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United Kingdom: Advertising Standards Authority zeroes in on greenwashing

ESGUnited Kingdom: Advertising Standards Authority zeroes in on greenwashing

Key considerations for businesses regarding green claims and environmental messaging

In brief

Recent decisions from the Advertising Standards Authority (ASA), a UK regulator, highlight how companies must critically rethink the ways in which they advertise and report on green credentials.

The transition to net zero means that companies are understandably keen to highlight such credentials, and existing and upcoming legislation in various jurisdictions, including the UK, requires certain companies to make public sustainability and environmental disclosures in annual reports and elsewhere. However, companies now face a delicate balancing act between advertising such credentials and making such disclosures, and the increased litigation risk from NGOs and other actors as well as regulatory enforcement and sanctions. The ASA’s recent decisions build upon industry-specific investigations into green claims conducted by the Competition and Markets Authority (CMA) earlier this year.

To avoid regulatory scrutiny, companies must ensure that green claims are robust, credible and aligned with the new ASA guidance regarding misleading environmental marketing. A closer look at some of the ASA’s recent decisions reveals trends which are worth bearing in mind when making green claims.

Industry context matters

Companies, especially those in the energy and transportation sectors, should be particularly mindful of the context of the industry’s overall environmental impact relative to the company’s green claims and initiatives. For example, the ASA previously deemed a Ryanair advert, which claimed that Ryanair was “Europe’s lowest emissions airline”, was misleading as it did not reflect the wider industry or high carbon emissions caused by air travel, and the basis of the claim was not made clear.

The focus on substantiation and contextualisation of claims was demonstrated again in the ASA’s recent ruling against Lufthansa in March 2023. The ASA ruled the advert, stating Lufthansa was “PROTECTING [THE WORLD’S] FUTURE”, was misleading to consumers as it had not been adequately substantiated. While the claim was based on specific steps Lufthansa had taken to be more environmentally friendly, the ASA deemed that the initiatives and targets underpinning this claim would only deliver results years into the future. Further, the ASA decided the lack of existing environmental initiatives or commercially viable technologies in aviation could not support this type of absolute green claim.

Consumer perception is key

Recent ASA rulings have also highlighted that, when making green claims, what a company fails to disclose is just as important as what it does disclose, especially regarding the average consumer’s understanding of those claims. In October 2022, the ASA ruled that two of HSBC’s adverts, highlighting its positive ambitions to help its clients’ transition to net zero and offset its own carbon emissions, did not reflect its current environmental impact. The ASA considered that HSBC’s failure to mention its continued investment in industries which emitted notable levels of carbon dioxide and other greenhouse gases was misleading, as this information would affect a consumer’s understanding of the advert’s overall message. The ASA’s ruling relied on HSBC’s annual report, which made certain disclosures around the bank’s financing activities in certain industries.

Similarly, the ASA found that two of Etihad Airways’ adverts referring to “sustainable aviation” were misleading because they lacked context. The ASA reasoned that the adverts therefore exaggerated the environmental impact of Etihad’s flights. Ultimately, the ASA considered that Etihad failed to convey how “sustainable aviation” was a complex, long-term commitment which average consumers, unlike industry insiders, were less likely to appreciate.

A multi-jurisdictional trend

The regulatory focus on green and environmental claims is not limited to the UK. EU jurisdictions, in particular the Netherlands and France, are also investigating green claims made by companies, especially in the travel and energy industries:

The Dutch Authority for Consumer Markets recently found Ryanair had been using misleading sustainability claims during an investigation into the company’s CO2 compensation scheme, as the statements Ryanair made in relation to the scheme could be interpreted by consumers as meaning they could “fly greener” by opting to travel with Ryanair.

Following a complaint by Dutch campaigner Fossielvrij, airline KLM pulled its ‘Fly Responsibly’ advert campaign which was brought to the District Court of Amsterdam on the basis that it breached EU consumer law standards by creating a false impression that its flights do not contribute to the worsening climate emergency.

TotalEnergies is currently subject to an ongoing lawsuit in France regarding its 2019 advert campaign which stated that the company was aiming for net zero by 2050 and was becoming a major player in the energy transition. Complainants claimed this was misleading to consumers as it gave the impression that the company is part of the solution to climate change when, according to complainants, TotalEnergies continues to significantly contribute to global pollution levels.

Future areas of regulatory focus

This trend of regulatory action shows no sign of slowing, and UK regulators have publicised specific areas for interrogation. As announced in early 2022, the CMA is investigating companies making misleading green claims in the fashion, fast-moving consumer goods (FMCG) and travel sectors. With investigations already conducted against major fashion brands last year and following the CMA’s announcement in January regarding its focus on the FMCG sector, companies operating in travel and transport should be mindful that increased scrutiny by UK regulators is likely fast-approaching.

The EU is also looking to take widespread action by introducing new legislation regulating environmental claims and the use of sustainability labels. In particular, the proposed Green Claims Directive would impose new substantiation, communication and verification requirements, as well as introducing additional monitoring and enforcement mechanisms. You can read more about the impact of the Green Claims Directive here.

Businesses should note that anyone can make a complaint to the ASA (or indeed, attempt to bring a claim in court), including members of the public, competitors’ employees and, increasingly, members of campaign and climate activist groups.

To help achieve the balance between making appropriate green claims and disclosures, and the risk of ASA or other scrutiny, companies may wish to consider:

Providing sufficient, industry-specific context for all green claims

Ensuring all green claims made are accurate, specific, and can be substantiated using objective evidence

Developing a green claims toolkit to ensure company-wide consistency

Implementing sign-off processes and effective verification and controls in respect of green claims

Story from globalcompliancenews.com

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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