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Greenwashing, Boohoo and the CMA

 



Boohoo hit the headlines yet again last month (Nov 2023), this time, regarding their ethical trading standards. But where does the company (alongside ASOS and ASDA) currently stand with the ongoing Competition and Markets Authority (CMA) investigation which began 29 July 2022 into arguably misleading advertisements about the environmental impact of their clothing lines?

 

In this post I will explore: what a greenwashing claim looks like; what the current CMA investigation into Boohoo et al. has examined so far; potential legal outcomes for said companies; the updated Advertising Standards Agency (ASA) Guidance from June 2023; how companies can avoid being accused of greenwashing and how consumers can pick the wheat from the chaff.

 

What rules must advertisements comply with?

 

There are currently 90 regulators in the United Kingdom (although the government is looking to reduce this figure). Regulators are not capable of making statute, but instead issue guidance and ‘handbooks’ for how companies should behave to adhere to the law. Therefore, if companies do not act in accordance with their regulators’ published requirements, legal consequences can arise.

 

The ASA are the publishers of the ‘Advertising Codes’: the rules that companies must abide by when advertising. The Committee of Advertising Practice (CAP) offers guidance on the interpretation of the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (the CAP Code) in relation to non-broadcast marketing communications. If these Codes are not abided by, the ASA will attempt to work with the company to change the nature of their advertisements. However, the ASA has the power to refer the matter to the Trading Standards where companies are persistently non-compliant. Trading Standards subsequently determine if the company has broken the law and whether to issue criminal prosecutions. Penalties for a finding of guilt may be in the form of: a summary conviction with an unlimited fine; conviction on indictment with a fine and/or imprisonment (for a term not exceeding two years) and/or confiscation of financial assets.

 

In June 2023, the ASA updated their Advertising Guidance for environmental claims in advertising: ‘The Environment: Misleading Claims and Social Responsibility in Advertising’. The Guidance offers exactly what it says on the tin: information on how companies can comply with the ASA Codes. The June 2023 Guidance is more detailed than previous versions, however guidance from the ASA was in existence when the investigation against Boohoo et al. began. Therefore, the playing field regarding environmental advertising campaigns was by no means the wild west, despite various companies operating as if it were.

 

What is Greenwashing?

 

The CMA reports that the fashion industry is responsible for 2-8% of global carbon emissions. With the public becoming ever-more aware of the negative environmental impact of supporting the creation of new clothing – by campaigns such as Oxfam’s Second Hand September – fashion house marketing strategies are rife with environmental-protection claims. Entire stores sell themselves as ‘sustainable’, other companies claim to have eco-friendly fashion lines using recycled materials (even Primark has ‘recycled’ lines).

 

What isn’t, however, usually mentioned by these companies is the reality of how little said specific product or service that is being advertised actually contributes to reducing the company’s footprint or slowing down climate change as a whole. A company might also employ vague language such as ‘sustainable’ or ‘eco-friendly’. Both techniques can cause the consumer to conclude that the company (either significantly or entirely) has ‘gone green’. This is greenwashing. It is essentially the act of not being specific enough when advertising the positive environmental impacts of products or services, leaving the potential for consumers to think more highly of the company than is deserved.

 

From 10 January 2022 the CMA has been investigating the fashion industry as a whole, examining the accuracy of marketing statements and whether they are specific enough to essentially inform the consumer that the companies’ green attempts are qualified. This investigation is ongoing. It has expanded into other sectors, not just fashion, and the CMA are considering launching further investigations into various companies.

 

The CMA Greenwashing Investigation

 

The CMA details that one of the issues under examination into Boohoo, ASOS and ASDA is whether the companies were employing vague language in their advertisements (as described above) by dubbing clothing lines ‘Ready for the Future’, the ‘Responsible edit’ and ‘George for Good’.

 

But how far has the CMA greenwashing investigation into Boohoo et al. progressed? The regulatory body is yet to conclude about whether there have been any breaches of

consumer protection law. However, they have published the issues under examination. These are, whether:

 

  • “the statements and language used by the businesses are too broad and vague, and may create the impression that clothing collections – such as the ‘Responsible edit’ from ASOS, Boohoo’s current ‘Ready for the Future’ range, and ‘George for Good’ – are more environmentally sustainable than they actually are

  • the criteria used by some of these businesses to decide which products to include in these collections may be lower than customers might reasonably expect from their descriptions and overall presentation – for example, some products may contain as little as 20% recycled fabric

  • some items have been included in these collections when they do not meet the criteria used by the business

  • there is a lack of information provided to customers about products included in any of the companies’ eco ranges, such as missing information about what the fabric is made from

  • any statements made by the companies about fabric accreditation schemes and standards are potentially misleading, such as a lack of clarity as to whether the accreditation applies to particular products or to the businesses’ wider practices.”

 

Potential outcomes

 

The CMA have the capacity to conclude that Boohoo and others have breached consumer protection laws through their advertisements. Both criminal and civil actions can arise as a result of their findings.

 

Considering that Boohoo was named as one of the least sustainable fashion brands by the UK Parliament’s Environmental Audit Committee in 2019, it is likely that sweeping, unqualified, statements made by the company about their ‘green’ fashion lines will be considered misleading and in breach of consumer protection law.

 

Can criminal prosecutions be brought against Boohoo and the like?


Firstly, criminal prosecutions may not be out of reach should it be found that Boohoo and others breached consumer protection laws. David Travers KC and George Spence-Jones of Gough Square Chambers believe that the Consumer Protection from Unfair Trading Regulations 2008 (CPUT) may apply in cases of greenwashing.

 

However, the sticking point in criminal prosecutions may be proving causation. Successful prosecutions under the CPUT require that the use of deception by said company was a significant factor which caused a change in the consumer’s behaviour (see the Guidance on the 2018 Amendments to CPUT). Whilst this might appear easy to establish at first blush, Travers KC and Spence-Jones raise the point that it may not be impossible to argue that consumers who are concerned with environmental impacts ought not to be easily persuaded by green claims. However, considering that other consumer sectors are notoriously heavily regulated in favour of strict protection of the consumer (mortgages and mobile phone telephone contracts for example), it seems arguable that consumers would be reasonable in assuming fashion companies were as heavily regulated and therefore that advertisements do not need fact-checking. The outcome of the CMA investigation will resolve this outstanding question about whether it is the consumer’s responsibility to check the accuracy of marketing claims.

 

It is also important to note that the CPUT is due to be revoked soon and will be replaced with Part 4 of the Digital Markets, Competition, and Consumers Bill 2022-23.

 

Civil claims

 

A very different type of claim may also be brought against Boohoo. Companies that are guilty of greenwashing may face civil action from particulars that are misleading. Many funds promote themselves as ‘ethical’, and for consumers, whether a particular bank or company is ethical is an important consideration regarding where, and how much, to invest. However, such funds could have been greenwashed in portfolios and particulars. As a result, individuals who have invested in these funds on the basis they are ‘ethical’ may wish to bring actions against company managers, which may, in turn, cause actions against the companies concerned under s.90 FSMA.

 

There has been a trend in company investors bringing claims arising from greenwashing. These fall into three categories: the first alleges breach of duties against investment managers and company directors over where the company has chosen to invest their money (Cowan v Scargill [1985] Ch 270 and the Bishop of Oxford case (not reported by LexisNexis®UK)); the second alleges misleading statements have caused the investors loss (Morrison v National Australia Bank 561 US 247 (2010) (not reported by LexisNexis®UK)); the third are tortious claims that misleading statements have caused the investors loss. If Boohoo are found by the CMA to have made misleading statements, the latter two scenarios may well erupt for the company.

 

Claims from investors over greenwashing matters are brought via ss. 90 and 90A or the Financial Services and Markets Act (2000) (FSMA), or under tort. For claims to be successful under the FSMA, the loss suffered by the investors must have been caused by ‘untrue or misleading statements’ or omissions in: prospectuses or particulars listings (ss.90), information published by the company, or a dishonest delay in information being published by the company (ss.90A).

 

Simon Bishop and Patrick Kenny of Hausfield and Edward Brown KC and Daniel Fox of Essex Court Chambers believe that greenwashing claims brought by both institutional and large groups of investors in the UK have been on the rise.They reference the following investors’ claims: the Royal Bank of Scotland rights issue litigation in 2008 (known as the Rights Issue Litigation); the £100m claim against Tesco (2016); the Glencore claim (2023); the G4S scandal (2021 & 2022), and the Indivior claim (2023).

 

Arguably, the decision in Butler-Sloss v Charity Commission will see the number of claims increase all the more. Whilst Butler-Sloss was not about greenwashing claims, the Investment Policy in consideration was about attempts to be in alignment with the goals of the Paris Agreement. Such attempts were considered in Butler-Sloss to be sufficiently certain for the charity trustees to pursue the claim. As such, Bishop et al. believe Butler-Sloss establishes that marketing statements that suggest companies are in alignment with the Paris Agreement could be taken by consumers as concrete and certain statements. If so, and if these statements are proven untrue, such false statements could become the foundation of greenwashing actions.

 

Further, a different type of investors’ claims will also be on the rise, since the British government have required large firms and various financial sector firms since 2022 to disclose how they will transition to net-zero carbon emissions by 2050. A report commissioned by Schroeders in October 2023 concluded that 49% of investors in Europe and the Middle East have made a commitment to reach net zero by 2050. It is therefore likely we will see an increase in investors bringing greenwashing claims if promises made by firms are not complied with. As such, actions brought by investors over greenwashing statements are still on the increase.

 

The current landscape

 

The summer of 2023 was the first ever deadline for companies to publish reports under the Financial Conduct Authority’s (FCA) climate-related financial disclosure regime (as set out in the Environment, Social and Governance (ESG) Sourcebook, which is a new component of the FCA Handbook). This year has therefore been the one in which companies face increased pressure to make public their environment protection contributions. As a result, Bishop et al. think that more companies and funds will be caught under the FCA handbook, which will have consequences for investor actions.

 

Indeed, the ASA have emphasised that companies do not have a choice about whether they should or shouldn’t be making claims about their company’s environmental impact (found in the ASA opinion piece, ‘Greenspeaking with confidence’which was published in conjunction with the updated June 2023 Guidance).


How can companies protect themselves?

 

But what should companies be announcing about their green footprint to avoid investigations, civil claims and potential prosecutions? The ASA considers the accuracy and transparency of the content of the adverts, not the products themselves. However, that does not mean the validity of companies’ advertising claims will not be scrutinised, and companies must retain evidence to prove both direct and implied claims.

 

Fundamentally, the 2023 Guidance emphasises transparency above all else. To avoid any chance of appearing misleading, companies should explain in their advertisements the basis upon which they arrived at the conclusion that their products are ‘green’. Further, companies (particularly those with a significantly negative impact on the environment) should qualify statements about positive environmental impacts with the reality that the company as a whole is not particularly green (whether this be through the use of figures or specific language). Vague language such as ‘sustainable’, ‘green’ and ‘environmentally friendly’ must be accompanied by strong evidence so that the consumer can understand how the company believe the product or service to be so. A handful of examples from the 2023 Guidance for how a company might achieve transparency are summarised below:

 

  • Businesses who make environmental claims about specific products should make it clear these claims are not about the entire business.

  • Where a business contributes significantly to environmental harm, advertisements about specific environmentally-friendly goods should be balanced with the reality that the business is generally battling to reduce their footprint.

  • Any claims about the reduction of carbon emissions by any part of a company should be qualified with the overall carbon emissions of the entire company, otherwise such claims can be misleading.

  • Imagery can create a false impression to the consumer that the company is greener than it actually is.

  • Strong evidence must accompany vague terminology such as ‘sustainable’ and ‘environmentally friendly’.

  • Companies should not create an impression that a negative environmental impact is in the past when the business continues to significantly harm the environment.

  • Where companies refer to methods of achieving ‘net zero’ they must explain how they are going about achieving this goal and when they anticipate to achieve this goal.


ASA rulings since the updated June 2023 Guidance (Renault UK Ltd t/a Dacia, Renault and Imiracle (HK) Ltd t/a ELFBAR) have found that when a business contributed significantly to the production of harmful emissions, advertisements that made positive environmental claims by said business about specific aspects of their company were breaching the Advertising Codes. These advertisements were considered misleading because they essentially exaggerated the business’s positive environmental achievements.

 

Therefore the 2023 Guidance might look in practice as such: if a particular clothing line is made from recycled plastic, for example, ideally the company would also inform the consumer about: the actual percentage of recycled material used within each item (so as to not create the impression it is greater than it really is); what emissions have instead been produced by way of recycling the material; and how the company’s overall green footprint is looking (to avoid an impression that the entire company can be considered ‘environmentally-friendly’ because of this singular ‘eco-friendly’ clothing line).

 

Where can consumers turn to fact-check companies?


The app ‘Good On You’ rank fashion companies based on their environmental, human and animal impact. Good On You explain how they have arrived at their conclusions, meaning if you’d like to focus on ensuring companies are vegan (for example), you can. The majority of the time you will see companies ranked poorly because they are not providing the full-picture about their trading standards and impact.

For those who have yet to try the app: none of the high-street brands are satisfactory. You will however discover quirky independent brands.

 

Where can companies turn for further guidance on interpreting the Advertising Codes?


It is important to note that Advertising Guidance is intended to guide businesses on how to interpret the Codes. The Guidance does not substitute the Codes, and nor does it provide additional rules to the Codes. The Advertising Guidance reflects CAP’s and/or the Broadcast Committee of Advertising Practice (BCAP)’s intended effect of the Codes but neither constitutes new rules nor binds the ASA Councils in the event of a complaint about an advertisement that follows it.


CAP provide guidance on the interpretation of the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (the CAP Code) in relation to non-broadcast marketing communications. Further, BCAP offers guidance on the interpretation of the UK Code of Broadcast Advertising (the BCAP Code) in relation to broadcast advertisements.

The European Commission also offer Compliance criteria (for advertisements made outside of the UK). DEFRA, too, have a Green Claims Guidance page.

 

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