26 July 2022

What does the new Greenwashing Regulation mean for UK Tech?

the UK’s Green Claims Code (GCC) was introduced at the end of 2021. Let’s take a closer look at what it all means for businesses.

By Rory Brown

What does the new Greenwashing Regulation mean for UK Tech?

The reality is most companies are greenwashing to some extent, whether intentionally or inadvertently. In fact, a 2020 study found that 40% of green claims made online were misleading.

The temptation to greenwash is not surprising - consumers are increasingly willing to pay extra for sustainability. A YouGov study of the same year reported that 57% of UK consumers would be willing to pay more for more sustainable products, rising to 69% for younger consumers.

And, with certain aspects of carbon accounting as tricky as they are (such as digital carbon- a major problem for tech companies) it’s also understandable that many companies greenwash by mistake.

To address these misleading environmental claims and hold businesses to account, the UK’s Green Claims Code (GCC) was introduced at the end of 2021. Let’s take a closer look at what it all means for businesses.

Who does the code apply to?

Since January 2022, the code has been enforceable to companies that meet just one of the following criteria:

Over 250 employees
Turnover equal to or greater than £36m
More than £18m on the balance sheet

What’s actually in the code?

We’re going to take a look at 7 key principles here which are particularly relevant for Tech companies:

1. Claims must be truthful and accurate

They must not deceive consumers, even if the claim is correct.

In the digital context, claims of ‘green hosting’ must be backed by evidence that all data is routed through a service provider that has a direct PPA with a renewable energy provider. A ‘green tariff’ agreement could easily not qualify as an evidenced claim under the new guidelines.

2. Claims must be clear and unambiguous

They should be worded in a transparent and easily understandable manner, including for Net Zero or sustainability plans.

In the digital context, companies will no longer be able to make statements such as “we’re intent on reducing our amount of digital waste” without a clear, evidenced and accessible plan.

3. Claims must not omit or hide important information

They should disclose all environmental impact information for consumers to make an informed choice, displayed accessibly.

In the digital context, companies touting the environmental benefits of operating entirely remotely will have to disclose the footprint that exists despite their limited physical presence.

4. Claims must only make fair and meaningful comparisons

They should be made with evidence that comparisons are accurate at the time of publication.

Companies will be able to make claims against the efficiency of a competitor’s software, hardware or digital operations as long as it is made with relevant evidence.

5. Claims must consider the full life cycle of the product

They should be made with consideration of the product or service’s entire duration of existence.

In the digital context, making claims about ‘eco’ or ‘green’ hosting may take into account the full life cycle of the data centre itself and the footprint of its construction as well as purchased energy.

6. Claims must be substantiated

They must be made with the most credible evidence, based on accepted science or methodologies.

Tech companies must keep on top of digital sustainability research and trends and making vague claims such as ‘the most sustainable tech company in the UK’ will need evidence. Publishing Cloud Carbon Footprints will require evidence of the calculation.

7. Product features that are legal requirements aren’t claimed as benefits

if an element of a product is essential for its legal right to be sold, it cannot be marketed as offering additional environmental benefits to consumers or suppliers.

Tech companies will need to offer environmental benefits that go above and beyond legal standards in order to make justified green claims.

So what are the consequences of breaking this code?

There are a number of consequences businesses can face if found to be in break of GCC regulations. To understand this, it’s important to realise that this is not brand new legislation and is actually drawing from the powers granted to the CMA by previous regulations:

Consumer Protection from Unfair Trading (2008)
Business Protection from Misleading Marketing (2008)

Something which will immediately make businesses sit up and take notice is the fact that breaching the Consumer Protection from Unfair Trading legislation can result in criminal liability for Directors and Company Officers.

Moreover, the CMA has investigative powers to require companies to disclose any evidence, or lack of, related to their claims.

There is also a direct civil right of redress for consumers against companies that make misleading claims, and companies can be required to financially compensate claims.

This means that, in theory, tech companies making sustainability claims may be taken to court by either the CMA, a member of the public or legal charities.

What’s next?

The new codes and guidelines appearing all over Europe from different authoritative bodies are just the tip of the iceberg in the worldwide push for accuracy in claims, practice and measurement.

Companies are increasingly required to prioritise environmental considerations. Not only are they legally compelled to publish statements about their environmental impact, but steps like this will require them to ensure these statements are highly accurate.

Our take

For many organisations, particularly tech companies, digital carbon emissions can be a huge, even majority, contributor to their overall environmental impact. Due to a lack of complete measurement software, however, companies are forced to guess, estimate, or ignore these emissions altogether.

As regulation continues to grow over accurate sustainability reporting, getting ahead on digital emissions is more important than ever.

Terms

Competition and Markets Authority

CMA is a non-ministerial body with legislative powers to ensure markets have fair competition and consumers have recourse for bad service, false claims and undisclosed negative impacts from purchased goods and services.

Green Claims Code

This guidance sets out principles which are designed to help businesses comply with the law. It explains each of these principles. It gives examples of how each of them applies and more detailed case studies where multiple principles apply. The guidance also sets out the legal framework on which these principles are based.

Greenwashing

Cambridge Dictionary - “Behaviour or activities that make people believe that a company is doing more to protect the environment than it really is”.

International Consumer Protection Enforcement Network

The International Consumer Protection and Enforcement Network (ICPEN), formerly the International Marketing Supervision Network (IMSN), is a global network of consumer protection authorities which engages in dispute resolution and encourages cooperation between law enforcement agencies for disputes arising from commerce across international borders.