Greenwashing and the Digital Markets, Competition and Consumers Act 2024

Environmental sustainability has become a top priority for consumers, who are increasingly making decisions about where they buy goods and services based on the credentials and reputations of businesses. It therefore comes as no surprise that businesses are increasingly tailoring their advertising and marketing campaigns to appeal to consumers on this topic. However, according to the Competition and Markets Authority (the “CMA”) approximately 40% of the green claims that are made online could be misleading.

Acknowledging growing distrust about the accuracy of sustainability-related information shared by businesses with consumers, there has been a notable uptick in regulatory enforcement. Indeed, the CMA has indicated that greenwashing is and will continue to be a priority area. In 2021, it published its 'Green Claims Code' to help businesses understand their obligations under consumer protection law. Since then, it has since undertaken industry-level investigations into the environmental claims made in fashion retail, fast-moving consumer goods and green heating and insulation.

Earlier this year, we identified some of the broader trends shaping responsible business and in this article we take a more detailed look at the risks of greenwashing for businesses in the context of the new Digital Markets, Competition and Consumers Act 2024 (the 'DMCCA').

What is greenwashing and how is it regulated by the DMCCA?

There is no legal definition of greenwashing. However, it is generally understood to be the act of misleading people about the environmental impact of a product, service, brand or business.

Whilst the DMCCA does not expressly address greenwashing, it does prohibit traders from engaging in unfair commercial practices more generally – which could, obviously, apply to environmental claims they make; and, crucially, the DMCCA grants the CMA broader and significant enforcement powers.

In summary:

1. Who does the DMCCA apply to?

Traders based inside or outside the UK, if they direct their activities to UK consumers. Whether a business 'directs' its activities to UK consumers will depend on the relevant facts and circumstances including the nature of the goods and services; the language used on the website and in marketing material; the currency in which the goods and services are offered for sale; and whether there have been past transactions with UK consumers.

2. What does the DMCCA prohibit?

Broadly speaking, there are two key categories of practices which are prohibited:

A. false claims – eg falsely claiming to be a signatory of a code of conduct or to have approval from a public/private body; or displaying a quality mark (or equivalent) without authority to do so; and

B. misleading actions – eg providing misleading or confusing information, or omitting information, that is likely to deceive consumers or cause them to make a decision that they would not otherwise have done (like buying the relevant good or service).

Some examples of claims or actions that might be prohibited include: using the term “eco” without substantiation; suggesting that the business has been accredited by an environmental body when it has not been, or at least has not been in the way that is suggested; and deceiving consumers into thinking that the business is “green”, for example by inviting consumers to “create a sustainable future together”.

3. What enforcement action can be taken?

The DMCCA gives the CMA the power to enforce certain consumer laws directly, without needing to go to court. For example, the CMA is now empowered to impose a range of sanctions, including:

A. requiring businesses to compensate consumers and take other remedial steps. For example, last year, the CMA secured undertakings from ASOS (see here), Boohoo (see here) and Asda (see here) in respect of misleading environmental claims; and issued an open letter to the wider fashion industry about market-level compliance; and

B. issuing fines, up to the higher of £300,000 or 10% of the business’ global annual turnover. Needless to say, in practice, a fine could be very high.

However, it is important to remember that further enforcement action may also be possible. Depending on the circumstances, that might be (other) regulatory action by the CMA, the Advertising Standards Authority or Trading Standards; or even litigation by investors, partners, and consumers. Whatever the scenario, there will be reputational concerns for the business which can potentially have a significant impact on the brand and, in turn, profitability.

What should businesses be doing now?

Our top three tips for businesses are:

1. Carefully review marketing materials before they are published, to ensure that any environmental claims are true and not misleading. Any claims should be specific (ie not vague or generic, but relevant to a specific product or service) and able to be substantiated.
2. Ensure you have a clear governance process in place, to review materials before they are published; and to deal with any issues that are raised by consumers, the press or regulators.
3. If environmental sustainability is a core part of your brand, consider an audit to check that the claims you are making can be substantiated; and address any recommendations that arise following that audit.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, September 2025