Greenwashing in the fast-moving consumer goods sector comes under the spotlight

As litigation based on claims of greenwashing steadily increases, examination of consumer facing businesses and their ESG statements continues to rise. On 26 January, the UK’s Competition and Markets Authority (“CMA”) announced that it was expanding its scrutiny of greenwashing claims into the fast-moving consumer goods (“FMCG”) sector. The investigation will focus on essential products that consumers use on a daily basis and regularly repurchase, such as dishwashing items and toilet products of which 91% and 100%, respectively, market themselves as ‘green’ or ‘environmentally friendly’. The CMA will analyse claims made in store and online, including all forms of media (app, website). Particular areas of concern are broad, vague statements claiming that a product is ‘sustainable’ or ‘better’ for the environment; how recyclable a product is; and ranges being described as ‘sustainable’. The focus on ‘essential’ items suggests that the CMA is concerned that potential greenwashing of these items will impact large swathes of the consumer population, and they will be keen to ensure that any greenwashing is subject to appropriate scrutiny.

This expansion is not wholly surprising. ‘Eco-conscious’ purchases are becoming increasingly prevalent within the FMCG sector, with recent reports suggesting that 52% of shoppers say sustainability is becoming increasingly important to them.[1] In January 2022 the CMA began investigating several well-known fashion brands who claim to have sustainable clothing lines. Asda, Boohoo and ASOS are all facing greenwashing investigations, with ASOS already removing the ‘Responsible Edit’ category from its website. The Edit claimed to be a selection for all environmentally conscious clothing, accessories and home items at ASOS and included brands that met certain sustainability criteria, such as use of recycled materials. ASOS stated that they “proactively” removed the Edit in response to the CMA Investigation. The Advertising Standards Authority (“ASA”) has also been focussing on the FMCG industry, making findings against both Tesco[2] and Unilever.[3]

However, a CMA investigation may just be the start for FMCG businesses. Greenwashing litigation is steadily increasing, both in the UK and abroad. Courts in the US have already heard greenwashing cases against high-profile brands such as Coca-Cola[4], Allbirds[5], Oatly[6] and Canada Goose[7] and in November 2022 H&M was subject to a class action lawsuit in the US, over claims that its ‘Conscious Choice’ range is environmentally friendly. According to the filing, H&M is accused of “misleadingly, illegally and deceptively” seeking to capitalise on consumers wanting to make eco-conscious fashion choices.[8] Similarly in the UK, courts are seeing a rise in greenwashing cases; evidenced in the substantial number of claims being issued in the High Court against German car manufactures for misleading consumers on vehicle engine omissions.

The focus by the CMA and ASA on FMCG will only fuel the potential for greenwashing claims in this sector. Greenwashing claims can arise in a variety of forms including claims under legislation, such as the Financial Services and Markets Act or the Consumer Protection from Unfair Trading Regulations 2008 (“CPUT”), or as a claim for misrepresentation. In July 2021, the UK published a consultation on reforming competition and consumer law and asked the CMA for advice. In March 2022, the CMA suggested adding misleading and unsubstantiated green claims to the list of automatically unfair practices in the CPUT, giving claimants more basis to bring claims. The first reading of the Digital Markets, Competition and Consumer Bill is due to take place in Spring 2023.

Greenwashing claims pose a further risk area for businesses in addition to the overall uptick in climate change and ESG litigation. The increasing consumer concern surrounding greenwashing claims, coupled with the CMA and ASA public scrutiny and pressure in the FMCG sector, will inevitably result in an increase in greenwashing litigation in the sector; and businesses should exercise increasing caution in promoting their green credentials.

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[1] How FMCG brands can capitalize on soaring eco-consumer spending power (gfk.com)

[2] In June 2022, ASA banned Tesco’s own-brand Plant Chef Burger adverts for having misleading environmental claims.

[3] In August 2022 ASA banned an advert for Persil for making to make clear its “kinder to our planet” claim.

[4] Earth Island Institute v The Coca-Cola Company, No. 2021 CA 001846B (D.C Super. Nov. 10 2022).

[5] Dwyer v Allbirds, Inc., No. 7:21-cv-05238 (S.D.N.Y 13 June 2021).

[6] In re Oatly Group AB Securities Litigation, 1:21-v-06360 (S.D.N.Y 2 May 2022).

[7] Lin v Canada Goose US, No. 1:21-cv-07614 (S.D.N.Y 12 September 2021).

[8] Lizama et al. v H&M Hennes & Mauritz LP, 2:22-CV-01170 (E.D.Mo).