Matthew Howse, Partner - Dispute Resolution and Litigation, Eversheds Sutherland
As companies become more and more eco-conscious, driven by evolving consumer demands as well as being obliged to do their own bit to address the climate crisis, ESG has become much more prominent and significant. Large corporations, in particular, are now expected to maintain responsible business practices and embody strong socially responsible values. While this is to be commended from firms who are keen to create better communities where they operate, it’s important that their green credentials can always stand up to scrutiny.
New legislation introduced by the UK Government in recent weeks is aimed at targeting so-called ‘greenwashing’ by companies and individuals. Under the Digital Markets, Competition and Consumer Bill, currently making its way through the House of Commons, large companies face the threat of civil penalties of up to 10% of their global turnover for breaches of consumer law, while individuals who breach these laws will face fines of up to £300,000. These new penalties will directly address greenwashing and companies who seek to flout their green commitments without the evidence to back it up.
The proposed bill will give new powers to the Competition and Markets Authority (CMA) to tackle and penalise companies who make false green claims. In their sights already, however, are products known as fast-moving consumer goods (FMCG). These include every day, essential household items including food and drink, cleaning products, and toiletries, many of which are increasingly marketed as being sustainable, green, or environmentally and eco-friendly. As one of the largest goods sectors in the UK, worth over £100 billion every year, the impact of any large-scale alleged greenwashing in FMCG products could be seismic and could force other sectors to change their ways.
There are no shortage of sectors or businesses who could be affected by these new laws including motoring, clothing and fashion, construction, or aviation. These are sectors which often go to pains to prove their green commitments and highlight their eco-conscious values to consumers who are increasingly keen to align themselves to brands which ‘care’. However, many could be forced to scale back their messaging around sustainability. We’ve already seen the CMA launch investigations into the environmental claims of large retailers like ASOS and Boohoo over the validity of their sustainability claims. With these new powers, the body would have greater strength to tackle such green offenders.
The UK isn’t the first country to take action against greenwashing. Australia, for example, has already brought legal action against a company regarding its net zero claims while the EU is developing its own plans to penalise greenwashing. With Prime Minister Rishi Sunak claiming that this new piece of legislation will be a priority for his government, companies must now make sure that their claims stand up to scrutiny. Regulators, watchdogs, and activists are emboldened like never before. It is, therefore, vital that firms ensure that they can properly demonstrate their claims – otherwise they will pay the price, both financially and reputationally.