The Advertising Standard Agency's (ASA's) use of AI-assisted collective advert monitoring is having a clear effect; with a 30-fold increase in the number of adverts analysed by the ASA in the period 2022 – 2023, and the ASA's new strategy to proactively pursue so-called "greenwashing" claims, businesses across many sectors are falling foul of the regulator.
In this briefing, we explain the risks to business from this increased scrutiny of green claims and what they can to do to minimise their exposure.
1 What can we expect from the ASA in the ESG space?
In April, the ASA published its 2023 Annual Report, setting out its five-year strategy which relies on AI-assisted collective advert regulation to shift the ASA from complaints-led investigations to proactive monitoring and enforcement. This is a significant change, establishing the ASA as a more visible and dynamic regulator in the ESG space.
The Annual Report makes clear that environmental claims remain a top priority for the regulator.
James Best (Chair of the Committee of Advertising Practice) notes in the report that perhaps the "most important work [of ASA and CAP] in the long term has been concerned with environmental claims", including work clarifying what "green claims" mean and determining how climate change and mitigating technologies should be communicated in adverts.
This is evidenced by the ASA's increased activity in the ESG space. In 2023, it introduced new guidelines on environmental claims in advertising, and in recent years it has actively investigated and made findings in relation to a significant number of misleading environmental (so called "greenwashing") claims, considered further below.
2 The ASA and AI
In 2023, the ASA introduced its active AI monitoring tool. The tool uses AI to proactively monitor online advertising and identify adverts which are most likely to be problematic for further review. By the end of 2023, the tool was processing over 500,000 adverts a month and the ASA says that it contributed to the majority of adverts which were amended/withdrawn following ASA action that year. As detailed below, the tool is being used to pursue the ASA's focus on environmental claims. The development of the system is ongoing, so the system's impact will likely continue to grow, both to enhance the ASA's activities in relation to environmental claims and to allow it to conduct reviews in other areas.
This is a significant shift for the ASA, which has previously tended to focus more on responding to complaints from consumers and in some cases, competitors. AI is clearly helping the ASA to adopt a more proactive and strategic approach, identifying potentially problematic adverts which have not necessarily been the subject of complaints.
AI and other regulators
The ASA is not the only regulator rapidly developing its AI capabilities. As we reported here, the FCA and PRA also recently updated firms on their use of AI.
Indeed, the FCA and ASA often work closely together in targeting misleading claims. The FCA recently published finalised guidance on the anti-greenwashing rule which came into effect on 31 May 2024 and applies to all FCA-authorised firms. The Rule requires that references made to the sustainability characteristics of a product or service, are (i) consistent with the sustainability characteristics of the product or services and (ii) clear, fair and not misleading. More information can be found in our article here.
3 What action has the ASA taken in the ESG space?
In 2021 the ASA launched its Climate Change and the Environment project, to respond to the climate crisis and to ensure that environmental claims made in advertising were not misleading or irresponsible. Since then, the ASA and CAP have issued substantive guidelines for businesses on environmental advertising and the ASA has significantly increased its activity in this area.
Major airlines targeted
Of particular note is the ASA's activity in the transport and aviation sector, which resulted in the following adverts being banned1:
- A Virgin Atlantic advert which stated
"Virgin Atlantic's Flight 100 will ... become the
world's first commercial airline to fly transatlantic on 100%
sustainable aviation fuel."
- An Etihad Airways advert which included the
claim "...Explore the World With Confidence and Total
Peace Of Mind With Etihad Airways. Environmental Advocacy.
Award-Winning Service".
- A Deutsche Lufthansa AG t/a Lufthansa advert
which included the claim "Fly now with Lufthansa [...]
Book your ticket directly with Lufthansa and explore destinations
around the world [...] Fly more sustainably".
- An Air France-KLM advert which included the claim "...Air France is committed to protecting the environment: travel better and sustainably".
The ASA found that each advert gave a misleading impression of the advertiser's environmental impact, and that the advertisers either could not provide any evidence to back up the claim, or had omitted material information regarding the claim which would have been required for the consumers to make an informed decision, or for them to properly understand the claims being made. Accordingly, the advertisers were required to retract the adverts (or, in the case of the Virgin Atlantic case, ensure that future adverts contained qualifying information which explained the environmental impact to customers).
Other sectors
The ASA has made similar findings relating to environmental claims across a variety of other sectors such as fossil fuels, financial services, and household goods. Examples include:
- Fossil fuels: a paid-for online display advert
for Repsol, a global energy company, featured several images of
leaves with text that stated, "At Repsol, we are
developing biofuels and synthetic fuels to achieve net zero
emissions". The ASA concluded that the advert omitted
material information and was misleading, failing to explain that it
was part of a wider plan to achieve net zero by 2050.
- E-cigarettes: adverts for the vaping company
Elf Bar after they used the slogan "recycling for a
greener future"; the ASA felt that this was misleading
because of the environmental damage of discarded vapes.
- Food: Ads for plant based milk brand Oatly,
for making claims , such as "Oatly generates 73% less CO2e
vs. milk, calculated from grower to grocer". The ASA said
the advert was misleading because Oatly based the claim on
comparing one of its products, Oatly Barista Edition, but consumers
would understand the claim to include all Oatly's products,
which was inaccurate.
- Cars: BMW ads claiming that its electric vehicles were "zero-emission"; the ASA disagreed, noting that the models produced carbon emissions during their manufacture, as well as when recharging using electricity generated from fossil fuels.
4 Risks to businesses
An adverse ASA finding can not only have financial consequences for a business (in terms of wasted costs when an advert is required to be amended or withdrawn) but also cause reputational damage.
Falling foul of the ASA also puts businesses at risk of coming within the cross-hairs of the Competition and Markets Authority (the "CMA"). Businesses should be aware that, from April 2025, the CMA will have significant new powers to investigate and enforce consumer protection laws pursuant to the Digital Markets, Competition & Consumers Act 2024 ("DMCCA"). As we have reported here and here, whereas before the CMA had to initiate lengthy Court proceedings to just establish a breach, the DMCCA will allow the CMA to directly impose fines of up to 10% of global annual turnover if it finds consumer law has been infringed, including in respect of deliberately misleading consumers about products or services. Individuals associated with the breach could also be sanctioned.
This marks an important shift from a primarily self-regulatory/judicial system of enforcement to a full administrative regime similar to the UK's existing approach to competition law enforcement. Whereas the CMA's current limited consumer powers arguably encourage it to accept voluntary settlements to resolve concerns, it will now have the arsenal to more aggressively pursue and sanction potential infringements.
How the CMA's approach differs from that of the ASA
Whereas the ASA might be characterised as adopting a "high volume" approach, scrutinising a large number of adverts across a wide range of sectors, the CMA tends to be more selective. Typically, it will focus on a smaller number of high impact investigations, often with a view to setting precedents which it hopes will influence the wider market. That said, when deciding which cases to pursue, the CMA will often look at areas where the ASA has already found a significant level of non-compliance – hence the danger that an adverse ASA ruling may ultimately draw the attention of the CMA (or other regulators such as the FCA). A further contrast with the ASA is that whereas the latter focusses on bringing infringing behaviours to an end, the CMA's new consumer powers will allow it to impose penalties for past conduct – thus substantially increasing the risks to business from making green claims which are later found to be misleading. Indeed, the CMA's latest action in relation to the fast fashion sector – where it has issued guidance on what it regards as misleading - seems to be laying the groundwork for enforcement action under its new powers if the relevant brands fail to respond.
Finally, it's also worth noting that the CMA has identified sustainability as an important objective not only for its consumer protection function but also in relation to its remit in the areas of competition law, merger control and market investigations, where it has enjoyed significant enforcement powers for some time.
In addition to regulatory risks in the UK, the EU is pursuing a number of measures intended to combat misleading environmental claims about products and services aimed at consumers, as we reported here.
Private enforcement
Looking to the future, there is also a clear risk to businesses that the ASA's (and the FCA's and CMA's) focus on the ESG space may encourage costly and reputationally-damaging litigation, including possible mass consumer claims. Indeed, we have already seen significant group litigation being brought against vehicle manufacturers over the diesel emissions scandal. Businesses must therefore give careful thought to how to mitigate these risks.
5. How to protect your business
Faced with these risks, some businesses may be tempted to steer clear of any sort of green claim – an approach which has been described as "greenhushing". However, this risks chilling the genuine and legitimate aspirations of most businesses to pursue their sustainability ambitions. Many have a good story to tell – and as the ASA itself has noted, it's important that consumers are made aware of that:
"Reducing the choice that businesses have between either greenwashing or greenhushing is far too simplistic. Impactful and informative green claims benefit consumers because they enable them to make more responsible choices."
ASA blog "Greenspeaking with confidence"
Stepping back, what regulators are asking business to do is arguably no different in principle from what they expect with regard to any type of marketing claim, namely that it should:
- be supported by adequate evidence; and
- not be expressed in a way that gives a misleading impression, particularly when it comes to the business' overall impact on the environment.
High carbon-emitting business may be particularly concerned by this last bullet, but as the ASA has acknowledged, it should not mean that green claims are completely off the table; on the contrary, it notes that some businesses have managed to strike the right balance:
"through the inclusion of straightforward, prominent copy in ads that acknowledges the less-climate-positive aspects of their activities, that indicates how early in their journey they are, or that provides summary details of their future planned activities. Such copy does not have to dominate ads, but it must not be hidden away."
That said, the current focus on greenwashing means that it is essential to ensure that such claims are thoroughly verified and that relevant individuals in the business (including at the highest levels) are satisfied with the accuracy of the claims2. In particular, absolute environmental claims (for example claims that a product is "100% recyclable" or "environmentally friendly") must be capable of substantiation or, alternatively, statements should be expressed in appropriately qualified terms.
Footnotes
1. (i) ASA Ruling on Virgin Atlantic Airways Ltd t/a Virgin Atlantic, 7 August 2024, (ii) Deutsche Lufthansa AG t/a Lufthansa, 1 March 2023; (iii) 4AIR LLC, 30 August 2023, and (iv) Etihad Airways, 6 December 2023; (v) Deutsche Lufthansa AG t/a Lufthansa, 6 December 2023; and (v) Air France-KLM, 6 December 2023.
2. Businesses should have reference to relevant regulator guidance prior to publishing any green claims, including the CAP Guidance on Misleading Environmental claims.
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.
