CMA investigation into eco-friendly credentials of consumer products


The Competition and Markets Authority (CMA) has announced that it will be investigating potentially misleading claims that some consumer products are eco-friendly or sustainable. The CMA is carrying out the investigations under its statutory powers at Section 5 of the Enterprise Act. 

In particular, the CMA will focus on:

  1. how claims about the environmental impact of products and services are made;
  2. whether such claims are supported by evidence;
  3. whether such claims influence behaviour when purchasing goods and services; and
  4. whether consumers are misled by an absence of information about the environmental impact of products and services.

The review will cover a wide range of sectors, although it will have a particular focus on sectors such as textiles and fashion, travel and transport and other fast-moving consumer goods.  The CMA has  outlined two key dates in the timetable for its investigations.  

Call for evidence

Firstly, in November and December 2020, the CMA called on consumers, businesses and stakeholders to complete surveys to help inform the CMA's investigations, asking for details of how businesses ensure that environmental claims are complaint with UK law, and what further support could be provided to help businesses comply with such laws. 

Guidance for business on a compliant transition to Net Zero

Secondly, the CMA announced that it intends to publish guidance for businesses in  summer 2021, to support businesses in transitioning to a low carbon economy, whilst not misleading consumers with claims about eco-friendly or sustainable products.

The CMA has also announced that it is co-leading a project with the Authority for Consumer and Markets in the Netherlands under the auspices of the International Consumer Protection Enforcement Network (ICPEN). This project also plans to publish high-level guidance for businesses that could help to set consistent global expectations on the truthfulness of environmental claims.

The CMA's announcement reflects increasing pressure on businesses from customers, shareholders, investors and other stakeholders to ensure that they operate and sell products and services in a sustainable and eco-friendly manner.  Indeed, the CMA noted in its press release that in 2019 consumers in the UK spent four times more on ethical goods than they did two decades ago.   This  growing demand is a strong incentive  to sell products and services which are labelled or represented as being sustainable or eco-friendly, and the CMA's initial research  has led to concerns that businesses may be motivated to make misleading, vague or false claims, or otherwise to omit material information in labels and publications. 

As at November 2020, the CMA had not reached a view that any consumer protection laws had been broken.  However, the CMA did indicate that it would take enforcement action should it discover evidence of misleading claims or omissions.  News of this investigation further serves to highlight the importance for businesses of ensuring good oversight over all claims and publications made about the environmental impact of the business and its products. 

[Whilst the CMA's current investigation relates to consumer products, we have also previously considered the risks faced by businesses when making ESG disclosures and public statements [here].]

Pension fund agrees settlement in landmark Australian climate change case, McVeigh v Rest

The  Australian superannuation fund Rest has agreed a settlement in a landmark case, acknowledging that "climate change could lead to catastrophic economic and social consequences and is an important concern of Rest's members", and that it is "important to actively identify and manage" that risk.

The case was brought two years ago by a member, beneficiary and contributor to the superannuation fund, Mark McVeigh, who claimed that Rest was in breach of its fiduciary duties due to its management of climate change risks and the disclosure of those risks.  It was one of the first cases of its kind, and was watched globally as the outcome  could have a far reaching impact for other pension funds . 

Rest also agreed to implement a number of climate-change initiatives, including a long-term objective to hit net-zero carbon footprint by 2050, to require its investment managers take active steps to consider climate change, to measure and manage financial risks posed by climate change and other ESG-related risks and to improve its climate change and ESG-related disclosures.

Although the case never made it to Court (settling just days before a hearing) the settlement, which clearly favours the Claimant McVeigh, is likely to act as a precedent globally, and highlights the potential liability, and adverse publicity, which might be faced by pensions and other investment funds if they do not adequately address the risks posed by climate change to their investments. 

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