As the cosmetics industry bore the brunt of a pair of significant greenwashing lawsuits in the United States at the end of 2021, the fashion industry is becoming the target of regulatory oversight action in the United Kingdom in 2022. In the wake of the Securities and Exchange Commission (“SEC”) in the U.S. beginning 2022 with a clear goal to investigate and commence enforcement actions against companies that it perceives may be engaging in greenwashing, the UK’s Competition and Markets Authority (“CMA”) announced in January that it was setting its enforcement action oversight directly on environmental marketing claims in the fashion industry, making greenwashing within the fashion sphere the latest area of corporate concern.
Now more than ever, globally-situated companies of all types that are drafting and then advertising and marketing Environmental, Social, and Governance (“ESG”) statements and/or disclosing information as required by regulatory agencies must pay extremely close attention to the language used in each of these types of documents (whether it be formal regulatory filings or glossy, consumer-facing ESG campaigns), or else run the risk of enforcement action or lawsuits.
Greenwashing & Fashion
The CMA indicated that it will investigate fashion industry marketing statements that relate to environmental friendliness of apparel and footwear, including claims, for example, that articles of clothing are “environmentally friendly” or “sustainable.” The CMA’s announcement followed from the September 2021 release of its green claims code, which aims to educate businesses on how to communicate their green initiatives while not misleading consumers. The release of the sustainability-centric guide coincides with a rise in interest among consumers in environmental sustainability issues, especially related to apparel.
The CMA is seemingly making good on its aim, announcing on July 29 that it has launched an investigation into three fashion brands to scrutinize their “green” claims, citing “concern about the way the firms’ products are being marketed to customers as eco-friendly.” Specifically, the CMA’s investigation will center on environmental claims made by ASOS, Boohoo and George at Asda about their fashion products, including clothing, footwear, and accessories. Several issues will be examined, including whether …
(1) The statements and language used by the businesses are too broad and vague, and may create the impression that clothing collections – such as the ‘Responsible edit’ from ASOS, Boohoo’s current ‘Ready for the Future’ range, and ‘George for Good’ – are more environmentally sustainable than they actually are;
(2) The criteria used by some of these businesses to decide which products to include in these collections may be lower than customers might reasonably expect from their descriptions and overall presentation – for example, some products may contain as little as 20% recycled fabric;
(3) Some items have been included in these collections when they do not meet the criteria used by the business;
(4) There is a lack of information provided to customers about products included in any of the companies’ eco ranges, such as missing information about what the fabric is made from; and
(5) Any statements made by the companies about fabric accreditation schemes and standards are potentially misleading, such as a lack of clarity as to whether the accreditation applies to particular products or to the businesses’ wider practices.
At “this early stage,” the CMA says that it has not reached a determination as to whether there have been any breaches of consumer protection law, but it noted that its “wider review of the fashion sector and potentially misleading environmental claims in other sectors will continue” as the government entity will “also consider whether to open further investigations.” In a statement on Friday, Sarah Cardell, interim Chief Executive of the CMA, said, “This is just the start of our work in this sector and all fashion companies should take note: look at your own practices and make sure they are in line with the law.”
If the CMA ultimately finds that fashion companies are in violation of the country’s consumer protection regulations, the regulator may take court action or undertake the equivalent of injunctive relief to force companies to change their practices, which could have significant implications for companies, including from a PR perspective.
Corporate Preparation Is Key
2022 is only half way over and both the SEC and CMA have shown a significant interest in pursuing companies that they feel are engaging in practices that amount to greenwashing. While the cosmetics industry has thus far found itself a target in the U.S. and the fashion industry in the UK, it is likely that both industries will soon become targets for investigation and enforcement in both countries – and beyond. As such, 2022 will likely see a great degree of regulatory enforcement action seeking to curb overzealous marketing language or statements that it sees as greenwashing.
There are numerous avenues for companies to examine to ensure that ESG principles are being upheld and accurately conveyed to the public, but an underlying compliance program for minimizing greenwashing allegation risks is absolutely critical for all players putting forth ESG-related statements. These compliance checks should not merely be one-time pre-issuance programs; rather, they should be ongoing and constant to ensure that with ever-evolving corporate practices, a focused interest by the regulatory agencies on ESG, and increasing attention by the legal world on greenwashing claims, all statement put forth are truly “ESG friendly” and not misleading in any way.
John Gardella is a Shareholder and Chief Services Officer at CMBG3 Law. He is licensed to practice in Massachusetts and Tennessee.
*This article was initially published on January 31, 2022 but has been updated to reflect to the CMA’s July 29 announcement.
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