CMA publishes guidance on environmental claims in the fashion sector

The CMA has published a practical compliance guide on environmental claims for fashion brands, applying the principles set out in its Green Claims Code, (the Code) and has also advised 17 fashion brands to review their green claims in light of the guidance.  This article summarises the key points arising from the guidance and potential implications for businesses both within and outside the fashion sector, including in relation to internal processes and supply chain engagement. 

Key takeaways

• The guidance, which is based on the Green Claims Code, contains detailed information on the CMA's expectations for any environmental or sustainability claims made by fashion brands in relation to products or ranges, and steps that can be taken to comply. The focus is on ensuring that sufficient information is provided so that any claims are clear, precise, accurate, and can be substantiated.
• Businesses are advised to have robust internal processes in place to ensure the accuracy of their environmental claims in line with the guidance. This includes having appropriate policies, regular staff training, and systems to verify product listings and supplier claims.
• The guidance is issued in anticipation of the CMA's new enforcement powers under the Digital Markets, Competition and Consumers Act 2024 (DMCC Act), which will allow the CMA to impose financial penalties of up to 10% of a business's global turnover for breaches of consumer protection law. The CMA has already contacted 17 fashion brands relating to concerns about their environmental claims, underlining the CMA's active monitoring of the sector and its expectation of compliance.

Background to the CMA's guidance

On 18 September 2024, the CMA published guidance (the Guidance) to the fashion retail sector on compliance with the Code and consumer law when making environmental claims. The Guidance has been issued in advance of the commencement of the CMA's new enforcement powers under the DMCC Act, which are expected to come into force in April 2025.  Once in force, the CMA will have the ability to impose financial penalties of up to 10% of a business' global turnover for breaches of consumer protection law, including in relation to misleading green claims. 

The Guidance follows the conclusions earlier this year of the CMA's investigations into ASOS, Boohoo and George at Asda, and largely reflects the undertakings (the Undertakings) offered by those firms to conclude the investigation.

When it published the Undertakings, the CMA noted that it considered their provisions to "set a benchmark for the industry".  It is therefore unsurprising that the Guidance essentially reflects the principles set out in the Undertakings, including in relation to the internal steps and systems that companies may be expected to take to ensure that their environmental claims are compliant. 

It demonstrates the CMA's continued priority of protecting consumers from misleading environmental claims in line with its 2024-2025 Annual Plan, in light of the increasing consumer demand for environmentally sustainable products.

General requirements for environmental claims 

The Guidance is aimed at all businesses active within the fashion sector and supply chains that are making environmental claims about clothing, footwear, fashion accessories and related services (e.g. packaging, delivery and returns). This includes retailers selling their own or third-party products via marketplaces, as well as manufacturers, suppliers (including third party branded suppliers), wholesalers and distributors.  All such organisations in the supply chain that supply products to UK consumers must ensure that any green claims relating to products, services, processes, brands or the business as a whole are "accurate and substantiated". 

To assist with compliance, the Guidance applies the key principles set out in the Code to the fashion sector, to explain how businesses can ensure that their environmental claims are compliant, as summarised below: 

1. Environmental claims should be clear and accurate, including claims made on products (e.g. on labels), in advertising, in store and online.
2. Important or qualifying information relevant to the claim should be clear and accurate, and presented close to the claim. It also should not require consumers to take further steps (e.g. clicking a hyperlink or scanning a QR code) to access key information. This is true of information contained on a product (e.g. the Guidance specifies it should be on the same side of a tag). If a business is prevented from including such information due to the space available, this is not considered to be an excuse under the Guidance and the business should assess whether it is appropriate to make the claim.
3. Unclear terms, particularly those which are broader, general or absolute, should be avoided to prevent consumers being misled. This includes language such as 'green', 'sustainable' or 'eco-friendly', which are considered vague and could suggest the product as a whole has a positive environmental impact.
4. Businesses should not use imagery or icons that give or reinforce a misleading impression of the environmental impact of the product.
5. Any comparisons should be explained, such as a statement that a product has a lower carbon footprint than another, to aid consumers in making informed choices between competing products. This information should generally be located close to the environmental claim in line with the Guidance (see point 2 above).
6. If a consumer needs to take certain action for a claimed environmental benefit to occur, businesses should clearly set out the circumstances that apply to the claim and the action the consumer needs to take. The information should be presented in line with the Guidance (see point 2 above).
7. If a website uses filters or navigational tools to identify sustainable products, the criteria used to identify the products as sustainable should be clear and not misleading. For example, a product filter that refers to 'recycled' products could give the impression that the products are made from 100% recycled materials, so a precise filter would accurately reflect the minimum criteria for inclusion in the range (such as 'at least 50% recycled content').
8. If a claim relates only to a certain part of a product's life cycle, this should be made clear, with any qualifying information also provided close to the claim. For example, a statement that certain fabrics and fibres 'minimise water usage and waste' should clarify that this relates only to the raw material and production stage, rather than the entire manufacturing process of the product.
9. In respect of environmental claims based on or referring to corporate targets, businesses should provide a clear and prominent summary of the target, with further information available on what the target aims to achieve, the date by which it is expected to be met, and how it will be achieved. Businesses should avoid using environmental claims that provide a misleading impression of its impact as a whole on the environment.

Product ranges, fabrics and affiliations / accreditations 

In addition to the general points contained in the Guidance outlined above, specific information is also provided in relation to the following:

• Product ranges: The criteria for the inclusion of products in an environmental range, whether online or instore, (such as collections, capsule collections or limited product releases) should clearly explain the range criteria in line with the Guidance (see point 2 above). The name of the range should not be misleading, for example, broader terms (such as 'environmentally conscious' or 'sustainable') could give the impression that a range has greater environmental benefits than is the case unless the benefits are fully explained. The range should also only include products that meet the relevant criteria for inclusion, including in any references made in advertising or social media posts.
• Fabrics: if environmental claims are made about a product based on the fabrics it contains, these should refer to objective properties of the fabrics rather than general descriptions (e.g. 'recycled' or 'organic' rather than 'responsible'). However, products should not imply they are made of a single fabric (such as recycled cotton) if that is not true, unless the proportion of non-recycled materials is negligible. If a product is made of a mix of fabrics, the percentages of the relevant fabric to which the environmental claim relates should be clear. Businesses should also have evidence to support the information they are providing.
• Affiliations and accreditations: assurance schemes should only be referred to where a product has the particular characteristics that satisfy the requirements of the scheme. Where an environmental claim is made in relation to a scheme, information on the environmental benefits associated with the scheme should be included, along with any details of the business' material connection to the scheme, reference to further information and a link to the scheme's website.

Establishing internal processes 

As well as providing practical guidance on the application of the Green Claims Code, the Guidance emphasises that businesses should have adequate internal processes in place to ensure that environmental claims are accurate and not misleading. In particular the Guidance emphasises:

• having appropriate policies in place, which should be reviewed at least annually based on the Undertakings to ensure they remain up to date. Whilst no further information on specific policies is provided in the Guidance, based on the Undertakings this could include internal guidance and policy documents that reflect the requirements of consumer protection laws, the Code, the Guidance and Advertising Standards Authority's codes, guidance and rulings.
• arranging regular training for staff. Based on the requirements included in the Undertakings, this should include training for employees responsible for: writing product descriptions and/or other web based and social media content; product ranges and brand advertising activities; product sourcing and supply chains; and reviewing supplier certificates, or otherwise verifying the fabric composition of products. Businesses should also review their training at least annually to ensure it remains up to date.
• putting systems in place to ensure that product listings are correct and any products advertised as being within an environmental range meet the advertised criteria. By way of example, the Undertakings require the businesses to conduct spot checks of at least 5% of any new online listings in respect of which an environmental claim are made, to be conducted at least once a week. It could also involve systems to ensure that any environmental claims are reviewed by the business' internal compliance or legal function, to confirm adherence to the Guidance. Processes should also be put in place to enable any mistakes to be identified and corrected promptly. Under the Undertakings, any environmental claims identified as being misleading should be removed or corrected as soon as reasonably practicable and generally within five working days, which provides a guide to the timeframe the CMA will likely consider to be reasonable for correcting any misleading claims.
• proactively ensuring that the business is able to substantiate any environmental claims that are made, including by having robust, credible, relevant and up to date evidence in support of the claims. The Guidance also emphasises the need to ensure that claims and information provided by suppliers can be supported, for example with evidence such as final scope certificates and final transaction certificates, and that businesses should therefore engage with their suppliers to ensure that relevant certificates can be provided on request. The Undertakings similarly contained a 'supplier due diligence process', emphasising that businesses should not simply rely on claims made by their suppliers without taking appropriate steps to verify them.

Whilst not specifically referenced in the Guidance, as a matter of good practice, businesses should keep records of their compliance with the Guidance, such as evidence of training provided, data on the number of products it has spot checked, documents with suppliers evidencing the completion of spot checks conducted in line with the supplier due diligence process, and all certificates obtained from suppliers.

Claims in relation to third party products 

The Guidance confirms that retailers and distributors are responsible for any claims made relating to any third-party products they sell, and that the businesses are responsible for satisfying themselves that the claims are not misleading.  

As an example, this could include requiring suppliers to complete a self-assessment questionnaire or providing evidence of an independent verification processes.  If the approach included in the Undertakings is considered best practice, businesses should obtain such information from current suppliers and new suppliers, and this should be repeated at least every two years.  

The Guidance states that "each business in the supply chain has a responsibility for ensuring that its claims are accurate and substantiated", so there is a clear expectation of engagement with suppliers to ensure that environmental claims are not misleading.

Comment

Alongside the Guidance, the CMA announced that it has contacted 17 fashion brands in relation to concerns identified in their environmental claims, although it has not launched enforcement action against them. It has not named the 17 companies concerned. This suggests that the CMA is actively monitoring compliance with the Code and underlines its expectation of industry compliance.  It also shows that action against misleading green claims remains a priority area for the CMA.

Whilst the Guidance is not legally binding on businesses, it does clearly set out the CMA's expectations of compliance with the Code and provides examples of how, in the CMA's view, businesses can minimise the chances of consumers being misled by their environmental claims.  In particular, by having appropriate policies in place, implementing staff training, ensuring adequate internal systems are in place to detect and address misleading environmental claims and having evidence to support such claims.  Although addressed to the fashion sector, the Guidance provides helpful guidance to any business making consumer-facing environmental claims. 

This Guidance is to be welcomed given the expected commencement (in April 2025) of the CMA's new direct enforcement powers, which will see companies facing financial penalties of up to 10% of their global turnover for breaches of consumer protection law.  

We expect that enforcement against misleading green claims will continue to be a priority area for the CMA, particularly given it's medium term priority for the UK economy to grow productively and sustainably.  The Guidance provides a further reminder that future enforcement in this area may well result in fines being imposed, particularly where the evidence shows that the Guidance has been ignored.

With thanks to Olivia Spong for her contribution.