of investigating green claims made in the fashion industry by ASOS, Boohoo and Asda (the latter via their George at Asda range). Indeed, the review into the fashion sector is due to expand, with the threat that other retailers may be put 'under the microscope' in due course. Moreover, the CMA has advised that it will potentially examine green claims made by businesses in other spheres as well.
This news serves as a reminder that organisations in all arenas need to ensure that their eco-friendly claims stand up to scrutiny.
There is an ever-increasing global focus on the sustainability of goods and services offered by businesses. This is particularly so in in the world of fashion, which is estimated to account for between 2% and 8% of global carbon emissions. It is little wonder, therefore, that consumers are becoming progressively conscious of the of the perils posed to the environment by so-called ‘fast fashion’, which is the rapid design, production, and sale of cheap clothing made from low quality materials.
Accordingly, fashion retailers are keener than ever to ensure that they have an environmentally friendly offering and to demonstrate their green credentials. Examples of this include H&M and Next’s ‘Conscious Choice’ and ‘Thought’ ranges respectively.
The CMA’s concern is that some brands may be playing fast and loose with their eco-friendly claims with the risk that consumers are being misled into purchasing goods and services that are not as sustainable or ethical as they appear. This activity has attracted the label of ‘greenwashing’, and it applies to businesses across the board.
The CMA’s project commenced in November 2020, and represented the start of a chain of events culminating in the investigation into the three fashion houses.
The enquiry started in earnest in December 2020 with a call for information from consumers, businesses, and other interested parties in the form of questionnaires. Consequently, in May 2021, the CMA went on to issue draft consumer protection law guidance for businesses making claims about the eco-friendliness of their goods and services. Interested parties were invited to reply to a series of questions about the guidance.
Responses were duly provided by several organisations. Interestingly, Asda was one of these respondents. The supermarket’s reaction was to acknowledge its responsibility to provide customers with ‘sustainable choices that save our customers money, cut our costs and protect our planet’. It also viewed the guidance as being ‘a positive step in encouraging businesses and suppliers to make credible claims around the environmental impact they are having’.
September 2021 saw the CMA publish its final guidance. That included detailed advice on making environmental claims on goods and services and a Green Claims Code checklist. In addition, the CMA said that January 2022 would see it begin a review of compliance with relevant consumer law.
On 10 January 2022 the CMA duly confirmed that its review had commenced and that it would focus on environmental claims in the fashion retail sector, leading to the announcement last month regarding ASOS, Boohoo and Asda.
The CMA has explained that in scrutinising the claims made by the three fashion brands it will analyse several issues, including:
The CMA has confirmed that it will use its evidence-gathering powers to advance its investigation. Sanctions that might ultimately be imposed include the securing of undertakings from the brands to change the way they operate, and potentially even action at court.
Given the CMA’s recent activity and commitment to future investigations, businesses making green claims would be well advised to not sit on their hands. It is more important than ever for companies to ensure that their eco-friendly statements are clear, comprehensive, and factually accurate.
Organisations should carefully consider the CMA guidance and ensure that it is implemented. If they are in any doubt, they should seek legal advice on the interpretation and application of the guidance. A failure to do so may invoke action by the CMA, lead to adverse publicity, and, perhaps most significantly, cause lasting damage to customer relationships.
If you have any queries arising from this article or need assistance digesting the CMA’s guidance, then Penningtons Manches Cooper’s sustainability, commercial and regulatory teams are well equipped to assist.