For retail brands, 2026 looks to be a continuation of the regulatory scrutiny of greenwashing that we have seen in recent years, writes Katrina Anderson, principal associate, and Rachel McDonnell, partner at national law firm Mills & Reeve.
Regulators now have unprecedented and enhanced powers to investigate and penalise misleading environmental claims – and beyond that, greenwashing could also be prosecuted under a new a criminal offence of failure to prevent fraud.
The green claims in retail and elsewhere have been in regulators’ crosshairs since the Competition and Markets Authority (CMA) introduced the Green Claims Code in September 2021. But two significant developments are set to make the implications far more serious this year.
The Digital Markets, Competition and Consumers Act 2024 (DMCCA) has equipped the CMA with dramatically enhanced enforcement powers. Simultaneously, greenwashing could now be prosecuted as a criminal offense under the “failure to prevent fraud” (FTPF) provisions of the Economic Crime and Corporate Transparency Act 2023 (ECCTA), which came into force in September 2025.
The expanding regulatory landscape
The regulatory focus on greenwashing stems from a 2021 Europe-wide review led by the CMA, which found that 40% of green claims made online could be misleading. The CMA has subsequently stated that environmentally motivated consumers may be particularly vulnerable to misleading claims.
To make matters worse, the CMA’s definition of environmental claim is deliberately broad, including any claim, whether implicit or explicit, “which suggests that a product, service, process, brand or business is better for the environment.” This encompasses suggestions of positive environmental impact, neutral impact, improvements over previous versions, or superiority to competing products.
Why retail remains in the spotlight?
The retail sector, particularly online fashion, became an early focus of enforcement efforts. In January 2022, just months after launching the Green Claims Code, the CMA opened a review of environmental claims in the fashion sector. By July, formal investigations into ASOS, Boohoo, and George at Asda were underway.
These investigations culminated in formal undertakings signed in March 2024, under which the brands committed to use only accurate and clear green claims. The commitments included pledges not to make misleading environmental claims, to clarify when claims rely on consumer action, and to provide transparent criteria for products sold as part of specific “sustainable” ranges.
Recent ASA rulings illustrate the pitfalls awaiting unwary retailers. Lacoste, Nike, and Superdry all fell foul of regulators for using the word “sustainable” in Google ads without clear qualification. The ASA ruled that “sustainable” is a “broad, general and absolute” term requiring businesses to prove their entire range, across its entire lifecycle, has no detrimental environmental impact.
A new era of direct enforcement
When the DMCCA’s consumer protection provisions came into force in April 2025, they fundamentally transformed the UK’s enforcement landscape. For the first time, the CMA can directly enforce consumer protection law through administrative proceedings without needing to go through the courts.
The regulator’s newly increased arsenal is formidable; it has the power to investigate suspected breaches and conclude there is a breach, which means it can force businesses to make changes, and crucially, issue direct financial penalties of up to 10 per cent of global group turnover. This is in addition to its existing power to prosecute through the courts for egregious breaches of the law.
The CMA has since reinforced that greenwashing will be an enforcement priority.
In its Annual Plan 2025/2026, the regulator stated it will use its “new, direct consumer protection powers under the DMCCA to help grow the economy through promoting consumer trust and confidence, while deterring poor corporate practices.” In November 2025, it opened its first consumer enforcement investigations under the new regime, signalling its intent to use these powers actively.
To support implementation, the CMA has published supplementary guidance specifically focused on green claims in the fashion sector and most recently guidance on how it will look at claims made by retailers and brands based on evidence collected from their supply chain, effectively putting businesses on notice of its expectations in these areas.
The regulator is likely to view practices as particularly egregious where “businesses should already be clear about their consumer law obligations” or where they lack appropriate internal processes to ensure environmental claims are accurate.
Importantly, intention is irrelevant under consumer protection law; an innocent or unwitting breach is still a breach. However, genuine attempts to comply may be considered a mitigating factor when assessing penalties.
The criminal dimension
Compounding the regulatory enforcement challenge, FTPF provisions could also see greenwashing prosecuted as a criminal offence. In broad terms, the offence applies to organisations meeting two or more of the following criteria: over 250 employees, more than £18 million in total assets, or more than £36 million turnover.
Two specified fraud offences are particularly pertinent to greenwashing: fraud by false representation and fraud by failing to disclose information. These could encompass green claims relating to environmental impact and materials used in production.
The government guidance on FTPF even provides an example involving greenwashing – an investment fund provider promoting an investment in a “sustainable” timber company despite knowing the credentials are fabricated.
Previously, such cases would fall solely under regulatory scrutiny. Now, organisations face potential investigation by the Serious Fraud Office and/or other authorities, unlimited fines, and the severe reputational damage that accompanies criminal conviction. The only defence is proving that “reasonable procedures” were in place to attempt to prevent fraud.
It is worth noting that greenwashing resulting from accidental overstatement of sustainability achievements would, most likely, fail to meet the ‘dishonesty’ threshold needed to establish fraud by false representation. However, that distinction offers cold comfort for organisations facing investigation.
How should retail brands react?
The government guidance sets out 6 principles for a fraud prevention framework, including top-level commitment from leadership, regular risk assessments, proportionate procedures, thorough due diligence, staff training, and ongoing monitoring.
For environmental claims specifically, businesses making claims are responsible for making sure they gather the evidence needed from the entire supply chain. The CMA’s recent guidance emphasises that businesses across the supply chain must support these efforts to ensure that environmental claims are accurate, whether made directly, indirectly, or by passing information up the chain so that information given to consumers about environmental credentials is accurate and not misleading.
In practice, this means retailers should conduct annual checks, spot checks, and ensure data flows up the supply chain. If relying on third parties for information, it remains the retailer’s responsibility to verify accuracy.
The Green Claims Code’s six core principles remain the benchmark to operate against – claims must be truthful and accurate, clear and unambiguous, not omit important information, make fair and meaningful comparisons, consider the full lifecycle, and be substantiated with robust evidence.
Protecting against a dual threat
While greenwashing may not be a fundamentally new issue, the enforcement landscape and risk have changed.
Retail brands now face a dual threat of the CMA’s enhanced civil enforcement powers and the potential for criminal prosecution under FTPF. Against that backdrop, it’s never been more important for environmental claims to be accurate, clear, substantiated, and consider full lifecycle impact. Robust compliance systems that take account of CMA expectations regarding working with the supply chain must also be in place and clearly evidencable.
One silver lining to end on – this more stringent regime will likely benefit ethical and principled brands who do their compliance properly by cracking down on those trying to gain an advantage through inaccurate and unfair claims.
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