Greenwashing continues to be a significant focus for the UK’s competition regulator as its scrutiny of the fashion sector continues.
In January 2022, only a few months after launching the Green Claims Code, the Competition and Markets Authority (“CMA”) opened a review of environmental claims in the fashion sector. In July 2022, the CMA opened an investigation into three specific fashion brands (ASOS, Boohoo and George at Asda).
That investigation led to formal undertakings being signed in March 2024 under which the three brands agreed only to use accurate and clear green claims in their marketing. The undertakings accepted by the companies included: not making misleading environmental claims or impressions (including through the use of imagery and icons); be clear when asserting environmental claims where the specific claim relies on consumer action (such as disposing of the product in a certain way); agreeing that items sold as part of a specific range must have clear and accessible criteria for being included in the range; and not claiming an item is organic or recycled where it contains non-negligible fibres which are not.
We explored this outcome in more detail in our previous blog, in which we explained how this impacted the companies in question and would have a broader, longer-term impact on the fashion sector and beyond. An open letter issued by the CMA at the same time as agreeing the undertakings sent a warning to the rest of the fashion sector, reminding them of both their obligations under consumer protection law and the six key principles of the Code.
Importantly, however, the CMA accepted that at the time the undertakings were agreed, it had not reached a view on whether any of the companies had in fact breached consumer protection law. It may well take a different approach next time however, particularly since the passing of the Digital Markets, Competition and Consumers Act 2024 (“DMCCA”) which provides the CMA, under Part 3, with powers to enforce consumer law directly, issue infringement notices (with requirements on businesses to take positive remedial actions) and impose penalties up to 10% of global turnover. At the time of writing, most of the DMCCA is not in force.
In the open letter sent in March 2024, Cecilia Parker Aranha, the CMA’s Director of Consumer Protection, noted the significance of the DMCCA and made it clear that businesses should already be familiarising themselves with the Code and the commitments in the undertakings given by ASOS, Boohoo and George at Asda. The letter also promised further guidance for the fashion industry.
Fashion business take note
The CMA has kept that promise. On 18 September 2024 it published new guidance titled Complying with consumer law when making environmental claims in the fashion retail sector. The 20-page Guidance specifically draws on the conclusions from the CMA’s fashion sector investigation and the undertakings agreed.
The CMA’s Guidance is relevant to “all businesses which make environmental claims about: clothing, footwear, fashion accessories, or related services for example packaging, delivery and returns”. Although it focuses on fashion retail, the CMA states that the Guidance will also be relevant to manufacturers and suppliers (including third party branded suppliers), as well as wholesalers and distributors.
The guidance sets out a number of clear rules applicable to environmental claims about relevant products, services, processes and brands, highlighting that “each business in the supply chain has a responsibility to ensure that its claims are accurate and substantiated”. The CMA also makes it clear that “businesses need to look at all their practices in the round”, as well as the specific issues highlighted in the guidance. “Businesses should consider whether they need to make other changes to ensure they comply with the law,” the CMA adds.
The primary rule overarching the Guidance is that all of a business’s environmental claims must be clear and accurate (whether they are made “on a product (including on labels), in advertising materials, in store or online”). Other rules include:
- Don’t hide important information
- Avoid using unclear terms
- Do not use imagery and icons in a misleading way
- Ensure comparisons are clear
- Explain clearly any action a consumer needs to take
- Be clear when using filters and other navigational tools
- Describe fabrics clearly and precisely
There is also guidance set out in relation to product ranges, affiliations and accreditations.
Third parties
One particular area of note is the extent to which businesses are expected to police the activities of third parties. The Guidance states that a retailer is “responsible for any claims made relating to third-party products”; businesses therefore need to satisfy themselves that those claims are not misleading.
The Guidance suggests that businesses should obtain evidence from their suppliers which supports the claims they make. This will often be in the form of final scope certificates and
final transaction certificates. The Guidance sets out that good practice will include conducting spot checks on relevant certificates obtaining confirmation from suppliers of compliance with their customer’s greenwashing policies and contractual terms.
Strengthened law and focus
On the same day it issued the Guidance, the CMA wrote (privately this time) to 17 “well-known fashion brands” urging them to review their business practices. According to the CMA, its letters “highlight areas of concern regarding their green claims, such as the use of broad or general terms and whether certain products are being wrongly included in ‘eco’ ranges.” This is all part of a suite of actions taken by the CMA over the past few years to promote environmental sustainability – from announcing in December 2023 its scrutiny of environmental claims concerning Unilever’s household goods, to issuing informal guidance to The Fairtrade Foundation on the application of the Competition Act 1998 to environmental sustainability agreements.
We can therefore expect greater scrutiny from the CMA on all things green. Promoting environmental sustainability remains a key part of the CMA’s 2024-25 Annual Plan, as does applying the new powers available to it under the DMCCA.
The underlying legislation protecting consumers from unfair commercial practices, under which greenwashing and misleading environmental claims fall, remains the same: the Consumer Protection from Unfair Trading Regulations 2008. However, the risk of the CMA being interested in such behaviours has undoubtedly increased. Along with closer attention comes an increased risk of the CMA taking enforcement action that could have a significant impact on business practices and revenue.
Further information
For further information on the issues raised in this blog post, please contact Sophie Wood.
About the AUthors
Sophie Wood is a Legal Director in the Criminal Litigation team with extensive experience in advising corporate and individual clients involved in a wide range of internal, criminal and regulatory investigations. Sophie has acted for individuals and companies involved in investigations brought by the Environment Agency, Health and Safety Executive and local authorities, and is a member of the firm’s cross-practice Health, Safety and Environment Group.
