Why Your Marketing Needs to Match Your Practices

Demonstrating green credentials is now a necessity, not just for consumer businesses but any organisation in any sector of the economy. However ‘greenwashing’ has become a dangerous game.

Regulators in the UK and Europe are tightening regulation around green claims. They’ve been busy introducing codes and rules aimed at stamping out environmental claims that are more marketing hype than reality.

Given the spotlight on ESG and eco-friendly claims, getting on the wrong side of the regulators will no doubt attract attention, especially on social media.

Consumers and businesses are watching closely. If claims in marketing or advertising have to be withdrawn after complaints to the Advertising Standards Authority, or if the Competition and Markets Authority (CMA) launches an investigation with the threat of enforcement action, there could be serious repercussions to a business’ reputation. Investment products meanwhile are coming under much closer scrutiny from the Financial Conduct Authority.

The Green Claims Code

The CMA launched the code in 2021 after finding 40% of green claims made online could be misleading. It’s prioritising consumer sectors such as textiles and fashion, travel and transport, food and beverages, and beauty and cleaning products. But it could switch its focus to any sector where significant concerns are uncovered.

The CMA's enforcement powers include initiating court action and fining companies.

A recent Government proposal recommends boosting the CMA's enforcement powers to include the ability to fine companies to impose fines of up to 10% of global annual turnover for breach of consumer protection law.

The code says green claims must be:

Truthful and accurate. Businesses must live up to the claims they make about their products, services, brands and activities.
Clear and unambiguous. A product’s messaging and its credentials should match.
Non-selective. Claims must not omit or hide important information.
Fair and meaningful. Comparisons must compare like with like.
Substantiated. Claims must be supported by robust, credible and up-to-date evidence.
Holistic. Claims must consider the full life cycle of the product.

Advertising code (ASA)

Whilst the ASA can’t initiate court proceedings or impose fines, it can require an ad be changed or removed. It’s been paying special attention to consumer brands’ claims about recycling and food sustainability, and has upheld some high-profile complaints against Hyundai, Ryanair, Pepsi Lipton, Aqua Pura and Tesco.

Its code stresses:

Relevance. A claim must be relevant and reflect a genuine benefit to the environment.
Clarity. A business must have a clear idea of the main environmental impacts of its product, service or organisation.
Language. Marketing should not use vague or ambiguous wording, or jargon that may be misunderstood.
Proof. Supporting evidence must be clear, robust and appropriately tested.

Draft financial regulations (FCA)

The FCA has been stepping up both engagement and enforcement in relation to purportedly sustainable finance.

A general anti-greenwashing requirement will become effective immediately on the publication of its Policy Statement, provisionally set for 30 June 2023, with new rules on disclosures and marketing coming into force over a two-year period from 30 June 2024.

Beyond the UK, the Sustainable Finance Disclosure Regulation seeks to increase transparency surrounding sustainability claims, while the Corporate Sustainability Reporting Directive requires all large companies to publish regular reports on their environmental and social impact activities and other sustainability issues. These rules will apply in three stages from 1 January 2024 to 1 January 2026.

Meanwhile the FCA’s code will include:

A general anti-greenwashing rule applicable to all regulated firms.
Three categories of sustainable investment product labels, including one for products improving their sustainability over time – underpinned by objective criteria.
Restrictions on how sustainability-related terms, such as green/ESG, can be used in names and marketing for products which don’t qualify for the sustainable investment labels.
Disclosures to help consumers understand the key sustainability-related features of an investment product, and more detailed disclosures, suitable for institutional and retail investors.
Obligations on distributors of products, such as investment platforms, to ensure that labels and disclosures are accessible and clear.

Business response

Avoid using vague terms such as eco, green, sustainable, or environmentally friendly unless you can be specific about what that means.
Evaluate a product/service fully to ensure that its full life cycle is reflected in any environmental claim.
Ensure any claim is backed by robust, credible and up-to-date evidence and keep an evidence trail in case the regulator calls.

Business benefits

Regulators aside, there’s great value in being transparent with your target audience.
Setting and actually achieving green targets can be a strong marketing tool.
Consumer review platforms represent either threat or opportunity. The ‘Good For You’ fashion platform ranks clothing and accessory brands for their sustainability. The Skyscanner travel platform gives flights a Co2 rating.

“Consumer scepticism is at an all-time high, with only 23% of consumers taking environmental claims from businesses at face value. Businesses need to comply with consumer protection laws and regulations and be able to evidence their environmental claims. Directors too need to be concerned. Given the scrutiny on ESG, directors need to be wary of their organisations making environmental statements that cannot be supported.”