Introduction
As consumers and investors increasingly favour environmentally responsible products, businesses face growing pressure to market themselves as sustainable. Not all claims are accurate. Regulators must decide how to stop misleading environmental, social and governance (ESG) claims without discouraging genuine progress.
Short Answer
Two regulators now police greenwashing from different angles.
The Competition and Markets Authority (CMA) enforces consumer protection law against misleading green claims made by any business. This authority gained direct enforcement powers under the Digital Markets, Competition and Consumers Act 2024 from April 2025, with supplementary supply‑chain guidance issued in January 2026.
The Financial Conduct Authority’s (FCA) anti-greenwashing rule, which came into force on 31 May 2024, specifically targets financial services firms marketing sustainable investment products.
Together, they create overlapping obligations that businesses cannot afford to ignore.
Development of the Regulation
The CMA published its Green Claims Code in September 2021, setting out principles requiring environmental claims to be truthful, accurate, and substantiated. Initially, enforcement relied on court action, which limited its impact. This process changed when the Digital Markets, Competition and Consumers Act 2024 granted the CMA power to fine businesses directly, up to ten per cent of global turnover, without a court order.
Separately, the FCA introduced its Sustainability Disclosure Requirements (SDR) regime in November 2023, alongside investment labelling rules. This anti-greenwashing rule requires any reference to a product's sustainability characteristics to be fair, clear, not misleading, and consistent with reality. The FCA's finalised guidance (FG24/3) helps firms understand what compliance looks like in practice.
Impact of the Regulation
For consumer-facing businesses, the CMA's new enforcement powers significantly raise the stakes. Misleading claims about recyclability, carbon neutrality or ethical sourcing can now result in substantial fines without lengthy litigation. The CMA's January 2026 supply-chain guidance further extends scrutiny to claims made about suppliers, which indicates that businesses must verify assertions throughout their supply chains and not just their own operations.
For financial services firms, the FCA's rule imposes a continuous obligation. Marketing materials, fund names, and product descriptions must be reviewed regularly to ensure claims remain accurate as underlying investments change. Companies that offer "sustainable" funds must have evidence to support these claims, or they risk enforcement actions and reputational harm.
Lawyers advising on marketing, brand strategy, or fund launches must now treat ESG claims with the same rigour as financial promotions. Compliance, marketing and legal teams increasingly need to work together before any sustainability claim reaches the public. Competition and consumer teams, financial regulatory teams, and commercial contract teams are all likely to become involved, depending on where in a business a sustainability claim originates.
Lawyers advising on marketing, brand strategy or fund launches must now treat ESG claims with the same rigour as financial promotions. Compliance, marketing and legal teams increasingly need to collaborate before any sustainability claim reaches the public. Competition, financial regulatory and commercial contract teams are all likely to become involved, depending on where in the business a sustainability claim originates.
Businesses that fail to adapt face more than fines. Reputational damage from a public greenwashing finding can significantly outweigh any financial penalty, particularly for brands that have built their identity around sustainability credentials.
Future Outlook
Overall, regulatory scrutiny of greenwashing is likely to intensify rather than ease. As the CMA extends its focus to supply chains and the FCA's disclosure regime widens to more firms, businesses making sustainability claims should expect closer examination of the evidence behind them. Contributors advising clients in this space should monitor upcoming CMA enforcement decisions, which will clarify how the new penalty powers are applied in practice.