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Feb 24, 2023

Companies to be hit with new fines for greenwashing claims

Penalties form part of the Digital Markets, Competition and Consumer Bill

Companies could face fines of up to 10 percent of their global turnover and individuals could be hit with penalties of up to £300,000 ($358,000) for making misleading green claims, known as greenwashing.

The term refers to companies delivering false or inaccurate information about their environmentally friendly strategies or products to capitalize on the growing demand for ESG standards.

The fines form part of the UK’s Digital Markets, Competition and Consumer Bill, which is due to be unveiled this year. The bill, first announced in April 2022, imposes stricter fines on companies that intentionally mislead consumers over their green initiatives.

Monetary penalties

As part of the upcoming legislation, the bill will allow the Competition and Markets Authority (CMA) to directly impose financial penalties on companies that fail to meet the regulatory standards.

The Financial Conduct Authority (FCA) issued a consultation in October 2022 proposing the introduction of new rules designed to improve trust in sustainable products and protect UK-based funds from greenwashing. The consultation of the regulator’s final rules is expected to be released in the first half of 2023.

Sacha Sadan, director of ESG at the FCA, said when the consultation was launched: ‘Greenwashing misleads consumers and erodes trust in all ESG products.

Consumers must be confident when products claim to be sustainable that they are. Our proposed rules will help consumers and firms build trust in this sector. We are raising the bar by setting robust regulatory standards to protect consumers in line with our wider FCA strategy.’

Possible greenwashing suspects include popular fashion brands ASOS, Boohoo and George at Asda, which were all under investigation in January this year by the CMA for marketing supposedly eco-friendly products that were ‘too broad and vague’ in description.

The authority said the claims may create the impression that clothing collections from the brands were more environmentally sustainable than ‘they actually are’.