Green Claims Across The Supply Chain

The CMA has published additional guidance on greenwashing for all businesses in the supply chain.

The CMA has published additional guidance (the guidance) on greenwashing for all businesses in the supply chain. The guidance supplements the CMA's Green Claims Code adopted in 2021 to assist businesses making environmental claims to do so without misleading consumers and infringing consumer protection law.

The latest guidance was adopted in response to requests from stakeholders seeking greater clarity around supply chain liability in relation to environmental claims, where different parties may hold important information needed to substantiate those claims.

The guidance acknowledges that supply chains can be complex and that multiple businesses may be involved in advertising or supplying products to consumers. Environmental claims often rely on information generated at various points in the supply chain, which is then carried forward until the product ends up with the consumer. Such claims remain attached to the product throughout this journey, and repeating them, by stocking, marketing, or offering the product for sale, also constitutes making a claim. As a result, a business may be held liable for enabling or communicating a misleading environmental claim, even if it was not the originator of the statement.

Businesses across the supply chain therefore need to take steps to ensure that the environmental claims they make, either directly or by passing on information from others, are accurate and not misleading. The guidance contains a number of worked examples demonstrating how the principles apply, as well as separate checklists for retailers, brands who sell through third party retailers, and suppliers and manufacturers.

The checklists contain the key points to be considered by businesses when working with others in the supply chain, in order to ensure the green claims they make to consumers are accurate and not misleading.

Retailers

Retailers should adopt processes to ensure they have the necessary evidence from suppliers that supports their sustainability claims. This includes:

• Asking suppliers for robust, credible and up to date evidence before advertising or selling their products to consumers
• Asking suppliers and brands to confirm that they have relevant proof or a declaration to substantiate that the claims are accurate
• Reviewing claims and supporting documentation on a regular basis
• Adopting additional measures when working with new suppliers to make sure a change in supplier does not impact the claims that are being made
• Requesting regular updates from suppliers and checking for any changes that may impact the accuracy of the claim
• Assessing whether the environmental claims made by the supplier are clear or whether additional information is necessary for the consumer to understand the claim

Brands selling through third-party retailers

• Brands who sell through a third-party retailer should make sure that any sustainability claims they make are accurate and verified and supported by up to date and credible evidence
• They should also provide the retailer with appropriate assurances that their claims are accurate, including, where relevant, sharing the supporting evidence and explaining the basis for the brand's environmental claims

Suppliers and manufacturers

Suppliers and manufacturers should provide retailers and brands with the necessary guarantees to allow them to confidently make accurate claims. This will include:

• Ensuring they obtain and, where appropriate, provide relevant evidence to substantiate their claims, and maintain proper records on matters such as product composition, testing, and origin
• Ensuring that there are effective systems to verify environmental claims, supporting transparency throughout the supply chain and providing updates where necessary in the event of a change that affects a claim
• Considering alternative ways to provide assurances where product information is confidential. For instance, instead of disclosing a manufacturing process or detailed composition, they could provide evidence of independent verification
• Avoiding casual statements that could be interpreted as verifiable claims

Comment

Making misleading green claims is a breach of the consumer protection legislation, more specifically the unfair commercial practices set out in the DMCC Act 2024 that prohibit misleading or aggressive practices in the consumer-trader relationship.

Greenwashing has been a growing focus for the CMA over the last years, and we have seen a number of investigations including into fashion, FMCGs and the green heating and insultation sectors, which have also resulted in more tailored, sector-specific guidance, expanding on the Green Claims Code.

Compliance has become even more important in light of the CMA's new direct enforcement regime under which it can impose penalties of up to 10% of global turnover on the infringing business. The CMA has indicated that future enforcement will focus on "egregious" breaches and sectors where they have already set clear standards. The CMA's latest guidance on liability across the supply chain now also puts businesses on notice of their responsibility for indirect green claims that don't originate with them, and the guidance should be factored into their internal compliance processes to ensure that their green claims do not mislead consumers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.