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However, overpromising and / or exaggerating green achievements may invite accusations of greenwashing and trigger disputes against companies and financial institutions regarding the soundness of their ESG credentials. In this Insight, we address the E in the ESG and the risks that companies and financial institutions may face regarding greenwashing disputes in the UK.
Greenwashing occurs when a business or organisation exaggerates their “green” credentials or “eco-friendly” products, services or investments, whether unintentionally or as a deliberate marketing strategy.
Exaggerating green achievements may invite accusations of greenwashing and trigger disputes
Under s463 of the Companies Act 2006, individual directors may be held accountable for publishing misleading statements in company reports, including misleading environmental statements.
As a general matter, companies may claim losses caused by misleading statements or omissions in certain reports against directors personally. For example, under s463 of the Companies Act 2006, individual directors may be held accountable for publishing misleading statements in company reports, including misleading environmental statements.
Shareholders may also bring claims against directors for failure to comply with green commitments. Recently, ClientEarth brought a claim against Shell’s board of directors challenging its net zero strategy based on alleged breaches of fiduciary duties.
In December 2021, the UK advertising watchdog, Advertising Standards Authority (‘ASA’) also published guidance, intended to be consistent with the Green Claims Code, to help advertisers apply existing rules on misleading environmental claims and social responsibility. The guidance includes practical examples of claims in advertisements that may be problematic. For example, HSBC recently received a ban of poster adverts placed at bus stops in London and Birmingham. The ASA ruled that the adverts on HSBC’s investments in tree planting and other environmental schemes were misleading because they failed to mention the bank’s links to fossil fuels projects and deforestation².
The UK’s competition watchdog recently launched investigations into eco-friendly statements made by Asos, Boohoo and Asda’s George brand.
¹ Competition Market Authority Investigation dated 29 July 2022 available at https://www.gov.uk/government/news/asos-boohoo-and-asda-investigated-over-fashion-green-claims
² ASA Ruling on HSBC dated 19 October 2022 available at https://www.asa.org.uk/rulings/hsbc-uk-bank-plc-g21-1127656-hsbc-uk-bank-plc.html
³ For more information on EU’s Commission’s proposal for a corporate sustainability due diligence directive see our article here.