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In the UK, 40% of large businesses face hefty fines for greenwashing in 2024, as stringent consumer protection regulations implemented by the Competitions and Markets Authority (CMA) and the EU take effect.
“Too broad and vague”
A recent sustainability analysis conducted by the AI-powered compliance platform Compare Ethics shows that businesses are failing to address the real risks, including the rapidly evolving landscape where each sustainability assertion requires thoroughly verification.
Abbie Morris, CEO of Compare Ethics, said that with the evolving regulations in both the UK and the EU, compliance is no longer merely a matter of ticking boxes for regulatory purposes.
In 2020, various consumer protection agencies worldwide collaborated on an independent survey, revealing that 40% of international corporations had made misleading environmental claims.
In the UK, Unilever and Boohoo, among others, have caught the attention of the CMA in the last two years. Highlighting their commitment to crack down in greenwashers, the CMA has spent £1.3 million and approximately 29,471 working hours in its investigations into greenwashing between Sep. 2021 to Jan. 2024, according to Financial News.
The CMA found that the language used by ASOS, Boohoo and George was "too broad and vague", implying a more sustainable fabrication of some clothes than was actually the case.
Such green claims must be thoroughly proved. Otherwise, companies could face a hefty penalty. The CMA has the power to fine companies up to 10% of their global revenue. After the Digital Markets, Competition and Consumers Bill comes into force, the CMA could directly enforce penalties.
Necessary investments for green claims verification
Compare Ethics predicts an increasing number of fines for greenwashing during the next 12 to 18 months. The CEO warned that "Not only are regulators holding companies to account, but increasingly, investors will actively sue your business if you're not taking it seriously, because they have their own regulatory pressure that they need to respond to."
According to its analysis, many large businesses aren't adequately investing in the procedures needed to comply with the new sustainability regulations in the EU and the UK.
The necessary investment for an average business is £500,000 to £1 million annually if chooses to manually carry out the verification of all the green claims. Building the technology could cost £2-4 million and it would be another £1-2 million to maintain the system.
According to Morris, it can take months, if not years, to collect the right data, set up necessary verification systems, and report back to relevant regulators. However, if they do not urgently verify their entire product supply chains, among other necessary measures, many UK businesses are at risk of facing products delays at the border.
