ARTICLE
5 January 2023

Regulators Will Take A Tougher Stance On Greenwashing

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Clyde & Co

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Clyde & Co is a leading, sector-focused global law firm with 415 partners, 2200 legal professionals and 3800 staff in over 50 offices and associated offices on six continents. The firm specialises in the sectors that move, build and power our connected world and the insurance that underpins it, namely: transport, infrastructure, energy, trade & commodities and insurance. With a strong focus on developed and emerging markets, the firm is one of the fastest growing law firms in the world with ambitious plans for further growth.
Companies face growing pressure from stakeholders (including regulators, consumers and investors) to be more transparent about their sustainability efforts and the environmental impact of their products...
UK Environment
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Companies can no longer point to a lack of clear guidance

Companies face growing pressure from stakeholders (including regulators, consumers and investors) to be more transparent about their sustainability efforts and the environmental impact of their products, services, activities and policies. However, companies that make claims about their commitment to addressing climate change and ESG without sufficient evidence may be accused of greenwashing which can have civil, regulatory and (depending on the jurisdiction) potentially criminalrepercussions.

Greenwashing allegations are becoming more common, and this trend is expected to accelerate given the increasing focus of regulators in multiple jurisdictions on the subject, we expect this trend to accelerate during 2023 and beyond, particularly as stricter regulations come into force.

A variety of industries, including airlines, financial services and retailers, are facing increased scrutiny from consumers and shareholders regarding their Net Zero and overall climate and ESG performance. Regulators, are also taking action against companies that make false statements or provide misleading information about the environmental impact of their products and services.

In the UK, regulators from all industries are taking a harder stance on greenwashing. For example, in October 2022 the Financial Conduct Authority released a consultation paper proposing new rules for sustainable investment product labels, similar to the EU's Taxonomy Regulation. These rules look set to be implemented in 2023.

In June 2021, the Competition and Markets Authority issued the "Green Claims Code" to help businesses accurately communicate their green credentials to customers. The Advertising Standards Agency (ASA) has evaluated several green claims, including a major bank's advertising, which was found to be misleading for omitting information about the bank's contribution to greenhouse gas emissions). The ASA has also published guidance on making environmental and green claims in advertising.

As for disclosures to investors, the UK is at the forefront of requiring companies to adopt the TCFD framework (or equivalent) in their reports.

As regulatory focus on ESG issues intensifies, companies can expect increased scrutiny of their green and sustainability statements and disclosures.

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.

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