CMA publishes guidance to tackle Greenwashing

September 24, 2021

The Competitions and Markets Authority (CMA) has published the ‘Green Claims Code’, containing guidance principles to assist businesses in complying with consumer protection law and avoid making misleading environmental claims. A full review of misleading claims will be conducted by the CMA at the beginning of 2022.

Misrepresented environmental claims, also known as Greenwashing, can occur in all types of businesses. Greenwashing can relate to a company’s goods or services, including a process, brand, or entire business.

Consumer protection law in the UK relates to any Green Claims that businesses make. The principles set out by the CMA assist in compliance with the law, by providing greater clarity on how the law is set out in practice. Specifically, the Green Claims Code highlights those businesses must ensure any claims are truthful and accurate, not be misleading, and not omit any important information.

The Green Claims initiative was announced ahead of COP26. Last year, a CMA investigation found that 40% of online claims could be misleading, paving the way for thousands of potential breaches in the law. The CMA will conduct a review across all sectors. Any business that fails to comply with the law can not only harm consumers but also risks damaging their own reputation.

The Finance sector is currently in the spotlight for how misleading claims can create a damaging effect. Allegations against DWS for misleading sustainability credentials were made last month. On the news that the SEC and BaFin were launching an investigation into allegations of Greenwashing, the share price for DWS dropped by 13.7%. This demonstrates the negative effect that potentially misleading ESG related claims can create.

ESG awareness in the Finance sector has become increasingly important, with firms wanting to become more sustainable and avoid reputational damage. With the increased pressure from the CMA, the Green Claims Code acts as an early warning to ensure businesses are transparent in their environmental claims.

Watch Minerva's latest webinar on Sustainable Securities Lending: The next greenwashing scandal in the making?