Earlier this month the Law Society updated its guidance to in-house and private practice solicitors on Climate risk governance and greenwashing risks, writes Thom Wilkinson, a Partner in our Property and Environmental Law team and recent member of the Law Society Land Law and Conveyancing Committee.
The World Economic Forum registered climate action failure, extreme weather events and biodiversity loss and ecosystem collapse as the top three global risks ranked by severity over the next 10 years in its Global Risks Report published on 31 January 2023.
I’ve advocated for years, and certainly agree with the Law Society, with its statement that, “Solicitors, both in-house and in private practice, can use their role of legal and strategic advice to play an important part in promoting climate risk governance frameworks within companies.
“It can also be supported through having a culture and leadership in place which take account of and champion the impact of the transition to Net Zero in line with the UK’s statutory commitment to achieve Net Zero by 2050.”
Greenwashing risks
Hard as it might be to identify whether a specific claim may be exaggerated both in-house legal counsel and external advisers are ideally placed to work with clients to ensure statements on how they are mitigating climate risk are legal, decent and honest.
To add to the complexity there is no harmonised legal definition of greenwashing. The concept differs between regulator, jurisdiction and the nature of the product or service. However, greenwashing generally concerns misrepresentation, misstatement and false or misleading practice in relation to effects upon the environment.
Greenwashing has been defined by the UK Financial Conduct Authority (FCA) as “marketing that portrays an organisation’s products, activities or policies as producing positive environmental outcomes when this is not the case”.
Environmental claims are also governed by many regulatory codes. In particular in the UK they must comply with the Competition and Marketing Authority’s (CMA) Green Claims Code (GCC) and the Advertising Standards Authority’s (ASA) CAP Code (Rule 11).
These codes apply to both business-to-consumer and business-to-business environmental claims, and broadly reflect the position under existing UK consumer protection law.
They are designed to help businesses understand and comply with their consumer protection law obligations when making environmental claims.
The Green Claims Code
The GCC is based on six overarching principles:
- claims must be truthful and accurate;
- claims must be clear and unambiguous;
- claims must not omit or hide important information;
- claims must consider the full life cycle of the product or service;
- claims be substantiated; and
- comparisons must be fair and meaningful.
Rule 11 of the CAP Code, and the ASA’s accompanying advertising guidance (ASA Guidance), reflect a similar set of principles.
In recent years, there has been increasing regulatory scrutiny by the CMA and ASA of misleading environmental claims or greenwashing.
In addition, the FCA has proposed an anti-greenwashing rule requiring all regulated firms to ensure that sustainability-related claims, naming and marketing of products are clear, fair and not misleading, and consistent with the sustainability profile of products.
Climate change risks for solicitors to be aware of are outlined in the Guidance. For example what does ‘Net Zero’ actually mean? “Net Zero refers to a state in which the greenhouse gases going into the atmosphere are balanced by removal out of the atmosphere.
“The term Net Zero is important because – for CO2 at least – this is the state at which global warming stops. The Paris Agreement underlines the need for Net Zero.
“It requires states to “achieve a balance between anthropogenic emissions by sources and removals …….. of greenhouse gases in the second half of this century”.
Solicitors are not generally expected to be experts on the law relating to climate change and ESG (as it may be outside their retainer and/or expertise). However, increasingly they ought to be attentive to and generally aware of climate-related and ESG issues and their impact on their own practice area.
The Law Society’s Guidance is timely, helpful and interesting.
Contact our Property Team
If you would like to discuss any of the points raised in this article, please do get in contact, quoting ref CB427. Thom Wilkinson is a Partner specialising in Property and Environmental Law and is contactable on: +44 (0)20 7692 7581 or twilkinson@bishopandsewell.co.uk
The above is accurate as at 16 October 2023. The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
