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A Legal Guide To Corporate Greenwashing (and how not to do it)




As the sense that sustainable action is the only way to secure our future continues to spread globally, many businesses - from large corporations to micro-businesses - are keen to flash their green credentials. There’s a good reason for this - consumers care. Enough to pay an additional 9.7% for sustainably produced products, according to a survey by PwC published in May 2024. Yet, whilst many organisations are making real strides towards reducing or off-setting their corporate carbon footprint, there is deep concern that misleading eco claims and insinuations are also being made, whether intentionally or unintentionally.


Being members of the public, and consumers, we must be alert to this, especially if we’re paying a premium for green products and services. However, as business owners, we also need to ensure we’re not greenwashing, because even being accused of doing so could negatively impact an organisation. It may even result in legal action, especially as the EU and the UK commit to getting tough on misleading claims around sustainability.


Can you back up your eco-claims? Or could your green image be accused of being more suspect than sustainable?


Let’s look at what greenwashing is, what might be perceived as greenwashing and how companies can ensure they are being transparent and legally compliant when showcasing their sustainable practices and values.


What Is Greenwashing?


Greenwashing is a term applied when organisations, including freelancers and small business owners, make claims or brand themselves as sustainable whilst not enacting meaningful change. This can mean they are failing to put sustainable practices in place, whilst insinuating that they do. It can also mean they use branding, imagery or language which implies they are eco-friendly when they actually produce a significant carbon footprint.


Greenwashing is complex because it isn’t always a matter of making directly false claims. Companies who brand themselves in the same way that genuinely green organisations do may also be at risk of greenwashing if they’re having a negative impact on the environment.


Why is this important? Well, it comes down to consumer trust and transparency. 96% of UK consumers have said they’ve purchased sustainable products. We also know that many, from Gen Z to Boomers, take environmental impact into consideration when making buying decisions. Therefore, misleading the public in this area is morally unethical and potentially unlawful. However, it’s important to recognise that not everyone who might be accused of greenwashing intends to do so.


When an oil company starts using green colours in its branding and talks of planting trees, it’s fairly obvious that this isn’t offsetting the carbon footprint. Certainly, there would be a case to answer for greenwashing. However, a seemingly ethical business owner may seek to reduce their carbon footprint through limiting printing, using all-natural or recyclable materials and operating a packaging returns policy, but may unknowingly be supporting deforestation when sourcing their all-natural products. They may be unaware of the environmental impact, it might be unavoidable or it might be far less significant than other operators in the industry. But, if they claim to be environmentally friendly, could this still be construed as greenwashing?


The jury is out on this. We have no legal measure for what does and what does not make a company legally able to claim they are ‘green’ and that’s why businesses must proceed with caution.


So, let’s look at the legislation we currently have in place and how businesses can ensure compliance. 


What Are The Legal Consequences Of Greenwashing?


Currently, it is the CMA who have the power to fine companies found to be greenwashing (that’s the Competitions and Markets Authority, not the Country Music Association). The CMA are the regulator responsible for ensuring that markets are operating fairly and competition is kept healthy. They can fine companies up to 10% of their global turnover if they believe they've made false claims about their sustainability practices. Currently, the CMA is not able to impose fines without going through court proceedings. However, the new Digital Markets, Competition and Consumers Bill (replacing the Consumer Protection from Unfair Trading Regulations 2008) has been granted royal assent and could have more power to hold companies accountable, when it becomes enforced in the later part of 2024.


B2B companies must stay compliant with the Business Protection from Misleading Marketing Regulations 2008. Both this and the Digital Markets, Competition and Consumers Bill prohibit companies from making misleading statements that are likely to impact their client or customer’s purchasing decisions.


The other regulator with the potential to penalise businesses that are greenwashing is the Advertising Stands Authority(ASA). Organisations suspected of making false claims in their promotions, including around sustainable practices, may be reported to the ASA. The ASA upholds the CAP Code (Committee of Advertising Practice) and if these are not being met the company may receive a warning and an opportunity to amend or remove the offending advert/promotion. Failing to comply could get an organisation added to the ASA’s public list of non-compliant advertisers and it could also mean a referral to Trading Standards

To find out more about the ASA, please refer to my guide on What Small Businesses Need To Know About The ASA (Advertising Standards Authority).


How Can Businesses Avoid Claims Of Greenwashing?


It’s essential for UK businesses to avoid accusations of greenwashing. Whilst the legal consequences are somewhat of a grey area at the moment, legislation is due to directly tackle this issue. Aside from the potential legal consequences of greenwashing, there is also significant reputational damage to consider. Businesses operating in the modern world do not need a jury to decide if they have behaved ethically when this discussion is highly likely to happen online where it may have a far more severe impact on consumer trust and brand loyalty.


Green credentials are often difficult to approximate. So, if you’re going to make any green claims or use branding, design or language that implies products or services are environmentally friendly, then you should be calculating your company’s carbon footprint properly, across all locations and your entire supply chain. Fortunately, there are many apps and organisations that can help you to do this. 


Assessing your environmental impact means you can make better decisions about how to promote your green credentials, knowing that you have made every effort to ensure their accuracy. Of course, there will likely be areas of your business or production line that fall below the desired standards, but that’s ok. So long as you recognise these publicly and commit to tackling them when possible. 


Impact Statements can be a good way to promote your sustainable practices with transparency, as the environmental commitments from Lush do. You might also include disclaimers on your packaging or in your marketing materials if they are making sustainable claims that might require further clarification.


Going green can be good for business and essential for our planet. Every sustainable action has the potential to make a difference and we must all endeavour to do all that we can. Yet, being truly sustainable in the modern world is challenging, if not impossible. So, when promoting or communicating your green values, remember to be realistic, transparent and maybe even a little humble. This will ensure you stay on the right side of ethical consumers and stay legally compliant.


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