The little black dress has long been the staple of all self-respecting wardrobes. But now it is the time of the little green statement issuing forth from all well-respected board rooms.

The focus on climate change and environmental considerations is moving apace and responsible companies know that they will need to embrace environmental and cultural changes to remain relevant to their customers. But is there a danger that the words get ahead of the actions in a bid to appear to be going the right thing?

At the annual State of Luxury summit in January, Luxury Law Alliance members and partners heard about the importance of the “E” for environmental in the ESG agenda; but we also heard of the dangers of “greenwashing”.

Customers are becoming more aware of the environmental implications of the products they purchase and are becoming more demanding of companies. Some businesses have strong green credentials; others have genuine green ambition. But there can sometimes be a fine line between a green and sustainable message, and greenwashing. “Greenwashing” is a process of conveying a false or unsubstantiated impression or providing misleading information on the environmental impact of a company’s products, usually to suggest that they are more environmentally sound that others in an attempt to capitalise on the growing demand for environmentally sound products – it is a play on the term “whitewashing,” meaning using misleading information to gloss over bad behaviour. It is also not a new concept, but in recent years has entered the vocabulary of the savvy consumer.

Greenwashing claims vary considerably, from statements around net carbon to recyclability; from clean energy to free-from-chemicals; from using only natural ingredients to saving the planet. The authorities are realising that, without some guidelines and checks, companies’ messaging could easily get out of control. Consequently, in September 2021, the UK’s Competition and Markets Authority (CMA) published its final guidance for businesses making green claims, stating that it will act in 2022 to ensure operators are following these standards.

The CMA’s research indicated that up to 40% of green claims made by online retailers of goods were misleading and could not be supported. The CMA had specific concerns about travel, sports, textiles and fashion sectors as well as fast-moving consumer goods (such as food and drink, beauty products, and cleaning products). Although companies are required to comply with existing consumer law, the CMA have indicated that it may consider implementing formal investigations, published undertakings where businesses have previously failed to meet their requirements, and possible prosecution for serious breaches of its new code.

THE CMA’s requirements focus on ensuring that claims (1) are truthful and accurate, (2) are clear and unambiguous, (3) do not omit or hide important relevant information, (4) consider the full lifecycle of the product or service, (5) are substantiated, and (6) comparisons are fair and meaningful.

Similar regulations apply in other countries; the US Federal Trade Commission has published a green guide to help business and consumers.

What does this mean for businesses?

It is important for all businesses that make “green” or sustainability statements, that the claims are thoroughly considered and checked, and are not misleading. This means considering the words used and how they may be interpreted by the consumer. It means ensuring that there is evidence to back up the claims. It also means that claims need to be complete and not focus on just one element of a product or deliberately avoid a fact which could undermine the statement. The claims should be reviewed by people outside the marketing departments to ensure that they can be substantiated. Additional consideration around substantiation should be given where claims are being made based on information provided by a third party in the supply chain. Luckily the CMA have produced a checklist which sets out 13 questions to consider for each claim. But businesses also need to consider other regulatory bodies, such as the Advertising Standards Authority as well as Trading Standards as they also have their own guidance on green claims, and for international business they need to consider the regulations in other territories.

As consumers increase their demands for environmentally friendly products and processes, and green considerations and sustainability become embedded in companies’ messages, training needs to accompany it.  This will ensure that those who are involved in sustainability claims understand the regulatory framework as well as the potential fallout from inflated or unsubstantiated claims, be that brand damage, loss of business, regulatory scrutiny, financial penalty or prosecution.

Kate Anthony Wilkinson is group general counsel and company secretary for Mulberry Group plc.  She is a member of the Luxury Law Alliance advisory board.