What is ‘greenhushing’ and will it replace ‘greenwashing’?

Greenwashing has become a common term in recent years to indicate misleading environmental claims about a business, its goods or services.

Legislation and regulatory guidance deal with greenwashing in the UK. However, the minefield of making incorrect green claims could potentially lead to a wave of ‘greenhushing’ – a concerted policy of not discussing activity with positive environmental impact, or not declaring environmentally-friendly credentials, through fear of the legal and social consequences of getting it wrong.

In this article, IP partner Marcus Collins considers whether greenhushing could potentially rise in reaction to increasingly more restrictive powers of enforcement.

Two recent developments affect this area of regulation:

1. The new Digital Markets, Competition and Consumers Act 2024 (“DMCCA”) received Royal Assent at the end of May 2024 and will likely come into force around October this year. This Act repeals the Consumer Protection from Unfair Trading Regulations 2008 (“CPUTR”), which have previously been the foundation of consumer protection from misleading marketing communications; and
2. The Financial Conduct Authority (“FCA”) has just published its Finalised non-handbook guidance on the Anti-Greenwashing Rule (FG24/3). This expands on its Anti-greenwashing Rule which came into force on 31 May 2024.

DMCCA penalties

In 2021, the Competition and Markets Authority (“CMA”) published Making environmental claims on goods and services (known as the ‘Green Claims Code’) on how to avoid misleading marketing claims on environmental matters. The CMA has a particular remit to protect consumers from being duped, and to uphold fair competition amongst business competitors, where green claims are made. A by-product is that compliant businesses can use their genuine green credentials to enhance their business profile and competitiveness, thereby being encouraged to do their bit to further protect the environment.

The CPUTR previously legislated against traders making misleading statements (or omissions) in marketing communications which do, or might, influence consumer behaviour. Enforcement was by way of a criminal offence with a moderate fine and, potentially, imprisonment. The CPUTR has now been replaced by Part 4, Chapter 1 of the DMCCA and will come into force in a few months.

The general principles are in effect very similar. However, the CMA now has remit to enforce consumer protection measures under the DMCCA without having to seek court orders. The level of penalty for egregious contravention of a CMA final enforcement notice in a regulated consumer matter is now on a par with fines for competition law breaches: the maximum penalty is 10% of the business’s global, annual turnover or £300,000 (whichever is higher).

There are also substantial penalties for providing the CMA with misleading information in the course of investigations into breaches of consumer law. The stakes are therefore significantly raised.

Though the DMCCA’s general prohibition on misleading communications covers greenwashing by implication, the Secretary of State is empowered to add to a list of specific actions deemed automatically misleading and this may possibly, in future, include a specific action involving misleading environmental statements.

Beware of unintended breaches

Every business operating, or targeting consumers, in the UK should take heed. Often breaches of the Green Claims code, and hence liability under supporting legislation, occurs innocently. For example: well-meant, broad, unsubstantiated claims that a product is simply ‘green’, ‘carbon neutral’ or ‘sustainable’ without further explanation can lead to a finding of infringement. Even imagery suggesting eco-friendliness such as trees, flowers or use of the colour green could be deemed misleading, depending on context.

Claims need to be accurate, supported by verifiable data, bases of comparison need to be clear and unambiguous, important information must not be omitted or hidden, comparisons must be meaningful, and the whole lifecycle of a product or service must be considered. A marketing communication is not just an advert – it includes corporate mission statements, investor relations material, operating policies and annual reports.

Regulation of green investment products by the FCA

The FCA’s new guidelines on its Anti-Greenwashing Rule follow a similar mantra to that stated above.

The rules which came into force at the end of May require all FCA-regulated parties to adhere to the Anti-Greenwashing Rule. Later in the year, certain disclosures by way of prescribed labelling will come into force when marketing financial products or services with an environmental impact.

Will ‘greenhushing’ increase?

The new regulatory landscape may potentially push businesses into silence over green credentials and activities in order to evade scrutiny. Indeed, not proclaiming environmental issues may itself be favourable to some industries whose operations are challenging on the green front.

However, businesses playing it safe to avoid greenwashing scrutiny are doing themselves a disservice and putting themselves at an economic disadvantage by not promoting good environmental practices and achievements. Society is also losing out by the environment not being put demonstrably at the forefront of business concerns.

Staying silent will not be a legitimate option for FCA-regulated businesses; and hiding or omitting environmental factors in other marketing communications may itself be misleading for the purposes of general consumer protection law.

If you have questions or concerns about greenwashing, please contact Marcus Collins.