Four principles to avoid greenwashing: why the FCA’s new rule should be a blueprint for all communicators

‘Greenwashing’ was back in the news last week, with the FCA confirming that its new bespoke rule to combat greenwashing will come into force from the 31st May.

The rule is part of a package of measures finalised in November 2023 through the FCA’s Sustainability Disclosure Requirements (SDR) and investment labels regime (PS23/16). It aims to stop investment companies inflating the sustainability credentials of their products and services to retail customers – stipulating that any such claims should be consistent with the sustainability characteristics of the product or service, and be fair, clear, and not misleading.  

In many ways, this shouldn’t be ‘new news’ given extensive existing requirements, including those from regulators such as the Competition and Markets Authority (CMA) and Advertising Standards Authority (ASA), but it is certainly the first time that the FCA is focusing on sustainability claims for all authorised firms. 

A blueprint for all communicators 

Despite the focus on FCA-authorised firms, the new rule has far broader applicability. Whether communicating to investors, marketing products to consumers, launching a new strategy, or developing content for your corporate website, it provides a clear blueprint for anyone wanting to avoid falling in the trap of greenwashing. 

So, what can we take away? Here are four things you need to know before making sustainability claims. 

1. Claims must be correct and proven 

Only make claims that are factually correct and can be backed up with robust, clear, relevant, and credible evidence. Avoid overstating or exaggerating a product or service’s sustainability or positive environmental and/or social impact. 

This might seem an obvious point in an anti-greenwashing rule – but it’s a pitfall that many have fallen into. Making sweeping statements about products such as ‘it’s fossil fuel free’, or using vague language such as ‘sustainably sourced’, ‘recyclable’, or ‘compostable’ is where companies often come unstuck. 

So before making claims, ask yourself: am I overstating our firm’s positive impact? Can I show evidence to substantiate what I’m saying – and can/should I make this evidence public?

2. Claims must be clear and understandable

Only make claims that are transparent and straightforward, and where all terms can be understood by the intended audience. 

We talk a lot about the ‘alphabet soup’ of the sustainability space, with jargon and technical terms in abundance. Ensuring clarity of language is therefore key when making claims. 

But clear and understandable messaging doesn’t solely rely on language. It’s important to consider the ‘overall impression’ that a visual presentation of a claim can create, too. This includes images, logos, and colours. Even if the claim itself is factually correct, it may be undermined if its visual presentation gives a different impression. 

This isn’t to say that you can’t use imagery that implies sustainable activity. But imagery should be carefully considered and should accurately reflect the activity it represents. 

Ask yourself: am I explaining any technical terms? Does the visual presentation of my claim conflict with written representations? Do images accurately convey an activity, rather than an unquantified benefit – and am I avoiding clichés? Have I tested my communications in advance to understand how they’re perceived?

3. Claims must be complete and consider the full life cycle  

Only make claims that represent the whole product or service, and don’t omit or hide decision-useful information. Where only referring to part of a product’s life cycle, this should be explicitly outlined. 

In other words, avoid cherry-picking information. 

Balance is key here. If making claims about a product’s positive sustainability characteristics, this mustn’t be done in a way that disguises negative impacts. 

Let’s say an FMCG company advertises a plastic bottle as ‘recyclable’, but doesn’t make explicit that the bottle’s cap and label are not. As the claim relates solely to an element of the packaging, consumers will falsely think that the whole product can be recycled. This is misleading.  

Ask yourself: does the claim I’m making only refer to my firm’s positive impact, at a risk of hiding any negatives? Do claims I’m making about products overstate their positive impact when taking into account their full lifecycle from raw materials to disposal? If I’m applying caveats to my claims, are these clear and prominent?

4. Claims making comparisons must be fair and meaningful

Don’t compare apples with oranges. Only make comparative claims that are like-for-like and allow your audience to make informed choices. 

This applies to both comparisons with previous versions of the same service or product, and with competitors’ products. When making such claims, ensure you’re providing enough information about what is being compared, and how you’re making the comparison. 

Unqualified statements about products such as ‘it’s the most sustainable’ or ‘it has lower emissions’ can cause communications to unravel. Likewise, claiming that a product is superior to others, when in fact it only meets a minimum standard of compliance with existing legal requirements, is misleading.

Ask yourself: have I compared my firm or products to others that meet the same needs, or are intended for the same purposes, to credibly make my comparative claim? Am I providing evidence to substantiate the comparison I’m making, and does this evidence cover everything I’m comparing?

A blueprint for everyone 

Regardless of whether you fall under the FCA’s new rule, holding your communications to account against its four key principles can provide a robust foundation for credible sustainable claims. 

For further advice and support in making credible sustainability claims, contact Lara Sharrock, Emperor’s Director of Sustainability, at [email protected].