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‘Greenwashing’ firms face steep new UK fines for misleading claims

When the hydrogen-powered Hyundai Nexo car was launched in the UK in the spring of 2019, it was described as “so beautifully clean” that it “purifies the air as it goes”.

Hyundai Motor UK claimed that if 10,000 of its cars were on the road, carbon emission reduction would be “equivalent to planting 60,000 trees”.

The suggestion that the new car – with a starting price of about £60,000 – could be driven without leaving any pollution sounded almost too good to be true, and in June 2021 the advertising regulator ruled that it was.

The Advertising Standards Authority (ASA) found that while the car does filter incoming air, it still releases pollutants from tyre and brake wear, with road tyres being a huge source of toxic particle pollution. Hyundai considered it had corroborated its claims, making clear it did not intend to suggest the vehicle left no particulates in the air, but the ASA ruled the ad was misleading and should not be used again.

Green claims routinely used to sell products, from cars and plane tickets to soft drinks and cleaning fluids, now face much greater scrutiny under proposed new laws – and risk fines of up to tens of millions of pounds for claims found to be unsubstantiated and misleading.

Under the digital markets, competition and consumer bill to be unveiled shortly, big companies face the threat of civil penalties of up to 10% of global turnover for breaches of consumer law. Individuals who breach these laws will face fines of up to £300,000. The prime minister, Rishi Sunak, has said passing the new bill is a priority for the government.

Lawyers said last week that new powers for the Competition and Markets Authority (CMA) to impose direct civil penalties on companies will almost certainly cover misleading environmental claims, known as greenwashing.

Richard Reichman, a specialist in regulatory investigations and enforcement at BCL Solicitors, said: “Greenwashing is in the crosshairs of the regulators, and I think we will almost certainly see large fines against corporations if they ignore the warnings.”

Stuart Ponting, a partner in regulatory and compliance at the legal firm Walker Morris, said: “The CMA is limited in consumer protection matters and this will widen their powers. It’s a bigger stick and they will be more willing to use it if necessary.”

The CMA published a green claims code in September 2021 and announced last July that it was investigating the eco-friendly and sustainability claims of three brands: Asos, Boohoo and George at Asda. The regulator said it would examine whether claims were misleading but has not reached a view on whether there have been breaches of consumer law.

The CMA announced last month that it would also examine the accuracy of environmental claims made about household essentials such as food, drink and toiletries.

In August last year, an advert for Persil, a brand owned by Unilever, was banned by the ASA after it ruled that the basis for the claim of “kinder to our planet” had not been made clear. Unilever said last week that it had led the way with environmental improvements, and was surprised by the ASA ruling because the advert had been cleared for broadcasting.

The Financial Conduct Authority has consulted on its own package of measures aimed at “clamping down on greenwashing”. It proposes restrictions on how certain terms such as “green” or “sustainable” can be used in investment product names and for marketing.

The European Union is also to table a new law in the next few weeks proposing fines for companies making unsubstantiated environmental claims. France introduced laws in January requiring firms claiming a product is carbon-neutral to report on all the greenhouse emissions of that product for its entire lifecycle.

George Harding-Rolls, campaign manager at the sustainability organisation Changing Markets Foundation, said companies had not previously been properly tested on their green claims and they should be required to provide all relevant evidence to back up any of their assertions.

He said: “It’s easy money to make by saying: ‘If you buy these products, then you can make a difference.’ Many of these claims are misleading and are not supported by evidence.”

Any serious offences of greenwashing would be breaches of the Consumer Protection from Unfair Trading Regulations 2008. Under the proposed laws to be unveiled shortly, the CMA will be able to impose civil monetary penalties for breaches of “core” consumer laws.

Hyundai did not respond last week to a request to support the claim of the impact on carbon emissions of putting 10,000 Nexo cars on the road, but said the claim on its website had been removed.

Hyundai said in response to the June 2021 ruling: “Our own internal tests and the fundamental mechanics of the air purification system contained within the hydrogen fuel cell system of the Nexo corroborated relevant claims used in regard to Nexo.”

Officials say details of the new bill will be announced shortly.

Read more:
‘Greenwashing’ firms face steep new UK fines for misleading claims

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