Guide to UK Legislation and Regulation on Greenwashing

UK regulations and legislation on greenwashing and climate-related risks focus on promoting transparency, accountability and compliance with environmental standards.

Currently, there is not one legal definition of ‘greenwashing’ in the UK. It differs between regulators and jurisdiction; however, it concerns misrepresentation, misstatement and false or misleading practice.

The following regulations have been put in place to combat such practices and to hold organisations and their executives accountable.

Greenwashing Regulations

1. Consumer Protection Laws

a. Consumer Protection from Unfair Trading Regulations 2008: Prohibits businesses from making false or misleading claims, including environmental ones, that could deceive consumers.

b. Advertising Standards Authority (ASA) Guidance: Requires that environmental claims in advertisements be clear, accurate and substantiated.

2. Competition and Markets Authority (CMA):

a. The Green Claims Code (GCC) provides guidance for businesses on making truthful and transparent environmental claims. Non-compliance can lead to investigations and penalties. The GCC is based on six overarching principles:

• Claims must be truthful and accurate;
• Claims must be clear and unambiguous;
• Claims must not omit or hide important information;
• Claims must consider the full life cycle of the product or service;
• Claims must be substantiated; and
• Comparisons must be fair and meaningful.

Climate-related risk disclosure

Businesses are required to disclose climate-related risks, ensuring that investors and stakeholders are informed about environmental impact and financial risks.

3. Companies Act 2006: Mandates certain companies to include climate-related information in their Strategic Reports, such as risks associated with climate change and their environmental impact.

4. Pension Schemes: Large pension schemes must report in line with CFD requirements to ensure climate related risks are factored into investment decisions.

5. Climate Change Act 2008:

a. The Climate Change Act 2008 commits the UK government by law to: (i) reduce gas emissions by 100% from their 1990 levels (net zero) by 2050; (ii) set legally binding ‘carbon budgets’ to act as stepping stones towards the 2050 net zero target and reduce emissions by at least 68% by 2030 and 78% by 2035.

Sustainability and corporate governance

6. UK Corporate Governance Code: Encourages boards to consider climate-related risks in their decision-making processes.

7. Environment Act 2021: Sets targets for biodiversity, waste reduction and air and water quality, emphasising corporate compliance with environmental goals.

Sector-specific rules

8. Energy and utilities: Companies in energy-intensive industries are subject to stricter climate reporting and compliance obligations under schemes like the UK Emissions Trading Scheme (UK ETS).

9. Financial services: The Financial Conduct Authority (FCA) has introduced rules for listed companies to report on climate-related financial risks. In addition, the FCA has proposed an anti-greenwashing rule which requires all regulated firms to ensure that sustainability-related claims concerning the naming and marketing of products are clear, fair, not misleading, and accurately reflect the sustainability profile of products.

Legal accountability

Companies that fail to comply with greenwashing and climate-related regulations can face penalties, legal action and reputational damage. This includes scrutiny by regulators, investor lawsuits, and public backlash.

These measures aim to ensure businesses and organisations operate transparently and responsibly in the context of climate change and sustainability. Unless a business has robust evidence to support it claims of sustainability across its full lifecycle, these claims are likely to be caught under the guidance in the GCC and ASA.

Businesses, its directors and even influencers hired as brand ambassadors should be on guard against greenwashing as stringent regulations are now in place. This could result in a rise in litigation under the Companies Act 2006 and other legislation holding responsible parties liable for their greenwashing practices.

If you have any queries about Greenwashing and compliance with the above legislation and regulation, please do not hesitate to get in touch by telephone on 0207 052 3545 or by email info@kaurmaxwell.com

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice.

Please contact KaurMaxwell for advice before taking any action in reliance on it. 

By: Maria Madara