32 01732 759725 Greenwashing red flag New regulatory powers make greenwashing increasingly risky for tech businesses warn Katrina Anderson, Principal Associate, and Rachel McDonnell, Partner, at national law firm Mills & Reeve With regulators now enjoying unprecedented and enhanced powers to investigate and penalise misleading environmental claims, and the potential for greenwashing to be prosecuted under a new criminal offence of ‘failure to prevent fraud’, the IT sector is facing mounting pressure to avoid greenwashing. Despite advances in green tech and digital innovation, many tech firms are still heavily dependent on fossil fuel energy, generate vast quantities of electronic waste and use staggering amounts of water. Their green claims – and those of other businesses – 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 offence 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 an 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 tech is in the spotlight The tech sector is facing growing scrutiny over its environmental claims, with accusations of greenwashing continuing to mount. While companies position AI as a powerful tool in the fight against climate change, data centres operated by firms such as Google and Microsoft have more than doubled their electricity use in the past four years. Critics point to the industry’s rising emissions as evidence of ‘false coupling’ – the pairing of a significant environmental cost with what is, so far, a comparatively modest climate benefit. The pressure does not stop at energy consumption. Several large technology companies, such as Apple, have faced legal challenges over alleged exaggeration of their environmental credentials. Claims around AI are also being closely examined, with concerns that efficiency gains are overstated and that ‘enabled emissions’ (the carbon produced through downstream applications of AI, particularly in energy-intensive sectors) remain largely unreported. 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 business to make changes and, crucially, issue direct financial penalties of up to 10% 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. Importantly, intention is irrelevant under consumer protection law; an innocent or unwitting breach can still be a breach. However, genuine attempts to comply may be considered a mitigating factor when assessing penalties. 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”. Demonstrating its intent to use its powers actively, the CMA has already issued Euro Car Parks with a fine of £473k, 75% of the maximum fixed penalty available, and opened consumer enforcement investigations against three companies around their presentation of mandatory fees. The criminal dimension Compounding the regulatory enforcement challenge, FTPF (failure to prevent fraud) provisions could 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. COMPLIANCE Katrina Anderson Rachel McDonnell
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