Two recent rulings over greenwashing have caught the attention of legal experts. The cases involve the water firms, Anglian Water and Severn Trent Water, which both ran adverts describing the environmental work they were doing.
Severn Trent’s advert talked about it “working towards protecting [water], nature and our future by planting a bucket-load of trees”. Anglian Water meanwhile focused on how it is “creating wetlands to clean water using nature and make homes for wildlife”.
A handful of complaints to the Advertising Standards Authority (ASA) questioned whether the companies had omitted significant information relating to the discharge of sewage into the environment.
In its assessment of the complaints, the advertising watchdog referred to the historical performance of the companies, including their most recent environmental performance assessments (EPA) - a metric which was introduced by the Environment Agency in 2011 as a non-statutory tool for comparing performance between water and sewerage companies.
Neither had a spotless record, but Anglian’s two-star (out of four) EPA was a factor in the ASA ruling that its ads were misleading. The authority pointed to the company’s rather chequered environmental performance, noting for example that it was below target for the number of sewerage pollution incidents and for compliance with its discharge permit.
Legal experts suggested this signifies a shift in the ASA’s position. “The ASA has been leaning heavily into its rule that unqualified claims could mislead if they omitted significant information,” explained Dominic Watkins, partner at DWF. “The ASA’s position appears to be that the ad is not really about its contents, but is really about how good the company is generally.”
The ASA told ENDS that the EPA ratings were very much relevant for both cases and threw down the gauntlet to others making environmental claims. “It’s up to advertisers to provide us with the evidence they think substantiate their claims rather than us telling them what evidence we require.”
This is also outlined in new guidance published last month on misleading environmental claims. Its guidance refers specifically to water companies, warning those with low EPA ratings that such information “is more likely to be considered material information that contradicts positive environmental claims and so should clearly be disclosed”.
Some lawyers said the approach being taken by the ASA is squeezing the safe spaces where companies can make green claims. “Context has always been key, but the scope of that context is changing,” Watkins warned. “What is not said is as important as what is.”
Severn’s ads were deemed fine “because their overall environmental performance did not contradict the overall impression of the ad [and] we did not consider that their history of releasing sewage into the environment was material information that needed to be included in the ad to prevent viewers from being misled”. Severn’s most recent EPA rating was four stars.
“These ratings went to the very heart of the issues that were being complained [about],” said Rob Biddlecombe, partner at Brabners. “The resemblance of these two matters to each other (same industry, same basic complaints, similar responses by the companies) suggests that it may only be fine margins that distinguish an advertisement that does not breach the advertising codes from one that does,” he also wrote in a blog.
Indeed, both firms had made sewage discharges and have been penalised by regulators for causing pollution in the recent past, and were publicising their current and future plans (rather than suggesting that they had a spotless environmental record).
Also interesting to note is that when looking at the context of claims, the ASA says it will not look back indefinitely, will not require perfection, and concluded that Severn Trent's "recent overall environmental performance was good."
The ASA will, it seems, increasingly lean on the Environment Agency’s ratings, rulings, and data. However, it could also cast its net wider in trying to establish the environmental performance of companies, according to Jill Crawford, senior associate at Irwin Mitchell. Potentially this could include reliance on checks and ratings completed by NGO and consumer groups.
And it’s not just water companies that need to watch out. Iona Silverman, intellectual property and media partner specialising in greenwashing at Freeths, noted how HSBC was “tripped up” recently after running an ad campaign highlighting how the bank had invested $1 trillion in climate-friendly initiatives but failed to mention its significant investments in high-emitting companies and industries. Silverman warned that talking about future environmental goals, like net-zero, must also now show clearly how any targets will be met.
Those involved in high-emitting sectors like oil, food, and transport are increasingly in the spotlight for the sustainability claims they make. The use of controversial offsets to claim carbon neutrality is, for example, in the crosshairs of regulators and campaigners alike. Major brands including food manufacturer Nestlé and fast food chain Leon have recently ditched their carbon neutral targets claims as fears of a major clampdown rise.
The Competition and Markets Authority (CMA) is also working closely with the ASA to identify greenwashing (which it sees as part of its role in helping deliver the country’s net zero ambitions). The CMA has published a green claims code for companies to follow and launched investigations into both the fashion and food sectors following research showing that around 40% of online environmental claims could be deemed misleading.
The CMA could soon have relevant new powers under the Digital Markets Consumers and Competition Bill, with the ability to fine firms 10% of global turnover for breaches of consumer law. This will almost certainly cover environmental claims, according to experts.
There is also the threat of litigation. The EY 2022 general counsel sustainability study showed the challenges presented by lawsuits and increased enforcement were among the risks faced due to sustainability issues or practices. Research published last month by the Grantham Research Institute on Climate and the Environment detailed the “explosion” of climate change litigation cases in recent years. Some have led to changes in policy.
Anita Lloyd, an environmental lawyer at Squire Patton Boggs, said companies with a less-than-perfect environmental record can still promote the good work they are doing but “it’s a balancing act”. Whether marketers can stomach adverts that flip between green credits and their dirtier secrets remains to be seen.
Regardless, regulators and campaigners are watching. The hope is that this will stimulate more transparent marketing and actually enhance corporate reputation, and even restore confidence in some sectors. But there could also be an unintended consequence. If companies fear talking about the good they are doing will they go quiet – so-called greenhushing – and actually pull the plug on some of their environmental programmes, actions and investments?