Competition and Markets Authority – Making green claims across the supply chain

The Competition and Markets Authority (CMA) has published a short explainer to supplement its Green Claims Code clarifying who is responsible for environmental claims across supply chains - including brands, manufacturers, suppliers and retailers. 

A ‘green claim’ (sometimes called an environmental claim, eco-friendly claim or sustainability claim), is a claim made by a business to a consumer which suggests how a product, service, brand or business provides a benefit, or is less harmful, to the environment. 

Supply chains are often complex, meaning that the evidence needed to substantiate a claim may sit with different parties; this increases the risk of inaccurate or misleading claims - particularly where information is incomplete or withheld. Consumer protection law in relation to green claims applies throughout the supply chain, requiring all claims to be accurate and not misleading - whether made directly by a business, or on its behalf. 

What penalties could the Competition and Markets Authority impose?

Misleading green claims have been an enforcement priority for the CMA when exercising its new enforcement powers in relation to consumer law, with multiple investigations being concluded in recent years. Failure to comply with CMA guidance on green claims puts organisations at risk of breaching consumer laws, which could lead to a CMA investigation, fines of up to 10% of group worldwide turnover, and directions to compensate customers and/or remedy non-compliant behaviours.

What could the crackdown on environmental claims mean for your brand?

As consumers become increasingly environmentally conscious, businesses selling to consumers seek to promote their green credentials in order to differentiate themselves from their competitors. Green claims which are accurate, backed up by evidence, and verifiable are permissible and encouraged by the CMA, who highlight that, with the right information, consumers can make informed choices - in turn building consumer confidence, and increasing the incentive to invest in green initiatives. However, green claims frequently fall foul of CMA guidance. 

Where does responsibility for green claims lie within the supply chain?

The CMA guidance, 'Making green claims: Getting it right, across the supply chain' seeks to clarify the position regarding who in the supply chain bears the burden of ensuring compliance, and which teams should be responsible for green claims compliance: 

  • Procurement teams: Ensuring that suppliers can verify their claims (including a contractual obligation to provide supporting information and verification), and evaluating relationships with suppliers that refuse to verify their claims;

  • Marketing teams: Investigating whether claims can be substantiated before they are made or repeated; and

  • Legal and compliance teams: Ensuring that appropriate internal processes and procedures are in place to foster compliance. 

Importantly for retailers, the CMA guidance sets out that even where a retailer is merely displaying a misleading green claim made by a manufacturer, both the manufacturer and the retailer may be liable for engaging in an unfair commercial practice - creating a significant risk for retailers. 

What steps can you take to ensure your sustainably claims are accurate?

The guidance issued by the CMA builds on legislation already in force. With no transitional period for implementation, compliance measures should be implemented swiftly to avoid CMA enforcement action. 

In summary, all businesses should: 

  • Review all green claims made across all sales channels, perform a risk analysis on them, identify any liability gaps or exposure to risk, and take proactive steps to address any issues. 

  • Regularly review green claims, re-verify information, and document compliance efforts on an ongoing basis considering varying requirements across different sectors. 

  • Supplier relationships: Ensure that contracts with suppliers address green claims - including appropriate obligations, warranties, and indemnities to manage the risk, and self-certifying supplier questionnaires in relation to green claims. 

  • Provide training to sales and marketing teams on the importance of making compliant claims, giving details of internal policies and procedures. 

Further guidance from the CMA is available here.

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Please be advised that this is an update which we think may be of general interest to our wider client base. The insights are not intended to be exhaustive or targeted at specific sectors as such, and whilst we naturally take every care in putting our articles together, they should not be considered a substitute for obtaining proper legal advice on key issues which your business may face.