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Singapore - Sustainability claims and greenwashing

What are the top 3 developments in your territory concerning green claims and the associated risk of greenwashing? 

Environmental concerns have grown over the past few years in Singapore, with regulatory bodies aiming to address the issue of greenwashing that has become increasingly problematic around the globe. While Singapore has specific laws and regulations governing green or sustainability claims, consumer protection laws will apply that allow consumers to take action against bogus or misleading claims. More recent developments to combat greenwashing have been implemented by Singapore’s central bank, the Monetary Authority of Singapore (“MAS”). 

We set out below the key points for companies in Singapore to take note of when making green claims.  

1. Claims must not be unfair, misleading; consumer protection laws will apply 

Claims relating to sustainability and greenwashing should be accurate, and not misleading. Consumer protection laws (detailed below) will apply in relation to such claims or advertisements made to consumers.  

The Consumer Protection (Fair Trading) Act 2003 (“CPFTA”) contains provisions that protects consumers against unfair practices. Under the CPFTA, an unfair practice in relating to a consumer transaction is to (a) do or say anything, or omit to do or say anything, if as a result a consumer might reasonably be deceived or misled; (b) to make a false claim; (c) to take advantage of a consumer if the supplier knows or ought reasonably to know that the consumer (i) is not in a position to protect his or her own interests; or (ii) is not reasonably able to understand the character, nature, language or effect of the transaction or any matter related to the transaction; or (d) do anything specified in the Second Schedule to the CPFTA.  

Some specific unfair practices set out in the Second Schedule that may be relevant to advertising include: (a) Representing that goods or services have sponsorship, approval, performance characteristics, accessories, ingredients, components, qualities, uses or benefits that they do not have, (b) Making a false or misleading representation concerning the need for any goods or services, (c) Making a representation that appears in an objective form such as an editorial, documentary or scientific report when the representation is primarily made to sell goods or services, unless the representation states that it is an advertisement or a promotion, (d) Representing that goods or services are available at a discounted price for a stated period of time if the supplier knows or ought to know that the goods or services will continue to be so available for a substantially longer period, (e) Representing that goods or services are available at a discounted price for a particular reason that is different from the fact (f) Omitting to provide a material fact to a consumer, using small print to conceal a material fact from the consumer or misleading a consumer as to a material fact, in connection with the supply of goods or services. 

In addition, advertisements that go against the Singapore Code of Advertising Practice (“SCAP”), implemented by the Advertising Standards Authority of Singapore (“ASAS”) (a self-regulating body of the advertising industry established as a Council under the Consumers Association of Singapore to promote ethical advertising in Singapore) could invite sanctions for the advertiser and create adverse publicity. 

The basic premise of the SCAP is that all advertisements should be legal, decent, honest and truthful. Appendix L of the SCAP also sets out standards relating to environmental claims, including that – (a) the basis of any claim should be explained clearly and qualified where necessary, (b) where comparisons are used (e.g. “greener” or “environmentally friendly”), advertisers will need to substantiate that the product provides an overall improvement in environmental terms either against their competitors’ or their own previous products, (c) where there is significant division of scientific opinion or where evidence is inconclusive this should be reflected in any statements made in the advertisements, (d) if a product has never had a demonstrably adverse effect on the environment, advertisers should not imply that the formulation has been changed to make it safe, and (e) the use of extravagant language should be avoided, as should bogus and confusing scientific terms, and where scientific expressions need to be used, the meaning should be clear.  

2. Disclosure and reporting guidelines for funds sold to retail investors under the label of ESG  

Following the increasing interest in environment, social, and governance (“ESG”) related investment products, the MAS had issued a circular to facilitate greater comparability in the disclosure made by retail ESG funds to allow investors to make more informed investment decisions. 

Circular No. CFC 02/2022 (the “Circular”), which took effect on 1 January 2023, sets out various guidelines that should be followed by ESG funds, including – (a) providing guidance relating to the name of the fund, such as requiring the name of a scheme to be appropriate, and not undesirable or misleading; (b) setting out key information that should be disclosed in a prospectus relating to an ESG fund, including on the investment’s focus, strategy, reference benchmark, and risks (a prospectus checklist has been set out in Appendix A1 of the Collective Investment Schemes (CIS) Practice Note 1/2005 updated on 3 January 2023); and (c) requiring enhanced reporting aid disclosures, such as to require the annual report of an ESG fund to disclose information on the extent to which the scheme’s ESG focus has been met and a comparison with the previous period (if any). 

Making such data public allows consumers and campaigners to hold companies accountable, should their green claims be inconsistent with the disclosed data. Companies should ensure that any green claims they make are substantiated and accurately reflected by the statistics.  

3. Mandatory climate disclosures for specified companies 

The Singapore Exchange (“SGX”) has introduced a phased approach to mandatory climate reporting, following a public consultation held in 2021: 

  • Climate reporting is now mandatory for all issuers on a “comply or explain” basis.  
  • Subsequently, climate reporting becomes mandatory for all issuers (from financial year commencing in 2023) in the (a) financial industry; (b) agriculture, food and forest products industry; and (c) energy industry while the other issuers will continue to report on a “comply or explain” basis.  
  • The scope of mandatory climate reporting will be further expanded to include issuers (from financial year commencing in 2024) in (a) materials and buildings industry; and (b) transportation industry, in addition to the list provided in the second bullet point above. Other issuers will continue to report on a “comply or explain” basis. 

 

Key contact

Sheena Jacob
Partner
Singapore
T +65 6422 2851

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Avoid industry jargon, or explain it when used. 2. Be specific Identify the specific environmental benefit of your product or service and state it clearly. Avoid terms like “sus­tain­able”, “green”, “en­vir­on­ment­ally friendly”, “eco-friendly” or “kind to the planet”, which are largely meaningless. Comparative claims, such as “more sustainable” or “greener”, may be acceptable if you explain the specific environmental benefit clearly. A claim made for a product or service generally should be based on a “cradle-to-grave” assessment, taking into account the environmental effects of inputs such as raw materials, water and electricity, manufacturing, transport, use and end-of-life disposal. Even with more narrowly-framed claims, make sure you consider all aspects – a common pitfall is to claim that packaging is recyclable or plastic free, without considering whether inner packaging, glue or tape, all of which form part of the packaging, meet that description. 3. Limit your claims to what you can prove Start with the evidence you have, and work out what claims you can make based on that evidence. A common pitfall is to start with the claim and then cast about for evidence to support it, which often leads to a broader claim than can be substantiated. If you have taken waste out of the supply chain, limit your claim to the supply chain. If you have reduced CO2 emissions from transport, limit your claim to transport. 4. Sub­stan­ti­ation should be thorough and detailed Because they are often technical and detailed, environmental claims may require in-depth substantiation, and you may need to expend significant time and effort compiling it. For example, claims regarding carbon neutrality or reduced carbon require a thorough survey of a business’s operation and supply chain over a significant period, first to determine its baseline carbon emissions and then to track its progress towards reduced carbon or carbon neutrality. Be aware that terms such as “bio­de­grad­able”, “organic”, “renewable”, “com­postable”, “recycled”, “re­cyc­lable”, “reusable” and “car­bon-neut­ral” have specific technical meanings, and be ready to substantiate them accordingly. Substantiation by reference to an independent test standard, such as ISO 14021 on self-declared environmental claims, tends to be more persuasive than a standard developed in-house. Take care with symbols, which have specific meanings and rules for use. Make sure evidence is up to date. Make sure claims are accurate for normal use of the products, or qualify them accordingly – for example, if a product is only biodegradable in a specialist facility, and is likely to go to landfill where it will not degrade any quicker than normal products, do not claim “bio­de­grad­able”, or at least state that specialist facilities are required. 5. Don’t claim normal product features, or things you are required to do by law, as environmental benefits For example, in the UK, rinse-off toiletry products may not contain micro beads. Claiming such products are “micro bead free” is misleading, as it implies that the products have a particular environmental advantage over other products, which they do not. 6.  Take care with comparisons Comparative advertising raises its own specific issues, and, where it refers to a competitor or its product or service by name, can substantially heighten risks by opening up the possibility of trademark infringement. Make sure you compare like with like – the comparison should be of products or services meeting the same needs or intended for the same purpose. The features compared should be material and representative, and also “veri­fi­able”, which requires the detailed basis of the comparison to be disclosed proactively, either in the advertising itself or by way of a “signpost” in the ad directing readers to the source of information.