FMCG come under CMA's greenwashing gaze

Summary: The UK Competition and Markets Authority (CMA) has launched an investigation into "greenwashing" in the fast-moving consumer goods (FMCG) sector, which is worth more than £130bn per year. Their aim is to assess whether consumers, who could end up paying more for goods that claim to be more environmentally friendly, are being misled. The authority will scrutinise online and in-store claims about environmentally friendly products to discover if broad "eco-statements" or claims about the use of recycled or natural materials are actually being upheld.

Why this is important: Tolerance for misrepresentation, particularly where a price premium is involved, is increasingly low and could lead to longer term reputational and brand damage.

The big theme: There has been a shift in thinking from considering just the impacts 'of' the environment, social and governance aspects and how they impact a business, to also considering the impact of the business 'on' the environment and society as a whole. This concept of 'Double Materiality' is also being embedded in reporting and disclosure requirements for both corporates and asset managers. Organisations need to consider a broader group of stakeholders interests including employees, customers and the community at large.

Summary of a press release from The UK Government

The CMA is expanding their work into greenwashing by reviewing products in the FMCG category. With almost 91% of all dishwashing products and all toilet products marketed as 'environmentally friendly' the concern is that shoppers may be being misled as to the true extent of these claims and even worse, potentially driven to pay a premium for those products. The average household spends almost £70 per week on food and drink alone with the FMCG sector worth more than £130bn annually.

In January of 2022, the CMA began focusing on the fashion sector bringing enforcement actions against Boohoo, George at Asda and ASOS in the middle of 2022. In its Annual Plan consultation 2023 to 2024, the CMA gave details on its priority to support the acceleration of the transition to a net zero economy and promote environmental sustainability.

Why this is important

A 'green claim' suggests that a product, service, process, brand or business is better for the environment either having no impact, a positive impact or less damaging that either a previous product or a competitor product. One of the concerns of the CMA is that consumers may end up paying a price premium for goods based on their environmental credentials. Greenwashing involves giving a misleading or false impression of how environmentally friendly an organisation's actions are.

However, it is interesting to note that research from Germany-based data and intelligence firm GfK found that whilst 71% of consumers believe that it is important that companies take environmentally friendly actions, only 25% of them trust the claims of FMCG brands about their environmental practices. Research on price premia is mixed. A recent survey by Deloitte found that 57% of consumers would adopt a more sustainable lifestyle if brands made "sustainable alternatives more affordable" and only 24% would actually pay more for sustainable packaging and products.

Consumer protection laws have been around for a while in the UK and around the globe and are largely focused on consumers being misled in general. In the UK, the key piece of consumer protection legislation is the Consumer Protection from Unfair Trading Regulations 2008 which includes specific prohibitions against misleading actions and misleading omissions. In France there are quite a few protections. For example, the Consumer Code provides general provisions against misleading commercial practices and misleading advertising, whilst the Climate and Resilience Law (enacted August 2021) has a specific greenwashing provision banning the use of any wording on the product, its packaging or advertising indicating that the offering is carbon-neutral or has no negative impact on the climate. The Australian Competition & Consumer Commission (ACCC) is actively targeting greenwashing too and Singapore has the Consumer Protection (Fair Trading) Act, the Misrepresentation Act and the Singapore Code of Advertising Practice although they do not explicitly cover greenwashing.

The CMA published a Green Claims Code checklist in September 2021 based on six key principles aimed at preventing businesses from making misleading environmental claims about their offerings. Claims should ...

Be truthful and accurate
Be clear and unambiguous
Not omit or hide important/relevant information
Be fair and meaningful, if they include comparisons
Consider the full life-cycle
Be substantiated

The full checklist can be found here

One example in the FMCG space on environmental claims was Unilever being called out by the UK Advertising Standards Authority (ASA) for a Persil (laundry detergent) TV advert that said Persil was "kinder to our planet" and featured children picking up litter on a beach. Following a complaint, the ASA banned the advert concluding that the basis of the claim "kinder to our planet" had not been made clear. "Although we acknowledged Persil were undertaking actions to reduce the environmental impact of their products, we had not seen evidence or analysis to demonstrate the overall environmental impact of the featured liquid detergents over their full-life cycles, compared with Persil's own previous products or other products, in support of the claim 'kinder to our planet'", the ASA said. Be substantiated.

Sometimes claims can be well intentioned but with targets that are too far out in the future or too generalised. Specifics are important. Although if you are specific, you had better be right and be able to back up your claims. On the same day in June of 2022, the UK Advertising Standards Authority (ASA) made two significant rulings under the Green Claims Code. Both rulings involved major supermarket chains and both supermarket chains made the same claim: "a plant-based diet is better for the planet and our health." However the ASA found in favour of one (Sainsbury's) but not the other (Tesco). So what's going on there? As Jane Shaw pointed out in her excellent article, Sainsbury's had made general statements which are based on scientific consensus, whereas Tesco had made claims relating to a specific product in its Plant Chef range. The truth was not the issue in this case. Tesco had no evidence to substantiate their claim.

Please read: important legal stuff.