Recently, the Competition and Markets Authority (CMA) issued a statement announcing an investigation into Unilever, expressing concerns about consumers being misled by Unilever’s “green” labels on some basic household products. Media reports referred to Unilever being investigated for “greenwashing.”
In simple terms, “greenwashing” refers to false environmental claims. In today’s society, ESG (Environmental, Social, and Governance) and sustainable strategies have become crucial for leading companies, and “greenwashing” clearly goes against these principles. So, what exactly happened?
Unilever under investigation for “greenwashing”
The CMA in the UK is an independent non-ministerial government department responsible for promoting business competition and protecting consumers from unfair business practices, ensuring the healthy development of the UK market. Its work in protecting market competition and consumer rights includes investigating allegations of monopolistic behavior or unfair competition, reviewing and supervising corporate mergers and acquisitions to prevent market monopolies or reduced competition, and taking measures to combat anti-competitive practices.
The CMA stated that Unilever may have exaggerated the environmental claims of certain products and provided the following examples: First, Unilever’s use of certain statements and language appears vague and broad, which may lead consumers to misunderstand the environmental impact of these products.
Second, Unilever’s claims about certain ingredients in its products may overstate the “natural” aspect, potentially creating inaccurate or misleading impressions for consumers.
Third, Unilever’s promotion focuses on a specific aspect of a product, which may imply to consumers that the product as a whole is environmentally friendly.
Fourth, Unilever’s green claims, especially those related to recyclability, may be unclear as they do not specify which part of the product or packaging is recyclable.
Fifth, Unilever’s use of packaging colors, logos, and images like green leaves may create an exaggerated impression that the overall product is highly “green” and environmentally friendly.
Sarah Cardell, CEO of the CMA, stated that they have initial evidence to suggest that consumers may be concerned that Unilever is promoting some products as environmentally friendly. They will conduct a thorough investigation to verify whether the company complies with standards. If we find that the company is indeed “greenwashing”, we will take action to ensure consumer protection.
It is reported that in January of this year, Unilever expanded its environmental efforts to include consumer goods such as food and beverages, cleaning products, toiletries, and personal care items. This investigation by the UK CMA is part of a broader examination of Unilever’s environmental claims. The CMA identified a series of concerns during its preliminary review and officially launched the investigation on December 12. The final investigation results could involve Unilever committing to changing its practices, the CMA taking the company to court, or reaching a settlement.
In response to the investigation, Unilever stated that it will continue to cooperate with the CMA but expressed surprise and disappointment at the CMA’s statement, denying that their claims were “misleading” in any way. A spokesperson for the company stated, Unilever is committed to making responsible claims about the benefits of our products on packaging, and these claims are transparent and clear, with robust procedures in place to ensure they are substantiated.
It is worth mentioning that under the leadership of former CEO Paul Polman, Unilever positioned itself as a global leader in sustainable development. However, a recent report by the environmental organization Greenpeace revealed that “Unilever is set to sell 53 billion non-reusable plastic sachets this year, containing various products from laundry detergent to shampoo.” This clearly contradicts Unilever’s commitment to “eliminating the use of single-use plastics.”
Countries advocate that “green products” should be substantiated
What is “greenwashing”? Why is Unilever being investigated by a UK government agency for alleged greenwashing?
“Greenwashing” is a term coined by American environmentalist Jay Westerveld, combining the words “green” (symbolizing environmental protection) and “whitewash.” It refers to a form of marketing that misleads consumers about the environmental attributes of products.
In 2007, the environmental marketing company Terra Choice conducted an investigation into so-called “green products” sold in North America. In their report, they identified the “seven sins” of greenwashing, including lack of proof, vagueness, misleading imagery, false claims, and false labeling, which generated significant public backlash.
Industry experts believe that once a company engages in greenwashing and is exposed, it can decrease consumer trust and willingness to purchase, and in severe cases, it can harm the company’s financial performance. “More importantly, once greenwashing behavior spreads, it will lead to public skepticism towards all sustainability claims made by companies, putting genuinely sustainable companies at risk. This would be a disaster for the entire industry and even society.” He suggests that companies need to be aware of the potential harm caused by greenwashing.
It can be seen that the harm of greenwashing is significant, both for the company itself and for the entire industry or society. Essentially, it stems from companies engaging in superficial or false greenwashing practices, leading to consumer distrust.
It is worth noting that UN Secretary-General António Guterres called for “zero tolerance” towards greenwashing in relation to net-zero emission claims during the 27th United Nations Climate Change Conference (COP27) held last year. In April of this year, the European Union proposed a new draft that requires all “environmentally friendly” products from European companies to undergo relevant certification and be substantiated. Additionally, in September of this year, the EU reached a temporary political agreement aimed at combating greenwashing.
Currently, there are no specific regulations in China that specifically regulate greenwashing advertisements. Relevant regulations mainly consist of the Anti-Unfair Competition Law, Advertising Law, Consumer Rights Protection Law, Product Quality Law, and Criminal Law. Measures such as the “Administrative Measures for Enterprises to Disclose Environmental Information in Accordance with the Law” and the “Administrative Measures for the Use of Green Product Labels” provide supplementary requirements for compliance disclosure of corporate environmental management information and the use of product labels.
It can be seen that countries adopt a stance of combating, prohibiting, and having zero tolerance towards greenwashing practices by companies.
Enterprise ESG needs to be substantiated
In the cosmetics industry, Unilever is not the only company caught in the “greenwashing” controversy. In 2021, a Korean cosmetics brand was also accused of engaging in “greenwashing” practices, which led to boycotts of its products in multiple countries’ markets.
Subsequently, the brand issued a statement apologizing to the public for not effectively conveying information in a precise manner.
However, the apology did not immediately quell the public opinion, and the incident still damaged the brand’s image. Moreover, some consumers also questioned the brand’s commitment to reducing plastic waste.
Industry experts believe that the reason companies engage in “borderline” practices regarding “environmentally friendly products” is related to the increased focus on ESG ratings by beauty companies.
ESG stands for Environmental, Social, and Governance, which are the initials of the three English words. Currently, ESG is mainly applied in the investment field and has become an important reference for investment decisions. It evaluates companies based on three non-financial dimensions: environmental, social, and corporate governance, assessing their contributions to promoting sustainable economic development and fulfilling social responsibilities.
With increasing global attention to green finance, companies with high ESG ratings often enjoy more conveniences in financing, such as lower costs and faster approval processes. In this context, ESG has become a “must-have” for beauty companies.
It can be seen that currently, ESG has become a consensus among global beauty companies. According to CITIC Securities data, the global scale of ESG funds reached $24.97 trillion in 2022. Among domestic cosmetic companies, seven listed companies have published their 2022 ESG reports.
The protagonist of this incident, Unilever, has also formulated corresponding ESG strategies early on. It is reported that the group has established a €1 billion climate and nature fund to address the climate crisis and help regenerate nature. At the same time, it has committed to “changing product formulations to biodegradable formulas by 2030 and replacing all carbon derived from fossil fuels used in cleaning and washing product formulations with renewable or recycled fuels.”
Just last month, on the 15th, Unilever also held the strategic launch event for “Clean Future 2.0,” which focuses on excellence, environmental sustainability, and value for money, announcing Unilever Home Care’s strategic and development concepts to the industry. However, only a month later, Unilever was investigated by the UK’s Competition and Markets Authority (CMA) for alleged greenwashing, which is undoubtedly regrettable.
The successive “greenwashing” controversies have sounded the alarm for the industry, indicating that genuine and substantial efforts are needed in beauty ESG, and that short-term gains should not take precedence.
