Environmental performance of products and businesses – the importance of substantiating claims

A new EU initiative will require companies to substantiate claims they make about the environmental footprint of their products or services by using standard methods for quantifying them. The aim is to make claims reliable, comparable and verifiable across the EU, thus reducing instances of greenwashing. A proposed regulation is planned for 2021. The aim is to equip customers with better information on the sustainability of products and to fight greenwashing.³

In the meantime, companies are well advised to follow the practical and comprehensive (draft) guidance recently issued by the UK Competition and Markets Authority (CMA),⁴ which is open to public consultation until 16 July 2021. If a company is concerned about greenwashing, this is a perfect opportunity to influence the debate and shape policy.⁵ Although only applicable to instances of greenwashing in the UK, the guidance should resonate with any companies making environmental claims wherever they are located.

Businesses keen to communicate their products’ green credentials while reducing the risk of misleading customers should respect the following key principles, which are well articulated in the CMA’s draft guidance:⁶

• Claims must be truthful and accurate: Businesses must live up to the claims they make about their products, services, brands and activities.
• Claims must be clear and unambiguous: The meaning that a customer is likely to take from a product or service’s messaging and the credentials of that product or service should match.
• Claims must not omit or hide important information: Claims must not prevent someone from making an informed choice because of the information they leave out.
• Claims must only make fair and meaningful comparisons: Any products / services compared should meet the same needs or be intended for the same purpose.
• Claims must consider the full life cycle of the product: When making claims, businesses must consider the total impact of a product or service. Claims can be misleading where they do not reflect the overall impact or where they focus on one aspect of it but not another.
• Claims must be substantiated: Businesses should be able to back up their claims with robust, credible and up-to-date evidence.

These principles are in line with earlier guidance from the EU Commission for making and assessing environmental claims under the Unfair Commercial Practices Directive.⁷ Additional useful criteria and examples can be found in several other national guidance documents on environmental claims, notably the French Practical Guide to Environmental Claims for traders and consumers,⁸ and the UK Green Claims Guidance.⁹

The Dutch Authority for Consumers and Markets (ACM) also recently published Guidelines regarding sustainability claims¹⁰ that contain similar recommendations to the draft UK guidance. They spell out in equally clear and simple terms the following five rules of thumb:

• Make clear what sustainability benefit the product offers: Sustainability claims are only of use to customers if these are clearly phrased and easy to understand.
• Substantiate sustainability claims with facts, and keep them up to date: It is important to check regularly whether claims still hold up, or whether they need to be revised.
• Comparisons with other products or companies must be fair: Comparisons with other products / services or companies should not lead to any misunderstandings among customers about the sustainability aspects of various products.
• Be honest and specific about your company’s efforts with regard to sustainability: A claim about future goals for marketing purposes should only be used if there is a clear, concrete, and verifiable strategy to realise those goals.
• Make sure that visual claims and labels are useful to consumers, not confusing: It must be clear what a label stands for, and on the basis of what criteria the label has been awarded.

Non-compliance can lead to:

• Costly and time-consuming investigations by consumer and/or competition authorities for unfair commercial practices and/or even, in some instances, for potential violations of competition law rules where a dominant company denigrates competing products, or where competitors use an environmental claim as a screen to engage in anti-competitive collaboration;
• Court proceedings;
• Payment of redress to any customers harmed;
• Fines and periodic penalties;
• A negative impact on supply relationships;
• Reputational damage.

The EU Commission is currently also looking at ways to strengthen the powers of national authorities, to better equip them to deal with greenwashing instances in a coordinated fashion.

Practical compliance tips

Companies should bear the following practical recommendations in mind when they formulate green claims about their products and services.

• DO express claims in a way that is transparent and straightforward. They need to be easily understandable.
• DO openly state any conditions or caveats that apply. These should not contradict the claim.
• DO ensure that claims can be substantiated by evidence that is robust, credible and up to date.
• DO use independent third-party research to support an environmental claim.
• DO make sure claims are up to date in light of new evidence, technological developments and changes to legislation.
• DO base comparisons with competing products / services on clear and objective information.
• DO make comparative claims that can be substantiated by transparent, accurate and easily verifiable evidence.
• DO take into account the total life cycle of a product or service before making an environmental claim.
• DO make sure that where a claim makes reference to a study or survey, the relevant study or survey is publicly available and accessible to customers.
• DO amend claims to ensure they are compliant.
• DO NOT make false or deceptive statements.
• DO NOT overstate or exaggerate the sustainability or positive environmental impact of a product or service.
• DO NOT make vague and/or general statements that are likely to be misleading.
• DO NOT omit or hide information that enables customers to make an informed choice.
• DO NOT cherry-pick beneficial aspects and highlight only those so as to mislead.
• DO NOT imply one product is greener or more environmentally friendly if it is not.
• DO NOT use self-made labels or certificates that are likely to deceive by giving the impression of responding to environmental standards endorsed by an official agency.

As a final recommendation, remember to seek legal advice before formulating green claims and/or if competitors are engaging in greenwashing.

1. The sweep was not only coordinated in the EU but also around the globe under the umbrella of the International Consumer Protection and Enforcement Network;
2. See the EU Commission press release, Screening of websites for ‘greenwashing': half of green claims lack evidence (28 January 2021), available at: https://ec.europa.eu;
3. More information about the EU Commission initiative to strengthen the role of customers in the green transition can be found via the following link: https://ec.europa.eu;
4. See the CMA’s Draft guidance on environmental claims on goods and services (21 May 2021) at: www.gov.uk;
5. More information about the CMA’s consultation is accessible at: www.gov.uk;
6. See paragraph 1.7 of the CMA’s Draft guidance on environmental claims on goods and services;
7. Directive 2005/29/EC; 2016 guidance available at: https://eur-lex.europa.eu. Other EU guidelines can be found in the Consumer market study on environmental claims for non-food products (2014), available at: https://ec.europa.eu;
8. Available at: www.economie.gouv.fr;
9. Available at: www.ukcpi.org;
10. See the ACM’s Guidelines regarding sustainability claims (28 January 2021) at: www.acm.nl.

In-depth 2021-194