Sustainability and Competition Law: The Limits of Sustainability Regulation in Consumer Law

In today's economy, consumers are increasingly factoring in sustainability when purchasing goods. This trend is evident from a recent study by the UK consumer organisation Which?, revealing that 56% of consumers consider sustainability when buying large household appliances like refrigerators. However, despite this growing awareness and demand, the regulatory landscape concerning sustainability in consumer law reveals significant limitations and challenges. My book chapter delves into these issues, highlighting the current state of sustainability regulation in consumer law and proposing actionable policy recommendations.

One of the most pressing issues in sustainability regulation is greenwashing. This deceptive practice involves brands falsely portraying their products or services as environmentally friendly. A study by the UK Competition and Markets Authority (CMA) found that 40% of green claims made by 500 vendors online were potentially misleading. Common tactics include vague terms like ‘eco’ or ‘natural’, self-created eco logos, and the omission of negative information such as pollution levels. These findings underscore the need for stringent regulatory measures to combat greenwashing and ensure transparency.

The European Commission has been proactive in addressing these challenges through various legislative measures. The Circular Economy Action Plan, introduced in early 2020, outlines several regulatory priorities to promote sustainability and protect consumers. Key measures include new information duties under the Consumer Rights Directive and a ban on greenwashing claims under the Unfair Commercial Practices Directive (UCPD). Additionally, Environmental, Social, and Governance (ESG) requirements for investment products and services aim to enhance transparency and accountability in the financial sector.

Despite these efforts, there are notable limitations. The proposed measures, while comprehensive, need further refinement to be truly effective. For instance, the absence of mandatory disclosures and product requirements for social sustainability, particularly in the fashion industry, indicates a gap that needs to be addressed.

The regulation of consumer sales, commercial communications, and financial services presents distinct challenges and opportunities. In consumer sales of goods, recent EU rules have mandated product requirements and sustainability-related disclosures, such as the requirement for smartphones and laptops to have USB-C charger ports by 2024 and 2026, respectively. However, these measures must balance the potential increase in consumer costs and avoid causing information overload. In commercial communications and marketing practices, amendments to the Unfair Commercial Practices Directive have explicitly banned misleading sustainability claims. This update is essential for preventing greenwashing and ensuring businesses provide accurate and transparent product information. Lastly, in the financial products and services sector, significant progress has been made in promoting sustainability through regulation. The European Securities and Markets Authority (ESMA) plays a crucial role in ensuring harmonised enforcement across member states. However, there remains a need for established theories on sustainable investments to guide regulatory practices effectively.

To address the limitations in sustainability regulation, several actionable policy recommendations are proposed in the book chapter. Firstly, transparency should be enhanced by extending mandatory disclosures to include social sustainability aspects, particularly in industries like fashion where issues like child labour are prevalent. Secondly, enforcement must be strengthened by equipping regulatory bodies with the necessary resources and authority to crack down on greenwashing practices and ensure compliance with new rules. Thirdly, consumer education should be promoted to help individuals understand sustainability labels and claims, enabling them to make informed purchasing decisions. Lastly, fostering innovation is crucial. Companies should be encouraged to develop sustainable product designs and practices, with industry standards playing a pivotal role in driving these efforts. Importantly, these new regulations and policies should be increasingly evidence-based to ensure they are effective and grounded in the latest research and data.

Sustainability regulation in consumer law is at a critical juncture. While significant progress has been made, there are still substantial gaps that need to be addressed to ensure a truly sustainable and transparent market. By implementing the proposed policy recommendations, regulators can better protect consumers and promote a more sustainable economy. As sustainability becomes an increasingly important factor in consumer decisions, robust and effective rules will be essential in shaping a greener future.

Felix Pflücke is a Postdoctoral Researcher in Law at the University of Luxembourg and a Stipendiary Lecturer in Law at the University of Oxford.

The full paper is available here.