A taste of the CMA’s green claims supply chain guidance

The Competition and Markets Authority (CMA) has published further guidance to industry on making compliant environmental claims.

This latest addition to the statutory regulator’s library of green claims guidance focuses on supply chain liability when it comes to making claims about how products provide a benefit, or are less harmful, to the environment. This could be about any element of the product, from how it’s produced to how it’s disposed of. 

It’s a valuable insight into the factors the CMA will take into account when deciding to take action and crucially, who it will take action against. The document notes that it only refers to CMA action (so doesn’t bind Trading Standards) and should be read alongside the CMA’s Guidance on 'Making environmental claims on goods and services' (aka: The Green Claims Code, published in 2021).

The guidance applies across all sectors and is relevant to any business seeking to make environmental claims about their product which are directed at consumers. It includes checklists for retailers, brands and suppliers/manufacturers. The guidance explains “making” an environmental claim as follows:

“'Making' an environmental claim includes what businesses say, how they present it and what they don’t say.”

It’s worth remembering the whilst the relevant law in this area applies to a wide range of communications, including claims made on packaging and point of sale in store and online as well as advertising more generally.

Key points on “making” a claim

• the more complex the supply chain the more businesses that are potentially responsible for the claims.
• the fact a business didn’t create the claim, doesn’t stop them from being considered to have “made” it.
• businesses making environmental claims need take steps to ensure that claims are accurate and non-misleading.
• if it’s not possible to verify a claim, businesses should reconsider their trading relationship with the supplier.

This is not dissimilar from the ASA’s position that the entity making the claim must hold the evidence itself and relying on claims provided by the manufacturer without the underlying evidence is not sufficient.

CMA’s approach to enforcement

When pursuing civil enforcement action, the intention of the business is not relevant to whether or not a claim would be considered misleading. This correlates with the ASA’s approach to claims and contrasts with the position in relation to criminal enforcement, where it is a defence for a business to argue that it took all reasonable precautions and exercised all due diligence to avoid making the misleading environmental claim.

However, the CMA has confirmed that it will apply its ‘4Ps’ framework for enforcement, in terms of pace, proportionality, predictability and process. It will go after the most egregious breaches as a priority. In a nutshell, there are two factors the CMA will consider to determine whether a breach is egregious:

1. when the CMA considers that the businesses should know what their obligations are (because there’s plenty of information available on compliance) and;
2.  when there are no processes in place to ensure environmental claims were made in a compliant fashion.

One of the significant changes to consumer law under the Digital Markets, Competition and Consumers Act 2024 (DMCC) is that the CMA can now impose fines directly for breaches of consumer law without going to Court. This includes in relation to misleading environmental claims. When calculating a fine, it will take into account:

• the seriousness of the infringement (particularly the level of harm and culpability of the business(es)).
• size of business (as well as its financial position at the time of the breach).
• mitigating circumstances (e.g. steps taken to correct infringing claims).
• aggravating circumstances (e.g. continuing the infringing claims having been warned that they may be unlawful).

Further detail on how the CMA will calculate fines is available in its direct enforcement guidance.

Sample from the case studies

We’d recommend reading the guidance in full, but here are a couple of high level summaries of two of the CMA’s case studies if you’re in a hurry:

• In a scenario where a “compostable” claim is stated on the labelling, with no further information that it must be returned to specific stores for composting, both the retailer and the manufacturer are responsible for ensuring the claim isn’t misleading, but the CMA may be more likely to prioritise action against the manufacturer, who made the claim on the product.

• In a scenario where a retailer decides to market a product as part of an “environmental range” and only notifies the manufacturer without further information and then the claim is considered misleading, the CMA is more likely to focus on the retailer.