Greenwashing is out of fashion, with the industry facing a crackdown on “eco-friendly” claims

Claire Smith, Elizabeth Richmond, Cloe Jolly and Alice Brennan
21 Oct 2022
Time to read: 3 minutes

Regulators are actively investigating green claims in the fast fashion industry, and their findings are also fuelling class actions.

A growing number of large fashion brands are facing both regulatory and consumer scrutiny over greenwashing claims, here and overseas. We take a closer look at the recent crackdown on Swedish fast fashion giant, H&M, which has been subject to regulatory action in both the Netherlands and the UK, as well as consumer activism in the US, and what that could mean in Australia.

This season’s colour: true green vs fake green claims

Fashion retailer H&M has made commitments to the Netherlands Authority for Consumers and Markets (ACM) to remove sustainability-related labels from their products and website, and to improve the use of sustainability claims in the future.

These commitments followed an investigation by ACM which found that H&M was engaging in greenwashing by using sustainability labels such as "Conscious" and "Conscious Choice" without explaining what the terms mean or providing descriptions of the sustainability benefits of the products. Additionally, ACM pointed out several practices by H&M in which it appears to make sustainability claims about products that may incorrectly give the impression of their sustainability benefits or guaranteeing that a specific product is made with sustainable materials.

H&M’s commitments include:

  • removing “Conscious” and “Conscious Choice” labels from specific product pages and product overview pages as well as the rest of H&M’s website (at least until it can comply with relevant rules and regulations);
  • assessing how, in the future, “it can communicate best to consumers the sustainability benefits of its products"; and
  • removing the heading “more-sustainable materials” from product descriptions so that only the heading “composition” remains. If applicable, the description of the materials can include information in brackets if more sustainable materials have been used.

Further, H&M committed to donating EUR 500,000 to a non-profit organisation, not affiliated with H&M, that is active in sustainability. Due to this commitment, ACM opted not to impose a monetary penalty on H&M.

ACM will monitor H&M's advertising for two years.

H&M is also facing legal challenge in the US. In July, a lawsuit was filed against H&M in the New York federal court, accusing it of “greenwashing” or engaging in false advertising about the sustainability of its clothing and" taking advantage of consumers' interest" in sustainability and environmentally friendly products. According to the proposed class action complaint, H&M's "Sustainability Profiles" used in labelling, packaging and material for several of its “Conscious Collection” products were designed to target eco-conscious consumers and were based on "falsified information that did not comport with underlying data".

Beyond H&M: other regulatory actions over fast fashion green claims

H&M is not an isolated case. For example, Boohoo, ASOS and George at Asda are all currently being investigated by the UK Competition and Markets Authority (CMA) for eco-friendly and sustainability claims made about their fashion products. Key aspects of the investigations include whether:

  • the statement and language used by the businesses are too broad and vague and may create the impression that clothing collections are more environmentally sustainable than they are;
  • the criteria used by some businesses to determine which products to include in these collections may be lower than customers might reasonably expect from their descriptions and overall presentation;
  • there is a lack of information provided to customers about products included in any of the companies' eco ranges, such as missing information about what the fabric is made from; and
  • any statements made by the companies about fabric accreditation schemes and standards are potentially misleading, such as to whether the accreditation applies to particular products or to the firm's wider practices.

The local focus on greenwashing claims

Earlier this year, we predicted the fashion industry would be under the spotlight for ESG-related scrutiny and activism. The ACM and CMA's investigations should be a wake-up call to fashion brands (as well as other consumer brands) making sustainability-focused claims without the proper evidence to back those claims up. Increasingly, consumers are also examining sustainability claims, with the lawsuit against H&M in the US demonstrating the lengths some consumers are willing to go to hold fashion brands to account.

In Australia, the ACCC recently announced that it is actively targeting greenwashing, emphasising the importance of business being able to “back up claims they are making, whether through reliable scientific reports, transparent supply chain information, reputable third-party certification, or other forms of evidence”. In October this year, the ACCC launched two internet sweeps of at least 200 company websites across a range of targeted sectors, including clothing and footwear, cosmetics, and food and drink packaging to identify misleading environmental and sustainability marketing claims and fake or misleading online business reviews. The sweeps form part of the ACCC's compliance and enforcement priorities for 2022-23, and was advised in advance. This suggests the ACCC is taking a two-prong approach:

  • by ensuring that the steps the ACCC is taking are advertised, industry may self-regulate by reconsidering claims made; and
  • by undertaking the review, industry players who do not revise claims may be caught up in enforcement activity.

Key takeaway

Greenwashing is a clear priority for regulatory agencies worldwide, and no industry, no matter how fashionable, is immune. As fashion is an industry that touches all consumers, it is not just regulators that companies need to be wary of; consumers are increasingly holding companies responsible for their sustainability claims. Fashion companies should consider carefully whether they can adequately substantiate eco-friendly and sustainability-related claims used in advertising to avoid regulatory scrutiny or consumer activism.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.