Green claims update: July 2024

Welcome to our round-up of the key legal and regulatory developments relating to green claims. If you have any questions about this, or about wider ESG and sustainability regulatory developments, please get in touch.

Key updates

EU Council adopts position on Green Claims Directive 

The EU Council has adopted its position on the Green Claims Directive (GCD). Key changes proposed include: (1) additional rules on carbon offset claims to require companies to disclose the percentage of emissions offset and show progress towards a net zero target; (2) a simplified verification procedure involving self-compliance for certain lower risk green claims; and (3) a softer approach to penalties including removing the reference to specific fines. The GCD will now be negotiated with final agreement expected later this year. Our breakdown of the key negotiation areas is here.

DMCC Act to introduce fines for greenwashing

The Digital Markets Competition and Consumers Act 2024 (DMCC Act) has now passed into law. It will give the CMA the power to impose fines of up to 10% of global annual turnover for breaches of consumer protection law, including for greenwashing. These new powers will be introduced through secondary legislation with timings tbc. See our article for more information.

ASA issues new green claims rulings

After a quiet few months, the ASA has stepped up its enforcement action with a spate of recent rulings against Luton Airport, HX Hurtigruten Expeditions, and Wessex Water for misleading green claims.

• Luton Airport

Magazine and poster ads about the airport's expansion were misleading because they omitted significant information about the GHG emissions caused by additional air traffic movements. This follows other rulings targeting the aviation sector for misleading claims about the environmental impact of flying (e.g. Etihad, Lufthansa).

• HX Hurtigruten Expeditions

An ad claiming the cruise company was "the leader in sustainable expeditions" was misleading because it did not make clear that it only related to the sea-travel portion of the trip and not the flights to/from the destination location. "Sustainable expeditions” was an absolute claim requiring substantiation across the full life cycle of a HX holiday (including flights) and this had not been provided. This follows a previous ruling against Intrepid Travel on similar grounds.

• Wessex Water

A TV ad promoting Wessex Water's ongoing investment in water management was misleading because it omitted material information about the water company's history of releasing sewage into the environment. Around the time of the ad, Wessex Water had a low EPA rating of two, which contradicted the overall positive impression in the ad. This follows a similar ruling against Anglian Water.

Sector-specific updates

Food and drink

• The ASA has published a helpful commentary on green claims in food advertising. Key messages for food advertisers include: tread carefully with 'green' or 'natural' imagery which can create a misleading overall impression, clearly explain the basis for any "regenerative farming" claim as this is not well understood, and ensure claims cover a product's full lifecycle. Absolute claims like "good for the planet" or "sustainable" (e.g. about plant-based food) require high levels of substantiation so are high risk.

Transport

• The ASA has published guidance on green claims about electric vehicles. Key messages for advertisers include: be transparent about the vehicle's source of power (e.g. electric or fuel combustion), make it clear that "no" or "zero" emissions claims only relate to driving and not to powering the vehicle, and avoid broad absolute claims like "give back to the environment" which are high risk.

• Following the recent greenwashing ruling against KLM, the environmental NGO ClientEarth has written to 71 airlines warning they should not promote common industry claims about "sustainable aviation fuels", "offsetting" and "net zero by 2050", which they say are likely to be unlawful. 

Finance

• The Financial Conduct Authority (FCA) has introduced a new “anti-greenwashing rule” to help ensure that any sustainability claims about financial products and services are fair, clear, not misleading and consistent with the sustainability profile of the product/service. Firms falling foul of the new rule risk enforcement action, including fines for cases of serious misconduct. See our article for more information.

Rest of the world

• Canada introduces new greenwashing laws

Amendments to the Canadian Competition Act introduce an explicit prohibition against deceptive green claims. All green claims must now be supported by "adequate and proper" tests/substantiation in accordance with "internationally recognized methodologies". Upcoming guidance will provide more detail on these requirements drawing on evolving standards in the EU and elsewhere. The amendments will also make it easier to bring greenwashing cases before Canada's Competition Tribunal.

• German court rules on use of vague "climate neutral" claim

The German Federal Supreme Court has ruled that ambiguous green claims like "climate neutral" ("klimaneutral") must include further information to explain the specific meaning of the claim. For example, "climate neutral" could be interpreted as a reduction in CO2 emitted during production processses or simply the offsetting of emissions, and without further information risks misleading consumers. This judgment follows recent amendments to EU consumer protection law which will introduce an outright ban on carbon neutral claims based on offsetting (see our previous update).

Publications

• The FCA's new “anti-greenwashing” rule and the role of whistleblowing in ESG compliance
• Digital Markets, Competition and Consumers Act receives Royal Assent
• From zero-emissions to AI-assisted ad monitoring: an overview of the ASA's activities in 2024
• The EU's Green Claims Directive
• Environmental sustainability: a snapshot of a changing regulatory landscape