What is Greenwashing?
Consumers are concerned about the environment and climate change. There is an increased demand for ‘green' products and services that are less harmful to the environment. The supply of products of this nature has led to an increase in making false or misleading environmental claims in advertisements also known as “greenwashing”. A recent ruling by the Advertising Standards Authority (ASA) in the UK illustrates the problems that can occur.
Two posters for HSBC UK Bank plc (HSBC), were displayed at bus stops in Bristol and London in October 2021.The first poster featured an aerial image of waves crashing on a shore with text that stated "Climate change doesn’t do borders. Neither do rising sea levels. That’s why HSBC is aiming to provide up to $1 trillion in financing and investment globally to help our clients transition to net zero”. The second poster featured an image of tree growth rings with text that stated "Climate changes doesn’t do borders. So in the UK, we’re helping to plant 2 million trees which will lock in 1.25 million tonnes of carbon over their lifetime".
The ASA received numerous complaints. The advertisements were challenged on the basis that they were misleading because they omitted significant information about HSBC’s contribution to carbon dioxide and greenhouse gas emissions.
HSBC said it had been making the claim in the first poster since 2020 directed at providing financing and investment globally to help some of its clients’ transition to net zero by 2030. HSBC said that the financing of greenhouse gas-emitting industries was required during the transition to net zero, and so their continued financing of those industries was not in conflict with the aims of a transition to net zero.
The claim in the second poster related to a four-year partnership HSBC had entered into with the National Trust, worth £4 million, to create 2,000 hectares of carbon-rich woodland. Under that partnership HSBC endeavoured to plant two million trees by 2025, which according to the Woodland Carbon Code, and based on the average 100-year lifespan of a tree, would lock in 1.25 million tonnes of carbon.
HSBC said it believed the claims made highlighted two tangible and specific short-to-medium term initiatives, capable of quantifiable measurement, and would not be seen as commenting, in a broader sense, on their green credentials or environmental contribution.
The Code that ASA applies requires that the basis of environmental claims must be clear and that unqualified claims can mislead if they omit significant information.
The ASA determined that consumers would understand the claims “HSBC is aiming to provide up to $1 trillion in financing and investment globally to help our clients transition to net zero” and “we’re helping to plant 2 million trees which will lock in 1.25 million tonnes of carbon in their lifetime” to mean that HSBC was making, and intended to make, a positive overall environmental contribution as a company. As part of that contribution, consumers would understand that HSBC was committed to ensuring its business and lending model would help support businesses’ transition to models that supported net zero targets. Additionally, they would understand that HSBC was undertaking an environmentally beneficial activity by planting trees which would contribute towards the sequestration of greenhouse gases in the atmosphere. Using imagery from the natural world, and in particular the image of waves crashing on a beach, contributed to that impression.
Despite the initiatives highlighted in the posters HSBC was continuing to significantly finance investments in businesses and industries that emitted notable levels of carbon dioxide and other greenhouse gasses. The ASA did not consider consumers would know that was the case, and it was material information that was likely to affect consumers’ understanding of the ads’ overall message, and so should have been clarified in the ads. The ASA concluded that the posters omitted material information and were misleading.
The claims in the posters were ordered not to appear again in the form complained of. HSBC was told to ensure that future marketing communications featuring environmental claims were adequately qualified and did not omit material information about its contribution to carbon dioxide and greenhouse gas emissions.
The Canadian Position
The Competition Bureau of Canada has said that it takes environmental claims seriously. The deceptive marketing provisions of the Competition Act prohibit businesses from making false or misleading claims to promote a service, product or business interest. Such claims include any messages, pictures, or verbal communications, including online and in-store advertisements, social media messages and promotional emails. To determine whether a claim is false or misleading, the courts consider the "general impression" conveyed, as well as the literal meaning. The Competition Act also prohibits performance claims that are not based on adequate and proper testing. This includes any form of statement, warranty or guarantee of a product’s performance, efficacy or length of life.
In the past the Bureau has attacked representations which are literally or technically true but fail to disclose essential information, so steps would likely be taken concerning representations similar to those made in the UK by HSBC.
The Commissioner of Competition has the option under the Act to enforce the misleading advertising provisions as civil matters reviewable by the Competition Tribunal or the civil courts, or as offences prosecuted in the criminal justice system. The choice to proceed with either regime is within the discretion of the Commissioner. Responding to an investigation under the Act is a significant matter.
Care should be taken to ensure that any environmental representations are reviewed by a knowledgeable individual for compliance with the Competition Act before such claims are made in public.
Toronto, October 2022
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These comments are general in nature and not intended to provide legal advice as
individual situations will differ and should be discussed with a lawyer.
A version of this article originally appeared in the Lawyer’s Daily published by LexisNexis Canada Inc.