How will the Green Claims Code affect you as a fintech?
With environmental, social and corporate governance (ESG) initiatives high on the agenda of many businesses for the year ahead, it is unsurprising that more legislation is being introduced at a global level to facilitate a move towards a greener future.
In the UK, the Competition and Markets Authority (CMA) have this month enacted the Green Claims Code. After uncovering that 40% of green claims made online have the potential to mislead customers, this new legislation aims to eradicate greenwashing once and for all.
The Code will set the precedent for authenticity in eco-credentials and hold accountable those organisations that continue to make vague, unsubstantiated claims.
So, why is ESG a priority? Politically, economically and at a societal level, there has arguably never been a greater focus on the environment. For those in the fast-paced world of financial services, the stakes are even higher. With only one in five consumers trusting brand claims (according to Compare Ethics), there is a substantial opportunity here to win back brand loyalty and build a community of advocates based on conscientious consumerism.
From sustainable finance to ESG investment, the Green Claims Code lays the foundation for a new age of authenticity in ESG communications.
What do you need to know about the Green Claims Code?
It’s important to first understand what a “Green Claim” is. The CMA defines this as a claim that suggests a business’s product, service or model is positive or better for the environment, as compared to a previous version or a competitor. The impact of falling foul of this is severe, with criminal prosecution on the table if brands get it wrong – and the regulations apply anywhere you’re making a green claim.
From January 2022, when the Green Claims Code takes effect in the UK, all financial institutions’ environmental statements must:
- Be factual and accurate
- Be fair and meaningful
- Avoid ambiguity or vague language
- Not seek to cover up any information of importance
- Take into consideration a product or service’s the full life cycle
- Be evidenced.
If we put these principles into action, there are a few key areas of focus for ESG communications plans within financial services.
Where complex language can sometimes be a barrier to understanding in the ever-changing world of finance, ensuring that information is clear, concise and avoids confusing customers must be a priority. Focusing on the impact to the consumer is one easy way to do this, as well as being sure to use external language rather than internal jargon.
When bringing out new products or services, considering the visual impact of your ESG strategy is also important – logos, product names and all visual merchandising must be taken into account in terms of your customer’s overall impression.
In the already highly regulated financial services industry, communicators must ensure that all messaging is related to activity not required by law, rather to something that your business has proactively introduced.
As a fintech here is what you can do now to prepare
Do an audit: Firstly, consider the full Green Claims Code policy in relation to your business’s current activity. Take the time to robustly audit the claims you are currently making and collect evidence to support them from around the business. This can be a good opportunity to ensure that everyone within the organisation understands the new regulation and what is required of them as a result. A company briefing can be an effective way of doing this.
Think ahead: As part of this audit, it may be pertinent to not only look at what you are currently doing, but at your ESG comms strategy for the years ahead. The Green Claims Code provides a significant opportunity to turn intention into action, so it’s time to eradicate any claims that your organisation is not completely committed to.
Upskill your staff: Now might also be the right time to invest in training across your organisation. At all levels, staff need to be upskilled and aware beyond the regular ESG communicators. The Green Claims Code highlights the importance of ESG integration across an entire business and ensuring that all staff are equipped with the latest information is the first step to achieving this.
Seek out partnerships: With 83% of consumers (according to Compare Ethics) reporting that they would be more likely to trust a product’s sustainability claims if verified by a third party, partnering with bodies offering accreditation can be a valuable route for many businesses. Particularly within financial services, where levels of trust are generally low, partnering externally or considering applying for B Corp status can help to demonstrate your commitment to ESG policies.
The CMA is not going to permit organisations to get away with mis claims therefore to avoid risking your brand reputation and losing your employees’ loyalty the time is now to think seriously about how you communicate your ESG claims.
About the author
Gihan Hyde is the award-winning communication specialist and founder of CommUnique, an ESG communication start-up.
She has been designing environmental, social, governance (ESG) communication campaigns in eight sectors, across six countries over the past 20 years.
Her campaigns have positively impacted over 150,000 employees, 200,000 customers, and have closed over £300 million in investment deals. Some of the clients she advised included The World Health Organisation (WHO), HSBC, Barclays, M&S, SUEZ, Grundfos, Philip Morris, USAID, and the Saudi Government.