2022 and 2023 may be remembered as pivotal years for efforts against so-called “greenwashing.”  In this article, we look at some recent developments in the regulation of “green claims” in the UK, the US, and the EU that corporates should be aware of.  We provide a broad summary and comparison snapshot of the UK, US and EU regimes to help companies navigate these rules.  Now is a critical time for companies to get up to speed: authorities in all three jurisdictions are focusing more and more intently on this issue; company reputations will increasingly rise and fall with the strength of their green claims, and national regulators are set to get new powers (including the power to levy significant fines) to tackle companies found in breach.

I.  Summary of recent developments: What’s new in greenwashing?

In January 2022, the UK’s Competition & Markets Authority (“CMA”) launched a sector‑by‑sector review of misleading environmental claims.  The CMA started with the fashion sector, and called out a number of high‑profile, fast‑fashion companies for their practices.  Twelve months later, the CMA announced that it was expanding the investigation to greenwashing around “household essentials”, including food, drink, toiletries and cleaning products.  The CMA’s review is the first concerted application of the CMA’s new Green Claims Code, published in September 2021, which gives guidance for any business (wherever based) making environmental claims in the UK.

Meanwhile, in December 2022, the US Federal Trade Commission’s (“FTC”) launched a review of the “Guides for the Use of Environmental Claims” (“Green Guides”), which was last updated in 2012.  The initial comment period closed on April 24, 2023.  The FTC plans to update the Green Guides to reflect developments in consumers’ perception of environmental marketing claims.  As a part of its ongoing review, the FTC also announced a workshop to examine recyclable claims.  The workshop is scheduled for May 23, 2023 and the public can submit comments on the subject of recyclable claims through June 13, 2023.  For more detail on the review, please see our dedicated blog post, here.

Finally, the EU has proposed two Directives to modernize and harmonize the rules on green claims across the bloc (together, the “EU Green Claims Proposals”).  Currently, EU law does not specifically regulate environmental claims.  Instead, environmental claims are subject only to general consumer protection and advertising rules (set out in Directive 2005/29 on Unfair Business-to-Consumer Practices and Directive 2006/114 on Comparative Advertising).  Admittedly, the EU has published guidance on interpreting and applying the general rules in the context of green claims (see the guidance here, and see our previous blog post discussing the guidance here).  However, in practice, EU Member States approach interpretation and enforcement in a variety of different ways.  On March 3, 2022, the European Commission published a Proposal for a Directive Empowering Consumers for the Green Transition, also known as the “Greenwashing Directive.”  The Greenwashing Directive amends the EU’s existing consumer protection rules, and bans a number of general green claims, such as “climate neutral” or “eco-friendly.”  It also imposes some rules on the use of non-environmental sustainability claims or “social impact” claims, such as “locally produced” or “fair labour.”  One year later, on March 22, 2023, the European Commission presented a Proposal for a Directive on Green Claims (“Green Claims Directive”), which we discussed here.  The Green Claims Directive proposes a new and strict framework, applicable to all companies operating in the EU/EEA, to harmonize the rules on the substantiation of voluntary green claims. 

Below, we outline the key aspects of the different legislative frameworks.

II.  Summary of UK, US and EU greenwashing regimes

 UK Green Claims CodeUS Green GuidesEU Green Claims Proposals
ScopeApplies to claims made in both business‑to‑consumer transactions, and business‑to‑business transactions. Does not replace or override other sector‑ or product‑specific rules (e.g. eco‑labelling; packaging and waste disclosures; or reporting of environmental impact under corporate reporting and disclosures rules).  CMA will consider the interaction with sector‑specific rules when enforcing the Green Claims Code. The Green Claims Code is not law, and is not directly enforceable.  However, it sets out the CMA’s interpretation of existing consumer protection and advertising law, as it relates to green claims.  CMA will use it as a guide and reference point when enforcing consumer protection law.  See further discussion below.  Applies to claims made in both business‑to‑consumer transactions, and business‑to‑business transactions. The US Green Guides are not law and are not independently enforceable.  But the FTC can take action if marketers make environmental claims that are inconsistent with the Guides.  In such an action, the FTC must still prove that the challenged act or practice is unfair or deceptive in violation of Section 5 of the FTC Act.  Does not replace or override other federal, state, or local laws related to greenwashing, although compliance with those laws will not necessarily prevent FTC enforcement.The EU Green Claims Proposals apply only to voluntary claims made by companies in the context of business‑to‑consumer transactions.  They do not cover business‑to‑business transactions. They do not replace or override mandatory environmental labelling or disclosures under other EU environmental rules (e.g. mandatory eco‑design declarations; eco‑labelling; packaging and waste disclosures; or reporting of environmental impact under corporate reporting and disclosures rules). The EU Green Claims Proposals will not be directly applicable to companies.  Instead, EU Member States will have to implement the new rules into national law before they can be enforced against companies.  That said, Member States are likely to transpose the requirements precisely and harmoniously across the EU, so companies should play close attention to the details of the EU Green Claims Proposals to get a head start on compliance.
StructureSets out general principles, supported by examples and guidance.  Discusses specific issues and claims (e.g. recycled content; compostability, etc.), but as applications of general principles, rather than discreet rules.Sets out general principles, supported by examples and guidance.  Also provides specific guidance on seals and certifications, carbon offsets, recyclable claims, biodegradable claims, recycled content claims, compostable claims, and others. Notably, the FTC is seeking public comment on the document in its entirety and has asked specific questions about claims such as carbon offset and climate change claims, compostable claims, recyclable claims, and recycled content claims. The Greenwashing Directive amends the existing consumer protection rules, introducing new provisions.  It prohibits the use of general and unspecified green claims (e.g., “carbon neutral”, “eco-friendly”, “sustainable”) in all cases.  It also prohibits the use of self-certification.  Moreover, it strengthens the protections against misleading advertising on the environmental or social impact of a product. The Green Claims Directive supplements the Greenwashing Directive by creating rules for (i) substantiating; (ii) communicating; and (iii) certifying green claims (including comparative and future performance claims); and rules for establishing and using environmental labels.  Some aspects of the practical implementation of these rules are not clear from the text of the EU Green Claims Proposals.  We expect that the European Commission may update its existing guidance on green claims, in light of the Proposals.
General claimsProvides that that broad or general environmental claims (e.g.green” or “eco‑friendly”) are difficult to substantiate and are therefore likely to be misleading.Provides that broad or general environmental claims (e.g.green” or “eco‑friendly”) are difficult to substantiate and are therefore likely to be misleading without qualification.The Greenwashing Directive specifically prohibits generic environmental claims (e.g., “carbon neutral”, “green”) where the trader cannot demonstrate specific and significant environmental performance relevant to the claim (according to precise standards set out in various pieces of sector‑specific EU legislation or in line with the methodology of the Green Claims Directive).  The Greenwashing Directive also prohibits claims about mere compliance with the law, or benefits that are common practice already in the market e.g.,  claims about recyclability of plastic bottles if already common on the market; claims such as “rainforest-friendly” or “no forced labor” that signify mere compliance with EU law.
Substantiation, qualification and extent of benefitEmphasizes that claims need to be appropriately qualified, and should not overstate the extent of the benefit.  States that any environmental claim should be significant: notes that it would be misleading for a business to make a claim about reducing plastic packaging if, for example, it had only reduced plastic packaging by 5%, while simultaneously increasing emissions from transport or manufacturing.Emphasizes that all claims must be supported by adequate substantiation.  States that claims need to be appropriately qualified and marketers should not overstate the extent of the benefit.  States that any environmental claim should be significant: instructs businesses to avoid claims if the environmental benefits are “negligible”.The Greenwashing Directive prohibits making environmental claims about the entire product when the benefit only relates to one aspect of the product e.g. claiming that a product is “made with recycled material”, when only the packaging is made with recycled material.  This requirement is included as part of the methodological requirements that green claims must meet under the Green Claims Directive.  In particular, the Green Claims Directive provides that claims must be substantiated through an approved methodology that meets specific criteria (more below).  It states that green claims should only be made about things that contribute significantly to the product’s or organization’s environmental impact; states that claims must be truthful and accurate, and not overstate the benefit.  Claims must be assessed to determine whether the environmental benefit claimed has led to any negative environmental impact.
Consideration of entire life‑cycleExplicitly requires companies to consider the entire life‑cycle of their product or service, and the impact of the rest of their business activities, before making a claim.No explicit requirement to consider the entire life‑cycle (The Commission declined to provide guidance on the use of life cycle information in marketing in 2012).  However, the Guides make clear that marketers are responsible for substantiating all reasonable consumer interpretations of claims.  As a result, marketers may need to assess the full life‑cycle impacts of their product or service in order to appropriately substantiate for certain claims in context.The Green Claims Directive requires that that claims should be significant from a life-cycle perspective, even if the claim itself only refers to one aspect of the product (e.g., recyclability).  Claims must be unambiguous about which part of the product life‑cycle they relate to.  This suggests that life-cycle assessments will be important even for claims that are constrained to a specific environmental aspect.  The Green Claims Directive also provides that, where the use phase is the most relevant life-cycle phase of a product, the green claim should include information for the consumer about how to use the product in order to achieve that environmental performance.
Evidence and substantiationRequires businesses to substantiate claims with sufficient evidence, preferably robust, independent, up‑to‑date scientific analyses by independent parties. Provides a series of questions that a business can use to assess the quality of their evidence.Requires marketers to have a “reasonable basis” for their claims; a standard that is flexible depending on the claim.  In the context of environmental marketing claims, the Green Guides provide that a reasonable basis often requires competent and reliable scientific evidence such as objective tests, analyses, research, or studies conducted by qualified persons generally accepted in the profession.The Green Claims Directive sets out a detailed framework for a methodology to substantiate green claims.  The methodology must be “based on widely recognised scientific evidence, use accurate information and take into account relevant international standards.”  The methodology must in principle account for the entire life‑cycle of the product; must weigh the positive environmental impact against any negative impact; must be verified by a third party, and must be revised to take account of scientific progress. For comparative green claims in particular, both of the EU Green Claims Proposals emphasize that company making a comparative claim must use the same methodology to assess its environmental impact as the company they want to compare their product or service against, as well as a comparable method of gathering substantiating data.  Broad, sector‑wide claims based on publicly available studies will no longer be acceptable.  
Third‑party certificationUrges businesses to be cautious when using certifications, logos, and seals of approval, and to only use third-party certifications that they have been authorized to use.  Notes that certifications awarded by independent third parties on the basis of a formal assessment against objective criteria are less likely to be misleading than self‑assessed certifications. Businesses should not use environmental certifications or seals that do not clearly convey the basis for the certification.     Notes that companies should disclose any material connections with third-party certifiers, and that obtaining a third-party certification “does not eliminate marketer’s obligation to ensure that it has substantiation for all claims reasonably communicated by the certification.The Greenwashing Directive completely prohibits the display of sustainability labels that are not based on an independent, third party certification scheme or established by public authorities.  This includes all sustainability labels, whether focused on environmental aspects (e.g., “carbon neutral”) or social aspects (e.g., “produced locally”). The Green Claims Directive imposes rules on certification schemes and environmental labels, which must comply with the methodological requirements of the Green Claims Directive.  It also requires EU Member States to accredit third‑party verifiers that will be specifically tasked with verifying compliance with the Green Claims Directive of companies’ environmental claims, as well as of any certification schemes.  Verifiers will be able to issue certificates to the effect that a company has substantiated their claims in accordance with the Greenwashing Directive.
Additional informationRecognizes that omitting important information from a claim or failing to qualify a claim can turn an acceptable, accurate claim into a misleading one.  Where it would be impracticable to provide detailed information or substantiation alongside the claim, the UK CMA Green Claims Code encourages businesses to provide consumers with a link or QR code, directing them a website with more information.The FTC evaluates claims based on their net impression.  Disclosures and qualifications that are necessary to prevent deception should be clear, prominent, and placed in close proximity to the qualified claim. The Greenwashing Directive broadly prohibits claims that deceive or are likely to deceive a consumer about the environmental or social impact of a product, or its durability or reparability.  Companies are likely to deceive consumers if they (i) provide false information; (ii) present true information in a misleading way (e.g., present a recycled claim as applying to all of the product, instead of its packaging); or (iii) omit relevant information.  In practice, whether an environmental claim will be considered as misleading under the Greenwashing Directive will likely depend on whether it meets the requirements of the Green Claims Directive.  The same will not apply to social impact claims (e.g., on forced labor or working conditions), for which the assessment on whether the claims are misleading or not will not be tied to specific requirements.  Both the Greenwashing Directive and the Green Claims Directive tackle forward‑looking claims (e.g. about a company’s plans to reduce its own environmental impact over time).  A forward‑looking claim must include time-bound commitments for improvements in the operations of the company and the value chain.
EnforcementThe CMA Green Claims Code is not directly enforceable.  However, it provides grounds for the CMA to challenge a business’s environmental claims.  It describes the types of environmental claims that the CMA may consider unfair, deceptive or misleading under consumer protection legislation.  The CMA has the power to launch investigations against companies where it believes the company has breached consumer protection legislation.  The CMA can take a number of enforcement actions, from “soft enforcement” actions like seeking voluntary cooperation or a civil undertaking; to “hard enforcement” actions, like issuing enforcement orders, seeking court‑mandated injunctions, and bringing civil or criminal proceedings against a business. In addition, the UK government plans to extend the CMA’s powers to allow the CMA itself to determine whether a business has breached the rules (without court proceedings), and to fine businesses up to 10% of their global turnover.The Green Guides are not directly enforceable.  However, the Guides describe the types of environmental claims that the FTC may consider unfair, deceptive or misleading under consumer protection legislation (the FTC Act).  The FTC can launch investigations and bring civil proceedings against businesses where it believes the business has violated the FTC Act.  FTC enforcement action can lead to injunctions, compliance monitoring, and reporting requirements.  In addition, as part of the FTC’s current review of the Green Guides, the FTC has requested public comment on whether it should consider a rulemaking under the FTC Act related to deceptive or unfair environmental claims.  If the FTC successfully promulgates a trade regulation rule related to green claims, it would be entitled to seek civil penalties of up to USD 50,120 per violation of the rule.Neither of the EU Green Claims Proposals are directly enforceable.  EU Member States will be required to implement the rules into national law, which will likely occur within 18 months of adoption of the rules.  Enforcement risks will vary across EU Member States, as different national regulators have different powers and different enforcement strategies. That said, EU Member States are required to have adequate and effective means to combat the unfair commercial practices that the Directives target.  Member States must also allow consumers, competitors, and third parties with a legitimate interest (e.g., NGOs, affected groups and communities) to take action before national courts or administrative bodies against businesses.  Member States have some discretion to set the type of penalties, and the process for imposing them, but the EU stipulates that those penalties must be effective, proportionate and dissuasive.  The penalty must take into account e.g. the nature, gravity, scale and duration of the business’s action, anything the business has done to mitigate or remedy the damage suffered by consumers, any previous infringements, and any financial benefits gained by the business.  The Green Claims Directive in particular requires Member States to implement penalties that deprive offenders of the financial benefits of their infringements, confiscate revenues implicated in infringements, and exclude offenders from public procurements processes for up to 12 months. The EU’s consumer protection rules also provide that, where a business’s actions are serious enough to require cross‑border cooperation by national enforcement authorities (i.e. the action is widespread/has a cross‑EU dimension), the business can be fined 4% of turnover in the EU Member State(s) concerned, or EUR 2 million if turnover data is unavailable. EU Member States are free to impose higher fines (e.g. based on global turnover).

III.  Next steps

In the UK, we expect the CMA to publish more information on its ongoing investigations some time in 2023.  Whatever the CMA reports will likely provide more guidance — either explicitly or implicitly — on how the CMA will approach green claims and enforcement against greenwashing moving forward.  Businesses should note that the CMA is not the only big player in greenwashing in the UK: the UK’s advertising self‑regulatory body, the ASA, also takes a keen interest in green claims and regularly rules that green claims breach the UK’s self‑regulatory advertising codes.

In the US, companies should consider engaging with the different phases of the FTC’s Green Guides regulatory review process.  The period is a once-per-decade opportunity to contribute to the shape of green marketing  guidance in the US for years to come. 

In the EU, the timelines are a little longer and more uncertain.  The Greenwashing Directive is nearing the end of the legislative process, and we expect significant progress during 2023.  The Green Claims Directive will now be considered, debated and amended by the European Parliament and Council.  In principle, this process should last 18 months, but we expect it to be expedited ahead of the European Parliament elections of May 2024.  During that time, businesses can track the changes in the text, and might consider lobbying on relevant aspects.  In both cases, EU Member States will need to implement the Directives into local law, which will typically occur within 18 months of the adoption of each Directive. Businesses operating in any of the three jurisdictions should take the time to review their claims — and their processes for formulating and substantiating claims — and make sure they get a “green light” under the relevant rules.

Photo of Laura Kim Laura Kim

Laura Kim draws upon her experience in senior positions at the Federal Trade Commission to advise clients across industries on complex advertising, privacy, and data security matters. She provides practical compliance advice and represents clients in FTC and State AG investigations. Ms. Kim…

Laura Kim draws upon her experience in senior positions at the Federal Trade Commission to advise clients across industries on complex advertising, privacy, and data security matters. She provides practical compliance advice and represents clients in FTC and State AG investigations. Ms. Kim advises on a wide range of consumer protection issues, including green claims, influencers, native advertising, claim substantiation, Made in USA claims, children’s privacy, subscription auto-renewal marketing, and other digital advertising matters. In addition, Ms. Kim actively practices before the NAD, including recent successful resolution of matters for both challengers and advertisers. She co-chairs Covington’s Advertising and Consumer Protection Practice Group and participates in the firm’s Internet of Things Initiative.

Ms. Kim re-joined Covington after a twelve-year tenure at the FTC, where she served as Assistant Director in two divisions of the Bureau of Consumer Protection, as well as Chief of Staff in the Bureau of Consumer Protection and Attorney Advisor to former Chairman William E. Kovacic. She worked on key FTC Rules and Guides such as the Green Guides, Jewelry Guides, and the Telemarketing Sales Rule. She supervised these and other rule making proceedings and oversaw dozens of the Commission’s investigations and enforcement actions involving compliance with these rules. Ms. Kim also supervised compliance monitoring for companies under federal court or Commission order.

Ms. Kim also served as Deputy Chief Enforcement Officer at the U.S. Department of Education, where she helped establish a new Enforcement Office within Federal Student Aid. In this role, she managed investigations of higher education institutions and oversaw issuance of fines and adverse actions for institutions in violation of federal student aid regulations. Ms. Kim also supervised the borrower defense to repayment division and the Clery campus safety and security division.

Photo of Lindsay Brewer Lindsay Brewer

Lindsay advises clients on environmental, human rights, product safety, and public policy matters.

She counsels clients seeking to set sustainability goals; track their progress on environmental, social, and governance topics; and communicate their achievements to external stakeholders in a manner that mitigates legal…

Lindsay advises clients on environmental, human rights, product safety, and public policy matters.

She counsels clients seeking to set sustainability goals; track their progress on environmental, social, and governance topics; and communicate their achievements to external stakeholders in a manner that mitigates legal risk. She also advises clients seeking to engage with regulators and policymakers on environmental policy. Lindsay has extensive experience advising clients on making environmental disclosures and public marketing claims related to their products and services, including under the FTC’s Green Guides and state consumer protection laws.

Lindsay’s legal and regulatory advice spans a range of topics, including climate, air, water, human rights, environmental justice, and product safety and stewardship. She has experience with a wide range of environmental and safety regimes, including the Federal Trade Commission Act, the Clean Air Act, the Consumer Product Safety Act, the Federal Motor Vehicle Safety Standards, and the Occupational Safety and Health Act. Lindsay works with companies of various sizes and across multiple sectors, including technology, energy, financial services, and consumer products.

Photo of Seán Finan Seán Finan

Seán Finan is an associate in the Life Sciences team.  His practice covers environmental, food and beverage and pharmaceutical regulation. 

Seán has specific experience in a number of key areas for EU and UK clients in the food and beverage, pharmaceutical, cosmetic and…

Seán Finan is an associate in the Life Sciences team.  His practice covers environmental, food and beverage and pharmaceutical regulation. 

Seán has specific experience in a number of key areas for EU and UK clients in the food and beverage, pharmaceutical, cosmetic and consumer goods industries, including:

  • General food regulation; novel food regulation; genetically modified and “precision bred” products;
  • Advertising claims, particularly environmental claims and “greenwashing”;
  • Environmental and ESG compliance issues (Extended Producer Responsibility, ); and
  • Chemicals legislation (REACH, CLP, Biocides).

Seán is qualified in both England & Wales, and the Republic of Ireland.

Photo of Rosa Oyarzabal Rosa Oyarzabal

Rosa Oyarzabal Arigita is an associate in the Life Sciences team. She assists clients across a range of regulatory, legal and procedural matters in the pharmaceutical and food sectors, and her practice focuses on EU and Spanish regulatory advice.

Rosa has acquired significant…

Rosa Oyarzabal Arigita is an associate in the Life Sciences team. She assists clients across a range of regulatory, legal and procedural matters in the pharmaceutical and food sectors, and her practice focuses on EU and Spanish regulatory advice.

Rosa has acquired significant experience in the pharmaceutical advertising space, both at EU level as well in Member States such as Spain and Belgium. She is also familiar with the EU food and advertising rules, and regularly advises clients in the plant-based sector on these topics. As part of her practice, Rosa also assists clients with the implementation of the Nagoya Protocol and the access and benefit sharing rules of a number of jurisdictions.

Rosa has assisted in multiple litigations in front of the European Court of Justice, including as part of pro bono efforts. For example, Rosa plead in front of the Court of Justice for case C-356/21, concerning the rights of LGBTQIA+ self-employed persons to not be discriminated against when contracting with another party and during the performance of their activities.

Photo of Cándido García Molyneux Cándido García Molyneux

Cándido García Molyneux provides clients with regulatory, policy and strategic advice on EU environmental and product safety legislation. He helps clients influence EU legislation and guidance and comply with requirements in an efficient manner, representing them before the EU Courts and institutions.

Cándido…

Cándido García Molyneux provides clients with regulatory, policy and strategic advice on EU environmental and product safety legislation. He helps clients influence EU legislation and guidance and comply with requirements in an efficient manner, representing them before the EU Courts and institutions.

Cándido co-chairs the firm’s Environmental Practice Group.

Cándido has a deep knowledge of EU requirements on chemicals, circular economy and waste management, climate change, energy efficiency, renewable energies as well as their interrelationship with specific product categories and industries, such as electronics, cosmetics, healthcare products, and more general consumer products.

In addition, Cándido has particular expertise on EU institutional and trade law, and the import of food products into the EU. Cándido also regularly advises clients on Spanish food and drug law.

Cándido is described by Chambers Europe as being “creative and frighteningly smart.” His clients note that “he has a very measured, considered, deliberative manner,” and that “he has superb analytical and writing skills.”