Every small business understands the importance of sustainability and caring for the environment. Not only is it essential for consumers, most SME owners worry about the planet and how their business practices will impact future generations. For example, a recent survey showed that half of small businesses calculate emissions, and 60% have plans to reduce carbon impact in the next years.
However, two-thirds of small business owners believe they don’t have the right skills and knowledge to tackle the climate crisis. This lack of knowledge can lead to the organisation’s ‘greenwashing’, an accusation that can seriously damage a brand. Greenwashing can also result in organisations breaching the Consumer Protection from Unfair Trading Regulations 2008 and the Advertising Code.
What is greenwashing?
According to ClientEarth, an international environmental law charity that has taken several large companies to court on accusations of greenwashing, the term refers to:
“… where a company uses advertising and public messaging to try to appear to be environmentally green and follow sustainable practices – greener than it really is. It’s also a technique certain companies use to distract consumers from the fact that their business model and activities do a lot of environmental harm and damage.”
The Competition and Markets Authority (CMA), which enforces the Consumer Protection from Unfair Trading Regulations 2008 and other consumer protection legislation, states that an environmental claim suggests that a product, service, process, brand, or business is better for the environment.
This could be because it’s an overall positive or no negative environmental impact or because it’s less damaging than a previous version or a competitor's offering.
Why do companies greenwash?
Although some companies have (or do) cynically use greenwashing as a marketing tool to improve the perception of their brand, the vast majority of businesses greenwash or make unsubstantiated green claims inadvertently whilst trying to do the right thing.
Recognising the need for businesses to have access to information about how to communicate their green credentials, in September 2021 accurately, the CMA published the Green Claims Code and checklist.
The principles of the Green Code are:
- Claims must be truthful and accurate
- Claims must be clear
- Claims mustn’t omit or hide important, relevant information
- Comparisons must be fair and meaningful
- Claims must consider the full life cycle of the product or service
- Claims must be substantiated
The Code also clearly defines what constitutes a misleading environmental claim:
“Misleading environmental claims occur where a business makes claims about its products, services, processes, brands or its operations as a whole, or omits or hides information, to give the impression they are less harmful or more beneficial to the environment than they are.”
Are consumers sceptical of greenwashing?
Consumers are sceptical of greenwashing; however, research illustrates that this applies to large companies more than SMEs. Green claims by specific industries, oil and gas and fast fashion being obvious examples, face greater disbelief than others.
What are the consequences of greenwashing?
Aside from the consequences of a CMA or Advertising Standards Authority investigation, the Harvard Business Review has found that greenwashing hits companies’ bottom lines. However, the most significant negative impact on SMEs is the brand damage from greenwashing.
Is greenwashing illegal?
There’s currently no legislation specifically outlawing greenwashing. The legal position mainly relates to protecting consumers from being misled by inaccurate green claims through marketing and/or advertising. The Consumer Protection from Unfair Trading Regulations 2008 prohibit unfair commercial practices and contain specific bars against false and misleading commercial practices and misleading omissions of material information.
If a misleading green claim causes or is likely to cause the average consumer to make a purchasing decision they wouldn’t have taken otherwise, a business owner could find themselves in breach of the Regulations. This could result in a fine or even a prison sentence.
How can a company avoid greenwashing?
Below are some top tips from our lawyers on how to avoid making misleading green claims:
- Create and maintain documentary evidence for any green claims made by your organisation
- Have policies and procedures that provide for a rigorous review process of any green claims before they’re used in marketing and promotional materials
- Review claims regularly, as the science can quickly change, making your claims inaccurate
- If claims of being carbon neutral rely on carbon offsetting, make this clear
- If the science differs, don’t state that your green claim is universally accepted
- Check that your suppliers can support your green claims
- If in doubt – leave it out
Get legal assistance from LawBite
Greenwashing poses a significant threat to businesses, particularly small and medium-sized enterprises (SMEs), as they navigate the complexities of sustainability and environmental responsibility. While many SMEs genuinely strive to adopt eco-friendly practices, a lack of knowledge and skills can inadvertently lead to greenwashing, damaging a brand's reputation and even resulting in legal consequences.
To avoid making misleading green claims, companies should maintain thorough documentation, implement rigorous review processes, stay updated on scientific advancements and ensure transparency regarding carbon offsetting and supplier support. Seeking legal assistance can provide valuable guidance in navigating these issues effectively and efficiently. If you need advice concerning avoiding greenwashing or defending greenwashing claims, book a free 15 minute consultation or call us on 020 3808 8314.
