Greenwashing: The position in Turkey
ESG and sustainability have increasing importance for companies, consumers and investors concerned about climate change. As the demand for ESG compliant and sustainable products and services grows, so does the risk of overstatements in terms of sustainability credentials to attract and retain customers and investors.
Greenwashing may appear in different forms, such as exaggerated or imprecise claims, to intentionally deceive or mislead others. Although the concept of greenwashing initially arises in environmental statements, it now extends to broader sustainability concepts. This article focuses on greenwashing in Turkey but also touches on developments in other jurisdictions to assist those Turkish firms with cross-border activities, with a final section giving practical tips and advice.
Turkey: Legislation to prevent greenwashing
Greenwashing is intended to be protected through a myriad of different laws in Turkey, including securities regulations, consumer protection laws, fraud and misrepresentation statutes and advertising standards.
Legislation on environmental labelling
General framework
With the increase in environmental problems, green/eco labels, a certification system has been created through the Environmental Labelling Regulation in 2018, aiming to ensure the sustainability of the environment, promote products with less negative environmental impacts, to provide accurate information to product users and to enable consumers to easily identify sustainable products which will enforce manufacturers to produce environmentally-friendly products.
Purpose
An environmental label certified under the 2018 Regulation is designed as a sign that represents a voluntary reward system established to promote products/services with reduced environmental impact from raw material procurement to disposal and to provide consumers with accurate, non-misleading, scientifically-based information. With environmental labelling practices, it is aimed to support sustainable consumption and production practices by encouraging businesses to follow environmentally-sensitive processes by targeting low carbon emissions, waste prevention, energy and water efficiency and not using harmful chemicals. Considering above, the environmental label serves for the promotion of both the protection of environmental values and economic efficiency for producers.
Right to information
Within the framework of the Law on the Right to Information, everyone has the right to access information on the environment and anyone who is harmed or informed about an activity that pollutes or degrades the environment may apply to the relevant authorities and request that the necessary supervision and control measures be taken to prevent improper and unauthorized use of the environmental label. Cooperation and exchange of information is to be ensured between the relevant institutions in order to harmoniously implement the control of unauthorized and improper use of the environmental label. Those concerned are obliged to provide to the relevant authorities information and samples (raw materials, fuels, products and wastes they use, production schemes, emergency plans, monitoring systems and pollution report). They must also cover the authorities' expenses regarding any analysis and measurements that need to be made.
Consequences for non-compliance
Where an environmental label has been used to mislead parties, a criminal complaint may be filed with the Public Prosecutor's Office against those who (i) used the environmental label without permission or by imitation, or forged documents during the application and (ii) provided and disclosed information and documents that may be considered trade secrets to unauthorized persons. The complainant information is kept confidential. Those who (i) provide false and misleading information in violation of the stipulated obligation to notify and provide information will be sentenced to imprisonment from six months to one year; or (ii) issue and use false and misleading documents will be subject to the provisions of the Turkish Penal Code on the offense of forgery of documents.
Rules on informing consumers on fuel economy and CO2 emission
The Regulation on Informing Consumers on Fuel Economy and CO2 Emission of New Passenger Automobiles, entered into force in 2013 and was further amended ten years later in 2023 in order to comply with European Union legislation, aims to ensure that consumers make conscious choices during their selection of automobiles. The Regulation imposes upon manufacturers a requirement to prepare fuel economy labels, which indicate official energy consumption and official CO2 emissions in the cars they are selling. The Regulation also aims to prevent greenwashing by prohibiting the usage of other non-compliant signs, symbols or records relating to fuel consumption and/or CO2 emissions on their labels, brochures, or promotion materials.
Energy labelling
The Framework Regulation on Energy Labelling entered into force in 2021. It creates a framework that is intended to direct customers to more energy efficient goods and services. It does this by informing customers as to the energy consumption of goods or systems offered to the market] (Energy Related Goods). Accordingly, suppliers are obliged to prepare energy labels to inform customers about energy efficiency and any complementary information regarding Energy Related Goods. The Regulation also includes provisions designed to prevent greenwashing by prohibiting sellers and suppliers from displaying any labels which may misinform customers in terms of energy consumption.
Legislation on capital markets and securities
Green and sustainable debt instruments
On 24 February 2022, the Capital Markets Board of Turkey (CMB) issued Guidelines on Green and Sustainable Debt Instruments and Lease Certificates, aiming to issue green and sustainable debt instruments and lease certificates in line with international standards by regulating fundamental principles for green project financing. Accordingly, issuers are required to meet certain conditions to refer to a debt instrument/lease certificate as "green" or "sustainable" (i.e., received funds are used exclusively for the financing or re-financing of green projects). Drawing borders for green project financing through the Guidelines helps prevent greenwashing as well.
Public disclosures
As per Article 32 of the Capital Markets Law No. 6362 (CML) any false, misleading and missing information in the documents foreseen by the CMB to inform the public such as issuance certificates, prospectuses, tender offer forms, public disclosures, announcement texts or financials, will result in the relevant legal entities or the signatories to those documents being liable. This general provision also aims to prevent greenwashing by public/listed companies or issuers.
On 2 October 2020, the CMB published sustainability principles for listed companies to consider during their operations. Although compliance with those principles is not mandatory, listed companies are obliged to report any instances of non-compliance. This includes in relation to environmental matters, where listed companies must disclosure the action taken by their suppliers, contractors and distributors to decrease greenhouse gas emissions. Any misleading information will also trigger Article 32 of the CML.
Commercial law
Provisions related to unfair competition of Turkish Commercial Law also help prevent greenwashing. The following examples are considered as unfair competition and are therefore prohibited:
- Making inaccurate or misleading statements in commercial enterprises, business signs, goods, business products, activities, inventories, sales campaigns, advertisements and business relations on environmental matters with an aim to be ahead of competitors.
- Impressions on having certain qualifications relating to environmental matters.
- Misleading the customer by concealing the characteristics, quantity, intended use, benefits, or dangers of goods, business products, or activities in terms of sustainability matters.
- Taking measures that cause confusion about the company, its products or services, in relation to an unjustified reputation about the protection of the environment.
Consumer protection law
Under the Consumer Protection Law commercial advertisements must be correct, in line with general morality and public order and advertising which deceives consumers and exploits their lack of experience and knowledge is prohibited and this in return is considered as another mechanism to prevent greenwashing against consumers. Rules for commercial advertising are regulated under the Regulation on Commercial Advertising and Unfair Commercial Practices. Key points to note include:
- Under the Regulation, advertisements for products or services must be correct. Furthermore, advertisements (i) should not include expressions which cause unfair competition, (ii) should be designed to consider its possible effects on the consumer; and (iii) shall not mislead the consumer by abuse of trust.
- In addition, the advertisers (i.e., clients (i) have the obligation to prove the accuracy of their statements in their commercial advertisements; (iii) are responsible for auditing commercial advertisements for compliance with the principles set forth in the Regulation and submitting documents proving the accuracy of the statements in the advertisement.
- Use of environmental signs, symbols and approvals in advertisements in a way that deceive consumers, as well as advertising in a way that exploits consumers' environmental awareness or possible lack of knowledge in this area are prohibited.
Greenwashing in other jurisdictions
In this section we briefly focus on greenwashing developments in the US, UK and Australia with the aim of helping those Turkish firms operating in those jurisdictions.
Securities
Greenwashing can artificially inflate share prices, by diverting spending power to companies with the best eco-credentials. Disclosures related to sustainability can therefore be material from the perspective of securities regulators.
The US Securities and Exchange Commission (SEC) has identified that funds and investment advisers are increasingly offering investment strategies that focus on ESG factors and is scrutinizing this.
The Australian Securities and Investments Commission (ASIC) has published a guide on avoiding greenwashing when offering or promoting sustainability-related products.
The UK Financial Conduct Authority (FCA) has noted the importance of the financial sector in helping the economy adapt to a more sustainable long-term future, and that consumers need to be able to rely on regulated firms to take ESG (which includes greenwashing) seriously. In Q3 2023 the FCA plans to issue a policy statement containing final rules and guidance on sustainability disclosure requirements and investment labels.
Advertising and consumer protection
Complainants have alleged greenwashing in advertising campaigns, in proceedings before advertising regulatory boards and tribunals in various jurisdictions. Advertisements may be misleading if they make claims that are untruthful, inaccurate, unsubstantiated or ambiguous.
The Australian Competition and Consumer Commission (ACCC) is a forerunner in protecting consumer interests in this area and has published a green marketing guide for the last ten years. In the US, many groups and governments have brought actions against companies, relying on state or city consumer protection legislation. At the Federal level, the Federal Trade Commission has alleged that an oil major has misled consumers about its efforts to reduce greenhouse gas emissions.
In the UK, among other things, the Competition and Markets Authority (CMA) has published a Green Claims Code to guide businesses on their obligations under consumer protection law, when making environmental claims about goods and services. The guidelines aim to ensure that such claims are accurate and substantiated, as well as clear and unambiguous. The CMA has announced a crackdown on misleading environmental claims in 2022.
Complaints were made to the UK's Advertising Standards Authority (ASA) about a 2019 marketing campaign by an airline, which claimed to have "low CO2 emissions" and be the "Lowest Emissions Airline" in Europe. ASA found that high CO2 emissions are so commonly associated with air travel that the claim "low CO2 emissions" would be considered a relative statement and that consumers would be unlikely to be misled into thinking that the airline's emissions were low in an absolute sense. ASA did, however, take issue with the second claim as, among other things, the study it was based on was conducted nearly a decade earlier and failed to sufficiently support the claim.
How can firms manage the regulatory risks?
There are a number of steps Turkish firms need to keep in mind when conducting business in Turkey or cross-border to manage the regulatory risks in reference to greenwashing.
Truth in promotion and clarity in communication: Consider whether you have used vague terminology, made headline claims that are potentially misleading, explained how you used metrics related to sustainability, whether you have reasonable grounds for a sustainability target and where further information is available.
Diligence: This is a fast-moving area. Sufficient internal resources must be allocated by firms to remain adequately informed about developments in the ESG space, including regulatory and industry guidance.
Training: Firms need to ensure that adequate training is delivered internally, including on regulatory expectations regarding ESG issues and the risks in this area.
Risk management: Firms should consider in particular whether they have appropriate ESG risk assessments, policies, committee(s) involving all relevant stakeholders, with clear escalation channels and clear documentation around ESG-decision making, in particular with regard to ESG-related disclosures and representations (such as greenwashing).
Adequate whistleblowing arrangements: ESG is an area which can evoke strong personal sentiment. This, combined with an increased regulatory focus on whistleblowing more generally, means that firms may well see an increase in whistleblowing relating to ESG.
Norton Rose Fulbright works in alliance with Pekin Bayar Mizrahi in Turkey. The firms have experienced ESG teams to help clients in all aspects of ESG-related regulations.
