UK takes aim at company ’greenwashing’

Premium Beauty News with AFP (Photo: © Tanaonte / Getty Images)

26 October 2022

Britain’s financial watchdog on Tuesday proposed rules against "greenwashing", or deceptive claims by businesses about the environmental impact of their products or climate actions. Although it targets financial markets, the measure illustrates the growing demand for sincerity and commitment that economic players must meet.

The Financial Conduct Authority said it was proposing regulations, including investment product sustainability labels and restrictions on terms such as "green", "sustainable" and "ESG" (environmental, social, and governance).

Consultation period

According to the FCA, there has been growth in the number of investment products marketed as ‘green’ or making wider sustainability claims. However, the agency considers exaggerated, misleading or unsubstantiated claims about ESG credentials damage confidence in these products.

"Greenwashing misleads consumers and erodes trust in all ESG products," said Sacha Sadan, FCA’s Director of Environment Social and Governance. "Consumers must be confident when products claim to be sustainable that they actually are. Our proposed rules will help consumers and firms build trust in this sector."

The FCA is proposing to introduce: sustainable investment product labels, restrictions on how certain sustainability-related terms – such as ‘ESG’, ‘green’ or ‘sustainable’ – can be used in product names and marketing for products which don’t qualify for the sustainable investment labels, consumer-facing disclosures, more detailed disclosures, suitable for institutional investors or retail investors that want to know more, requirements for distributors of products, such as investment platforms, to ensure that the labels and consumer-facing disclosures are accessible and clear to consumers.

The FCA is running a consultation on its proposals until January 25, ahead of publishing final rules by the end of June.

HSBC comes under fire over adverts

Last week, a British watchdog hit out at HSBC for adverts promoting its green initiatives that failed to highlight the bank’s contributions to greenhouse gas emissions. The Advertising Standards Authority banned further use of HSBC posters that appeared a year ago ahead of the COP26 climate summit hosted by Britain.

HSBC insisted that the financial sector had "a responsibility to communicate its role in the low carbon transition to raise public awareness and engage its customers". But it also acknowledged the need to "consider how best to do this" as it delivers on the bank’s "ambitious net zero commitments".

UK multinationals seeking to meet a British government target of net zero carbon emissions by 2050 are frequently accused of "greenwashing" by environmentalists.