Practical Steps to Avoid Greenwashing
Stuart Helmer
Avoiding greenwashing is tricky but crucial. Join Stuart Helmer as he breaks down common pitfalls and practical tips to help you make legally compliant environmental claims.
Avoiding greenwashing is tricky but crucial. Join Stuart Helmer as he breaks down common pitfalls and practical tips to help you make legally compliant environmental claims.
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Practical Steps to Avoid Greenwashing
13 mins 5 secs
Key learning objectives:
Understand common pitfalls in green advertising
Outline practical steps to avoid greenwashing
Outline sector-specific greenwashing regulation
Overview:
Greenwashing is now a major focus for regulators globally. The UK’s Competition and Markets Authority (CMA) continues to investigate misleading environmental claims, and the FCA’s new rule signals increasing scrutiny in financial services. With regulators gaining more enforcement powers, businesses must take green claims seriously at a board level to avoid legal and reputational risks. There are many traps to avoid in green advertising - such as using technical or vague terms, using future-facing claims and misleading symbols. Companies should base claims on evidence, consider consumer perception and implement internal processes.
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Summary
What are common pitfalls in green advertising?
- Unclear technical terms: Terms like ‘biodegradable’ and ‘compostable’ have distinct meanings and should be properly explained
- Vague claims: Words like ‘sustainable’ or ‘eco-friendly’ may imply an overall positive impact, which is a high bar
- Unqualified claims: A claim should clearly state its scope - if only part of a product is recyclable or sustainably sourced, this must be made clear
- Consumer actions: If a product’s environmental benefits depend on the consumer taking specific actions (e.g. using a special recycling facility), this should be stated
- Future-facing claims: Claims like “carbon neutral by 2030” must be backed by a concrete plan with board-level approval and demonstrated progress
- Offsetting concerns: Many carbon offsetting schemes do not deliver the claimed benefits
- Lack of substantiation: Environmental claims must be backed by solid evidence, even if obtaining this evidence is costly or time-consuming
- Misleading symbols: Businesses should be cautious about using self-created environmental symbols, as they may be perceived as misleading
- Green imagery: Ads must be assessed in context - using nature-themed images alongside general claims about responsibility can give a misleading impression
What practical steps can businesses take to avoid greenwashing?
- Base claims on evidence: Instead of deciding what to claim first, businesses should start with the evidence they have and ensure their claims align with it
- Consider consumer perception: Advertisers should step back and assess how an average consumer might interpret a claim, ensuring it does not rely on technical knowledge
- Implement internal processes: Businesses should establish policies and training programmes to ensure environmental claims are accurate and not misleading. This is particularly important for industries under regulatory scrutiny, such as fashion retail
What are the key regulations for green claims in financial services?
The Financial Conduct Authority (FCA) introduced an anti-greenwashing rule requiring FCA-authorised firms to ensure sustainability claims are: consistent with the product’s actual sustainability characteristics and fair, clear, and not misleading. The FCA guidance emphasises four principles: claims must be correct and capable of being substantiated, claims should be clear and easy to understand, claims must be complete and not omit key information, and comparisons should be fair and meaningful.
What are the risks of breaching greenwashing regulations?
For financial services firms, non-compliance with the FCA’s anti-greenwashing rule can lead to:
- Fines, suspensions, or other enforcement actions by the FCA
- Civil claims or consumer complaints from individuals who relied on misleading sustainability claims
- Complaints to the Financial Ombudsman Service, potentially leading to compensation payments
- Legal challenges from competitors or NGOs seeking to ensure a fair and transparent market
What is the future of greenwashing regulation?
Greenwashing is now a major focus for regulators globally. The UK’s Competition and Markets Authority (CMA) continues to investigate misleading environmental claims, and the FCA’s new rule signals increasing scrutiny in financial services. With regulators gaining more enforcement powers, businesses must take green claims seriously at a board level to avoid legal and reputational risks.
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Stuart Helmer
Stuart Helmer, UK Head of Advertising and Marketing at CMS in London, has 20 years of experience in advertising compliance and disputes. He advises businesses on making advertising claims, including environmental claims, in compliance with English law and regulation. He leads multinational teams advising on these issues throughout Europe and beyond. Stuart also advises on advertising disputes, regulatory enquiries, and dealing with competitors with unfair or misleading advertising.
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