COSMETICS BUSINESS LIVE
KENNEDYS LAW LLP
ESG in cosmetics – green claims & greenwashing Speaker Sarah-Jane Dobson
T
he issue of greenwashing is not only topical, as a key concern of the modern day socially- and environmentally- conscious consumer, but also one with real and tangible legal repercussions for companies that get it wrong.
Greenwashing – touting false environmental credentials to entice consumers to purchase products – can result in significant legal exposure. Across Europe, companies can face criminal or unlimited financial sanctions (or a significant percentage of overall global turnover) for breach of product safety regulations, consumer protection laws and/or advertising regimes, all in addition to the significant reputational harm that can have a long-lasting negative economic impact. A strategy to identify and mitigate legal exposure is crucial to the success and longevity of cosmetic industry actors, particularly those leading the charge on environmental topics such as sustainability and green ingredients.
THE CONTEXT OF GREENWASHING But why has the topic of ‘green’ claims or ‘greenwashing’ become highly regulated on so many levels, and why is it a key enforcement target for international regulators?
The environment has been a key focus of EU regulators for some time, most tangibly in the consumer products space since its 2020 Circular Economy Plan and green claims a particular sub-focus within it, including with the 2022 Competition Market Authority’s (CMA’s) ‘green claims code’, proposed increased powers and recent enforcement actions which saw the fashion industry squarely in the firing line for reputation- damaging findings against them in respect of greenwashing.
Such trends are only a handful of examples in the context of a well-worn general appetite by advertising agencies to focus on this topic for some time now.
There is a complex and diverse source of legal obligation under cosmetics sector-specific regulations and ‘safety net’ legislation, which are applicable in absence of more specific legislation. Such ‘safety net’ legislation encompasses a broad range of legal sources which the cosmetics industry is much less likely to be familiar with, as compared with the cosmetics regime. This includes general product safety laws, consumer protection laws, unfair trading laws and misleading and advertising laws.
The multi-layered body of legal guidance that exists in this area is, strictly speaking, non-legally
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binding but is a ‘gold standard’, which is likely to be a useful mitigation in respect of any subsequent legal exposure, either regulatory enforcement action or civil claims by consumers. However, perhaps more crucially, a failure to follow such guidance can be a truly damning factor against a company in defending themselves. A clear focus on substantiation of any and all claims made with a consideration of that substantiation across the full product lifecycle, including waste handling, and an increased focus on imagery rather than just words, are areas of future focus.
Practical examples of large, household-name companies receiving recent adverse rulings from advertising authorities in respect of a broad range of environmental claims demonstrate the growing trend for enforcement in this area. Problematic claims include absolute claims, including 100% recycled claims, claims that failed for substantiation generally, or indeed claims that could not be substantiated across the full product lifecycle (even if they could for part thereof). The following are practical tips to mitigate against the risk of being at the wrong end of legal proceedings, either regulatory or consumer driven: 1. Know your product intimately, including all aspects across the product lifecycle that might impact the claims you make in respect of the environment or ethical practices. 2. Know the complex legal regimes applicable, including the focus of regulatory enforcement and the areas that are outside your general expertise (such as broader laws in advertising, consumer protection and similar).
3. Consider the self-regulating guidance and codes before making environmental claims, including understanding the interplay between guidance documents and hard law. Have a cogent argument as to why any available non- binding legal guidance has not been followed, but ideally strive for this ‘gold standard’ wherever possible to avoid the need for such an argument. 4. Have hard facts and substantiation of any claims you do make – including perhaps with external technical experts providing such substantiation. 5. Review and carefully consider all claims made and their positioning on packaging and any environmentally-focused initiatives being undertaken. Ensure such review is holistic and deploys relevant specialty expertise
Kennedys Law LLP discussed the tangible legal repercussions of greenwashing for the cosmetics industry
December 2022 41
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