As the cosmetics industry bore the brunt of a pair of significant greenwashing lawsuits in the United States at the end of 2021, it is now the fashion industry that is the target of regulatory oversight action in the United Kingdom to start 2022. As the Securities and Exchange Commission (SEC) in the United States begins 2022 with a clear goal to investigate and commence enforcement actions against companies that it perceives may be engaging in greenwashing, The U.K.’s Competition and Markets Authority (CMA) said on January 14, 2022 that it was setting its enforcement action oversight directly on environmental marketing claims in the fashion industry, making greenwashing and fashion the latest area of corporate concern. Now more than ever, globally situated companies of all types that are advertising, marketing, drafting ESG statements, or disclosing information as required by regulatory agencies must pay extremely close attention to the language used in all of these types of documents, or else run the risk of enforcement action or lawsuits.
Greenwashing and Fashion
The CMA indicated that it will investigate fashion industry marketing statements that relate to environmental friendliness of apparel and footwear. Claims, for example, that articles of clothing are environmentally friendly or environmentally sustainable. The CMA’s actions follow its step in September 2021 when it publicized its green claims code, which set out to educate businesses on how to communicate their green initiatives while not misleading consumers. The CMA’s step last fall was taken due to the significant interest among consumers in environmental sustainability issues related to apparel. If the CMA were to find that fashion companies are in violation of the country’s consumer protection regulations, the CMA may take court action or undertake the equivalent of injunctive relief to have companies change their practices.
Corporate Preparation Is Key
2022 is only three weeks old, and already both the SEC and CMA have shows a significant interest in pursuing companies that they feel are engaging in practices that amount to greenwashing of consumers. While the cosmetics industry has thus far found itself a target in the U.S. and the fashion industry in the U.K., it is likely that both industries will soon become targets for investigation and enforcement in both countries. We predict that 2022 will see a great degree of regulatory enforcement action seeking to curb over zealous marketing language or statements that it sees as greenwashing.
While there are numerous avenues to examine to ensure that ESG principles are being upheld and accurately conveyed to the public, the underlying compliance program for minimizing greenwashing allegation risks is absolutely critical for all players putting forth ESG-related statements. These compliance checks should not merely be one-time pre-issuance programs; rather, they should be ongoing and constant to ensure that with ever-evolving corporate practices, a focused interest by the regulatory agencies on ESG, and increasing attention by the legal world on greenwashing claims, all statement put forth are truly “ESG friendly” and not misleading in any way.
CMBG3 Law LLC has represented clients in environmental and social related issues for years. We regularly consult with private equity, banking, and investment world firms to identify future risk potentials from portfolios under consideration, and assist issuers and investment world firms alike with ESG related issues. For more information about our ESG and risk assessment consulting services, please contact John Gardella (617-279-8225).