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South Africa: Developments in the regulation of green claims and greenwashing

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‘Greenwashing’ and ‘green claims’ are relatively new concepts, arising from increased societal scrutiny on business impacts on the environment, and calls that businesses contribute to a less carbon-intensive and more sustainable economy.

Given that climate and environmental concerns are playing an increasing role in driving market activity, business can expect greater scrutiny of such claims.

What are ‘green claims’? What is ‘greenwashing’?

‘Green claims’ are environmental claims or statements made about the environmentally beneficial qualities or characteristics of goods or services. They are any type of claim that:

  • either explicitly or implicitly makes reference to the environmental or ecological aspects of a product or service;
  • relates to the production, packaging, distribution and the use/ consumption or disposal of products or services;
  • is made in any medium, including packaging, labelling, package inserts, promotional and point of sales materials, product literature, radio and television, as well as via digital or electronic media such as e-mail, telephone and the internet; and
  • may include imagery such as landscapes and wildlife, or specially developed symbols, pictures or labels as well as colours.

‘Greenwashing’ arises when misleading claims are made about the sustainability characteristics of a product or about environmental or sustainability practices.

The fundamental guidance emerging internationally is that green, ecological and net-zero claims must be capable of clear substantiation, and this must be well-explained to consumers. 

The legislative scheme that regulates these practices in South Africa is not explicit, but we have distilled and detailed the key regulations which might be used to regulate green claims.

The Consumer Protection Act

The Consumer Protection Act 68 of 2008 (CPA) provides the regulatory framework for consumer-facing product marketing and sales in South Africa.

The CPA prohibits the marketing of goods through ‘false, misleading or deceptive representations of fact’ regarding the goods or services. These terms are not defined in the CPA.

The CPA specifically provides that when interpreting or applying the CPA a person, court or Tribunal or the National Consumer Commission may consider (a) appropriate foreign and international law; (b) appropriate conventions, declarations or protocols relating to consumer protection.

As such, while the National Consumer Commission has to date not published specific rules or regulations relating to when a ‘green’ claim may be considered to be ‘misleading’, reference may be made to international precedent.

Currently our understanding is that this is an emerging area internationally and most of the guidance on these issues, for example, in the US and EU, is still under development.

In the UK the Competition and Markets Authority (CMA) has provided guidance on making ‘Green Claims’ that may be persuasive in a South African context. The key principles outlined in the Green Claims Code is the following:

  • claims must be truthful and accurate;
  • claims must be clear and unambiguous;
  • claims must not omit or hide important, relevant information;
  • comparisons must be fair and meaningful;
  • claims must consider the full life cycle of the product or service; and
  • claims must be substantiated.

Consumers who believe that a company has been making false, misleading, or deceptive claims may lodge a complaint with the National Consumer Commission. Suppliers of goods or services who have been found by the National Consumer Commission to have made false, misleading, or deceptive representations may be subject to administrative penalties (of up to 10% of the guilty company’s annual profit) or criminal offences related to falsification of labelling, over and above any statutory remedies available to the consumer.

However, the National Consumer Commission deals with a high volume of complaints made in terms of the Act and is thus not a very efficient regulator of such matters.

South African National Standards

In South Africa there are various National Standards that have been developed by the South African Bureau of Standards (SABS), based on international standards, that are ‘voluntary’, but these too could be referenced in order to determine whether, objectively judged, a claim is ‘misleading’. These are:

  • SANS 14021:2017 (Environmental Labels and Declarations – Self-declared Environmental Claims (Type II Environmental Labelling));
  • SANS 14024:1999 (Environmental Labels and Declarations (Type I Environmental Labelling – Principles and Procedures)); and
  • SANS 1728:2019 (Ed. 1.100) ‘The requirements for the marking and identification of degradable plastics’ providing for voluntary standard dealing with the marking and identification of biodegradable packaging.

With regard to SANS 1728:2019 the SABS Acting CEO is on record as noting that there are no products that have been certified by the SABS as compliant or meeting the requirements of SANS 1728:2019 and thus, claims of plastic products being degradable, environmentally friendly or plastic free may be unverified or unsubstantiated.

The Advertising Regulatory Board

Although the South African Advertising Regulatory Board (ARB) is voluntary regulatory body, it is relevant to the ‘legislative’ framework because it is a body that has specific guidance on green claims. Its findings can have far-reaching implications both reputationally and on advertising campaigns undertaken by reputable marketing agencies which belong to the ARB.

The ARB is a membership organisation made up of many reputable marketing companies and media platforms.  It is guided by its Code of Advertising Practice (Code), which regulates advertising practices in the South African market. The Code prohibits advertisements that contain statements or visual images/ symbols that will either directly or implicitly, through omission, ambiguity, inaccuracy, or exaggeration, mislead, or is likely to mislead a consumer.

‘Advertisement’ is widely defined to include any visual or aural communication, representation, reference, or notification of any kind that is intended to promote the sale, leasing or use of any goods or services; or that appeals for or promotes the support of any cause. Promotional content of display material, menus, labels and packaging also fall within the definition.

It has always been a requirement that advertisements should provide accurate information, which is meaningful to the consumer and is based on scientific standards and principles.

However, in 2022 the Code was specifically amended to include an Appendix G dealing with ‘environmental claims’ (Appendix) which are defined as: ‘any direct or indirect claim, representation, reference or indication in an advertisement relating to the immediate or future impact or influence on the environment of a product or its packaging or a service’.

The Appendix requires that all environmental claims and statements made in advertising should provide accurate information, that is meaningful to the consumer and is based on recognised scientific standards and principles. It also requires that advertising should not contain vague, incomplete or irrelevant statements about environmental matters, nor impair public confidence in the efforts made by the business community to improve its ecological standards.

The Appendix has specific provisions with regard to terms such as ‘recyclable’, ‘degradable’ and ‘ozone-friendly’. It also requires that advertisements containing general statements such as ‘environmentally friendly’ or ‘ozone friendly’ or ‘green’, or graphics or symbols designed to convey a similar environmental message, are not be permitted unless qualified by a description of the benefit conferred, e.g. ‘ozone friendly – free from CFCs’. Environmental signs or symbols used in advertising are required to clearly indicate their source and should not imply official approval.

In assessing whether there has been a breach of the Code, it is likely that the ARB will consider whether the claims made have the effect of misleading the consumer (or are likely to mislead the customer), are false or unsubstantiated or in violation of the Code. Therefore, it is imperative that a company is able to provide evidence to support claims and ensure that claims are put into sufficient context to enable consumers to understand the basis on which they are made.

Unlawful competition

False advertising arising from deceptive or misleading green claims also has the potential to give rise to common law claims based on unlawful competition.

Such claims can be brought by a competitor who claims that the misleading claims have caused harm to the competitor, which entitled the competitor to damages or injunctive relief.

The competitor would need to show actual harm and it is considered that such claims are less likely to succeed than stakeholder and consumer action in respect of green claims.

In South Africa most ‘competitor’ claims are made under the Competition Act 89 of 1998 (Competition Act) and, as we discuss below, to date there have been no ‘green washing’ claims brought under that regime.

The Competition Act

The Competition Act does not specifically address/ regulate conduct such as greenwashing, which is, essentially, misleading. Competition law principles require an effect on ‘competition’ in a correctly defined market to be demonstrated. There would need to be more than an ‘advantage’ gained by the company accused of misleading advertising – the advantage would need to ‘impact competition’, which is a fairly high bar.

However, with respect to ‘prohibited practices’ under the Competition Act, there is the possibility of a complaint being filed in relation to conduct that involves misleading claims regarding sustainability or related matters, and it may certainly attract the Competition Commission’s (Commission) attention if the greenwashing firm is a prominent company.

To the extent that a firm is ‘dominant’ for the purposes of the Competition Act, and it engages in making misleading claims regarding sustainability or related matters, then depending on the facts, it may be possible for such conduct to also constitute an ‘exclusionary act’ for the purposes of section 8 of the Competition Act. Under the Competition Act, an ‘exclusionary act’ means an ‘act that impedes or prevents a firm from entering into, participating in or expanding within a market’, where ‘participate’ refers to ‘the ability of or opportunity for firms to sustain themselves in the market’. There is heightened interest where the ‘exclusionary act’ may implicate a small or medium sized firm and/ or a firm owned or controlled by ‘historically disadvantaged persons’.

Although a complaint would not necessarily mean that the conduct contravenes the Competition Act, the Commission would still be required investigate the complaint and the complaint would still need to be successfully prosecuted before the Competition Tribunal. This in itself brings reputational risk to the company against whom the complaint was made.

Additionally, as part of the merger review process, the competition authorities will consider the effect of a transaction on competition as well as the public interest. While the competition authorities have previously taken into account sustainability considerations as part of their review of mergers, these considerations are also not specifically addressed under the merger control provisions of the Competition Act. That said, in the context of considering the effect that a transaction may have on the public interest and, specifically, a particular industrial sector or region, the Commission’s draft revised public interest guidelines require the Commission to take into consideration the effect of the merger on, among other things, the environment (e.g., pollution, increased carbon emissions, etc). As such, there does seem to be a shift towards considering these aspects more. In this context, where false/ misleading greenwashing claims are made during the merger review process, then this could, among other things, jeopardise any merger approval.

Examples of greenwashing enforcement and reputational damage against companies

To drive home the point that greenwashing is receiving a flurry of litigious and other scrutiny, we list various high-profile instances where companies have been found to have made misleading green claims:

  • A Ryanair campaign that claimed it to be Europe’s ‘lowest emissions airline’ was ruled ‘misleading’ by the UK Advertising Standards Authority due to the inherently high-emitting nature of airline travel.
  • Alpro (plant-based milk) was required by the UK ASA to withdraw environmental claims ‘Next stop, your recipe to a healthier planet!’ ‘Good for the planet, good for you.’ due to their vague and ambiguous nature.
  • Lipton recently had their ‘Deliciously Refreshing, 100% recycled’ marketing campaign successfully challenged by complainants before the UK ASA, because it implied that all of the Lipton bottle was made from 100% recycled plastic.
  • Regarding the Shell-Go consumer loyalty scheme, the term ‘Drive carbon-neutral’ was found by the UK ASA to be misleading.
  • In the US, a challenge was brought by an NPO to recommend that JBS USA Holdings, Inc discontinue its’ claims relating to its goal of achieving ‘net zero’ emissions by 2040.
  • The former head of Audi was convicted in Germany and given a suspended sentence of one year and nine months for fraud over the European diesel emissions testing scandal. There have also been a number of civil claims brought against Audi amounting to EUR 9 million. In South Africa, a class action was brought by purchasers of Audi, VW and Porsche motor vehicles affected by the scandal.
  • There was a recent, prominent Dutch class action in the Dutch Courts against KLM. The lawsuit – the first of its kind to challenge airline industry greenwashing – argues that KLM’s climate ads ‘Fly Responsibly’ breach EU consumer law standards by creating a false impression that its flights do not contribute to the worsening climate emergency.

Conclusion

This is an area in which the law is evolving at a rapid pace and we can expect South Africa to follow other jurisdictions.

The EU proposed in March 2023 a Directive on Green Claims which proposes a new and strict framework, applicable to all companies operating in the EU/ EEA, to harmonise the rules on the substantiation of voluntary green claims. It has also proposed a Directive Empowering Consumers for the Green Transition. This proposes amending the EU’s existing consumer protection rules, and bans a number of general green claims, such as ‘climate neutral’ or ‘eco-friendly’.

In the US, the Federal Trade Commission has launched a review of the Guides for the Use of Environmental Claims (Green Guides), which was last updated in 2012. The initial comment period closed on April 24, 2023. The FTC plans to update the Green Guides to reflect developments in consumers’ perception of environmental marketing claims. The Proposed EU Directive focuses on substantiation, communication and certification.

The fundamental guidance emerging internationally is that green, ecological and net-zero claims must be capable of clear substantiation, and this must be well-explained to consumers.

The continuous process of audit, substantiation, and certification which the EU requires and which all companies wanting to protect their businesses from ‘green washing’ claims may consider adopting includes the following steps:

  1. Audit marketing materials
  2. Substantiate environmental claims
  3. Carbon accounting
  4. Implement environmental labels
  5. Train employees
  6. Monitor marketing materials

For more information and to keep up to date with the latest developments, please contact Claire Tucker or Wandisile Mandlana in our Environment, Sustainability and Climate Change Practice.