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FCA Proposes Rules to Clamp Down on Greenwashing

Sam Boughedda trader
Updated 26 Oct 2022

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Key points:

  • On Tuesday, the FCA proposed new measures to clamp down on greenwashing
  • The regulator wants to introduce rules to make green claims clearer for consumers
  • In July, the CMA said it was investigating some fashion companies over green claims

On Tuesday, the FCA revealed that in a bid to clamp down on “greenwashing,” it is proposing a “package of new measures including investment product sustainability labels and restrictions on how terms like ‘ESG,' ‘green' or ‘sustainable' can be used.”

Greenwashing is when a business claims to be environmentally conscious to boost its image for marketing but isn't making any substantial sustainability efforts.

The new measures could impact how companies such as ASOS and Boohoo market their items. While there have been no concrete claims that those companies have been greenwashing, they are under investigation.

Womens clothing

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At the end of July, the Competition and Markets Authority announced it was launching an investigation into the online fashion brands, as well as Asda, to scrutinise their ‘green' claims.

“The Competition and Markets Authority (CMA) will be scrutinising eco-friendly and sustainability claims made by ASOS, Boohoo and George at Asda about their fashion products, including clothing, footwear, and accessories,” the authority said at the time.

The CMA said they would be specifically looking into whether the statements and language used by the businesses are too broad and vague and whether the criteria used to decide which products to include in the collections may be lower than customers might expect from their descriptions and presentation.

In addition, they will assess whether some items have been included when they do not meet the criteria, if there is a lack of information provided, and if any statements made about fabric accreditation schemes and standards are potentially misleading. At the time, the CMA said it wrote to the three companies outlining its concerns.

However, the FCA is now proposing rules that will impact so-called greenwashing.

The regulator has proposed that sustainable investment product labels are introduced with three different categories.

In addition, it is seeking restrictions on how specific sustainability-related terms, such as ESG, green and sustainable, are used in product names and marketing for products that don't qualify for the sustainable investment labels. Furthermore, they want to introduce consumer-facing disclosures and requirements for distributors of products, such as investment platforms.

Sam is a trader and lead stock market writer at AskTraders. After starting his career in the forex market, Sam now focuses on stocks, specifically consumer staples.