Greenwashing, the practice of making misleading environmental claims, has prompted both the UK and EU to implement strict regulations for businesses. The Financial Conduct Authority (FCA), the Competition Markets Authority (CMA) and European Union have introduced comprehensive greenwashing regulations for businesses to ensure transparency and protect consumers from deceptive environmental claims. These regulatory frameworks mark a significant shift in how companies must communicate their environmental initiatives and sustainability practises.
In the UK, the FCA has implemented an anti-greenwashing rule for businesses that requires them to provide clear, substantiated evidence for their environmental claims. This rule, introduced in 2024, applies to firms across sectors, particularly those in finance, and mandates full disclosure of the environmental impact of products or services. For UK firms, the FCA has emphasised that while the anti-greenwashing rule introduces new compliance requirements, it builds upon existing obligations to maintain fair, clear and non-misleading communications. The regulator has indicated it will take its standard supervisory and enforcement approach, with particular attention to cases where there is potential consumer harm or serious misconduct.
The Green Claims Code, created by the Competition Markets Authority (CMA) in the UK, is applicable to any companies operating in the country that make the following claims about a product, service, or brand:
The Code applies to all environmental claims directed at UK consumers. This includes claims made by both UK and overseas businesses. It covers manufacturers, wholesalers, distributors, and retailers. Retailers, including online marketplaces, must ensure that the claims on the products they sell are accurate. To do this, they need to verify the data provided by suppliers and remove any products with misleading claims. The Code also covers environmental claims in corporate reports if directed at consumers, with significant implications for compliance with UK reporting standards like TCFD.
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In contrast, the EU’s approach centres on the SFDR, which has established a structured disclosure framework. The SFDR, which came into effect in 2021, requires financial market participants to disclose the environmental impact of their investments, with a specific focus on sustainability risks and opportunities. According to data, 31.5% of funds available for sale in the EU were classified under SFDR Articles 8 and 9 as of March 2022. Failure to comply with the SFDR can lead to penalties and reputational damage, making it crucial for companies to adopt rigorous reporting processes.
Key differences between the two regulatory frameworks include:
These anti-greenwashing regulations for business represent a significant shift in corporate sustainability reporting requirements across the UK and EU. These frameworks address the pressing issue of misleading environmental claims while establishing clear guidelines for businesses to follow. For effective implementation, firms must meet several key requirements:
Read More: Anti-greenwashing Regulations: Business Implications
Both the UK and EU have the same goal of ensuring that businesses can no longer make vague, unverifiable environmental claims without consequences. Organisations that embrace these standards and implement appropriate compliance measures will strengthen their market position while contributing to genuine environmental progress. Our expert Green Marketing support is designed to help businesses enhance their sustainability profiles while ensuring compliance with evolving regulations like the FCA's Anti-Greenwashing Rule and the EU’s SFDR.