How the Green Claims Code affects your business

Customisable business insurance
24 January 2022
7 minute read

Environmentalism in advertising is a hot topic at the moment and one that is under the microscope because of its ability to influence consumers in an increasingly eco-conscious world. However, societal awareness of the impact of business practices on the environment is nothing new.

As a society we have, for centuries, harboured concerns about how poor practices in business and industry have the capacity to damage our world. The poet William Blake wrote of England’s ‘green and pleasant lands’ being blighted by the ‘dark satanic mills’ of ruthless industry, prioritising profit over sustainable practices, more than 200 years ago.

Fast forward to the modern age of hyper-awareness of the need to reduce our collective environmental impact and businesses are feeling pressured to demonstrate that they are playing their part in the solution. This has led to a glut of advertising and branding that makes often sensational claims about the positive environmental impact of a product or service.

In a vast and fast-moving business landscape, how can we ensure that all these many claims of environmental sustainability are true and accurate?

What is corporate sustainability?

Sustainability in business is actually a concept that encapsulates more than just environmental issues and carbon emissions, but also an understanding of the ways in which a business’ practices impact stakeholders and wider society. This includes considerations in a number of different areas:

  • Ethical
  • Social
  • Environmental
  • Cultural
  • Economic

You can read more about how to make your business more sustainable across all the areas mentioned above.

For the purposes of this article, however, we will focus on sustainability from an environmental perspective, understanding how businesses in the UK are expected to behave when advertising their ‘green credentials’.

The benefits of making ‘green’ claims

Boost your business’ reputation

Reputation matters, pure and simple. Scandals of any kind can damage a brand and create ambivalence or even hostility towards your business, encouraging accusations of ‘greenwashing’. Maintaining a healthy reputation in areas such as quality of product, trustworthiness, quality of communication and ease of purchase is vital for any business.

On top of all that, highlighting just how sustainable and environmentally friendly your business is can be the icing on the cake when it comes to cementing a positive reputation amongst your target customers.

Attract conscientious consumers

Whatever sector your business sits in, it is likely that your customer base will include a sizable proportion of people for whom environmental concerns are a notable factor in their decision-making as a consumer.

Survey data from Deloitte in 2021 suggested that more than a quarter (28%) of respondents have actively stopped purchasing certain brands because of ethical or sustainability related concerns. Also, research by the Worldwide Fund for Nature (WWF) suggests that Google searches around sustainable goods have risen by a whopping 71% since 2016.

This trend of active consumer consciousness of environmental issues is only set to become more significant in future years. A 2020 report by consulting firm Mckinsey indicated that three times as many Gen Z respondents said they would pay a higher price for eco-friendly products than baby boomers would.

With all of this in mind, embarking on a marketing strategy that highlights how environmentally sustainable your product or service is can be a huge benefit in reaching a conscious audience who may be willing, under certain circumstances, to pay above market price for a product or service they deem to be sustainable.

The Green Claims Code

What is the Green Claims Code?

To help businesses make the most of their green, environmental credentials and advertise responsibly, the Competition and Markets Authority (CMA) created a new set of guidelines in late 2021, known as the ‘Green Claims Code’. The code comprises six principles for businesses who make claims, either through their marketing, or on the packaging of their products, about their environmental impact and their sustainability.

Let’s explore each of these six guiding principles in a little more detail:

Claims must be truthful and accurate

This is, in many ways, the most obvious of the key principles. Businesses must not make environmental claims, in their marketing material, online presence or brand packaging that are factually inaccurate. Furthermore, the CMA maintains that even if a claim is technically true, it can be considered inaccurate if it is presented in a way that is likely to give a consumer an inaccurate impression of the sustainability of a product.

Claims must be clear and unambiguous

Vagueness is often the marketer’s friend, but when it comes to environmental claims, the Green Claims Code states that claims must leave no room for wide or varied interpretation. Claims should not be vague enough to leave room in the consumer’s mind to speculate on what it may mean.

Claims must not omit or hide important relevant information

This principle addresses the concept of dishonesty through omission. For example, if a product is sustainably sourced, but the packaging it is in is non-biodegradable, claiming that the product is ‘good for the planet’ is only half true. The omission of information about the sustainability of the packaging itself would violate the code.

Comparisons must be fair and meaningful

A great way to market a product is to compare it favourably to a competitor brand or similar product. When it comes to making comparisons about the environmental virtues of your product, you must make reasonable and fair comparisons, comparing like with like and not misleading consumers by artificially skewing comparisons in your favour.

Claims must consider the full life cycle of the product or service

This crucial element of the Green Claims Code states that marketers must not make claims about the environmental impact of a product unless every element of the lifecycle is considered. A manufacturer, for example, must not claim that their product is good for the planet because it was produced in a carbon neutral manner, if the materials used are non-recyclable.

Claims must be substantiated

While green claims should be fair, clear, truthful, unambiguous and accurate, any business that makes environmental claims must be able to substantiate any claim, with data, research or proof of a strategy in place to achieve stated goals.

How is it enforced?

The main thing to note about the Green Claims Code is that it is a set of principles, rather than a law or set of regulations in itself. The actual legislation that governs how businesses may advertise themselves to consumers and other businesses are the Consumer Protection from Unfair Trading Regulations 2008 and Business Protection from Misleading Marketing Regulations 2008.

The CMA explains that the Green Claims Code is “designed to help businesses comply with the law”, encouraging best practice in advertising, branding and packaging. Should a business be discovered or accused of making misleading environmental claims in breach of the principles of the Green Claims Code, then they may face action from one of the following sources:

The Competition and Markets Authority (CMA)

The CMA has the power to launch legal proceedings against businesses that it believes are acting in violation of consumer protection legislation, including businesses that do not adhere to the Green Claims Code.

Trading Standards Services

Similarly, Trading Standards may bring court proceedings against businesses for making misleading claims that violate consumer protection law. Often the CMA and Trading Standards will work together to assess which authority is in the best position to initiate legal proceedings.

The Advertising Standards Authority (ASA)

The ASA do not generally engage in legal proceedings in response to complaints about misleading advertising claims. However, they do have the power to compel businesses to cease marketing campaigns and remove misleading advertising from the internet, physical billboards and broadcast channels.

Individual consumers

Any individual can take action against a business, without recourse to any regulators or authorities, if they believe that they have been misled by that business’ advertising or branding. This would usually take the form of a private civil lawsuit, as a result of which a business may be ordered to pay damages to that individual.

Sustainability in business as a good in itself

The business case for sustainability

More than 50 years ago, the influential neoliberal economist Milton Friedman penned an article that became known as the Friedman Doctrine which argued that because companies are not the same as individuals, the only responsibility of business was to increase its profit. Businesses, in Friendman’s estimation, were responsible only to their shareholders, and not to anyone else, certainly not to the planet and society at large. This ideology dominated for some time, especially during the 1980s, before academic thought evolved and corporate responsibility became a serious concern.

Now, in the 2020s, Friedman’s ideas have been challenged to the point that a new orthodoxy is emerging, one in which there is a strong and compelling business case for putting sustainability at the heart of corporate strategy. As consumer demands change in recognition of the destructive power of unsustainable industry, supply must change with it and businesses that embrace true sustainability can reap the competitive benefits of being early adopters of the necessary practices of the future.

Looking beyond reputation alone

Two decades into the 21st Century, no business wishes to be seen as Blake’s ‘dark satanic mill’ - a contributor to the climate crisis and a blight on the landscape. As consumers’ eyes are opened to the reality of climate change, a poor environmental reputation can sink a business. This concern over reputation, however, is only half the story.

Many, many businesses, especially the small businesses that make up the backbone of the UK economy are actively taking significant steps to reduce their impact on the planet and operate sustainably. They understand the value of sustainability as a good in itself and do not take decisions about green practices merely as an act of window dressing.

It is these conscientious businesses, who incorporate sustainable practices into their business for reasons other than just reputation, that the CMA’s Green Claims Code seeks to protect and encourage. Regulations are in place not just to punish wrongdoing, but also to help businesses make positive efforts to advertise honestly and conscientiously, especially in areas as important as the environment.

You may also like:

This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.

Share this article

We've made buying insurance simple. Get started.

Related posts