Member Article

As we approach COP26 in Glasgow in November, a vast amount of policy development is underway to help develop the strategies we need to address the global climate crisis.

A central challenge is changing consumer behaviour, which is a complex and multi-faceted issue. 

It raises questions around affordability, such as changing heating systems, purchasing zero emissions vehicles and better insulating our homes. It also raises questions around lifestyle, such as adopting a more plant-based diet, reducing air travel and considering the impact of our day-to-day purchasing decisions on climate change.

On the final point – consumer purchases – a number of policy initiatives are being developed to address the way businesses sell their green credentials to consumers. This is important, as research suggests 40% of ‘green’ claims online could be misleading. 

Regulating ‘green’ claims

The work of the Competition and Markets Authority (CMA), which consulted with businesses on draft guidance on environmental claims on goods and services earlier this year, is an important addition to the consumer law enforcement landscape in the context of ‘green’ claims. The final guidance is due to be published at the end of September. The CMA has proposed six principles regarding ‘green’ claims – applicable to all businesses that make environmental claims aimed at consumers of their products or services, but also to businesses that sell to other businesses:

1. Claims must be truthful and accurate.
2. Claims should be clear and unambiguous.
3. Claims should not omit or hide important information.
4. Comparisons should be fair and meaningful.
5. In making the claim you should consider the full lifecycle of the product.
6. Claims should be substantiated.
   
   

Why does this matter to businesses?

The CMA has a role in the enforcement of consumer protection law, though currently its powers in this area are limited (when compared to its powers of enforcing competition law), and it must go through the courts to secure compliance in these cases. 

Nevertheless, there are three reasons why businesses should pay close attention.

1. Despite the CMA’s restricted powers to enforce consumer law, it is increasingly willing to use them (as our article earlier this year explains). Earlier this month, the CMA launched further consumer law investigations into secondary ticketing and into Groupon. CMA activity in this area is increasing.
2. The CMA has made clear it considers the six principles outlined above to be its interpretation of how ‘green’ claims align with the requirements of consumer law. This means businesses that do not align to these principles may find themselves the subject of a CMA investigation.
3. Perhaps most importantly, consumer law enforcement is soon to be radically reformed. The Department for Business Energy and Industrial Strategy is now consulting on wide-ranging reforms to consumer and competition law enforcement. This could lead to direct enforcement of consumer protection law by the CMA, rather than it having to apply to the courts. This significantly increases the risk of enforcement action against businesses, with the potential for significant fines. You can read more about the UK Government’s proposals in our article here.
   
   

This is an important emerging risk area for businesses, and one where the risk will almost certainly grow in the future. Businesses should prepare now, by reviewing their marketing materials and practices, to ensure they are consistent with the CMA’s expectations.

Need help with consumer and competition law?

Our regulatory experts can help you ensure compliance or support you in dealing with regulatory enforcement actions. For more information please contact Scott Rodger, a solicitor in our regulation and markets team, at [email protected], or your usual Shepherd and Wedderburn contact.