Legal consequences for greenwashing in supply chains have reached new heights, with the consequences going way beyond the reach and influence of companies that make false environmental claims. The Competition and Markets Authority (CMA) new guidance states that businesses in supply chains of all sizes can face penalties for misleading green claims. Even retailers who just stock products can be held responsible when they pass on incorrect information from manufacturers, meaning that now companies should be serious about how they handle their environmental marketing claims.
After the Digital Markets, Competition and Consumers Act 2024 (DMCCA) took effect in April 2025, it was found that companies have the possibility of facing tough penalties if they don’t comply. Any business caught greenwashing could be fined up to 10% of their global annual turnover. On top of that, the CMA makes it clear that consumer protection law covers all claims that affect buying decisions. This applies to retailers, brands, and manufacturers throughout the supply chain. Companies need to really look at their contracts, set up reliable verification processes, and create clear policies if they don’t want to face greenwashing accusations that could hurt their legal position and damage their brand’s reputation.
Recent court cases have highlighted the severe consequences of greenwashing, which has dramatically changed the legal landscape for environmental claims in commercial contracts. Companies should reassess their supplier relationships and contractual protections because environmental warranties carry substantial weight in business transactions.
Business-to-business settings now recognize environmental claims as material contractual terms, not just marketing statements. The MDW Holdings Ltd v Norvill case shows how breaches of environmental warranties can lead to successful post-acquisition claims. Courts are willing to consider potential reputational damage when assessing losses, even if it did not actually occur.
Businesses throughout the supply chain share responsibility to ensure environmental claims are accurate under CMA guidance. Retailers may face liability for misleading claims even when they only pass along information from manufacturers. The CMA states clearly that “where another business is the source of the claim and will not or cannot verify it, then you may need to think over your trading relationship with that business for that product, given the legal risk this may open up for you.” That poses questions on whether companies must review or even end relationships with suppliers who cannot prove their green claims.
Businesses should include specific protective measures in contracts to alleviate greenwashing risks, such as verification mechanisms with evidence requirements, regular review periods that ensure the claims remain accurate, and supplier warranties regarding environmental compliance.
The verification process should start when selecting suppliers. A successful system needs clear environmental standards that suppliers understand. Retailers should give their suppliers the right resources and help break barriers between different parts of the business. Marketing claims need testing before placing orders, not after. New suppliers need extra checks, while the system should also spot any supply chain changes that affect these claims.
A detailed evidence pack that suppliers should provide usually includes product specs and composition details, any current certificates checked against public registries, legal entity details and compliance contacts, and any documents that show chain of custody.
For example, fashion retailers need final scope certificates and transaction certificates to check fabric makeup. When getting proof for every product isn’t possible, retailers can use self-assessment forms. These forms make suppliers state their claims are true.
Audits should regularly take place, as they build trust and keep everyone accountable for their environmental claims. Good verification doesn’t just avoid legal trouble, but it helps prevent the rejection rate, which is usually around 45%, and many retailers see in their first claim reviews. Of course, building strong supplier relationships and using eco-friendly sourcing helps stop greenwashing throughout supply chains. Retailers earn stakeholder trust by being open about their progress and challenges.
Consumer trust has become a fragile commodity as greenwashing spreads through supply chains. Most of the sustainability claims made by European fashion brands are ‘unsubstantiated’ and ‘misleading,’ highlighting a growing problem.
Consumers can easily lose trust through motivated reasoning and expectation violation when they find a gap between promises and reality, and that takes a hit on the brand image for the companies that fail to link environmental claims with practices. Especially with e-commerce shoppers, they significantly value transparency in their purchasing decisions.
But exposed greenwashing creates problems beyond consumer skepticism. To name just one example, Keurig paid a £1.19 million fine without admitting wrongdoing when their recyclability claims were found misleading. Shell faced similar consequences with an advertising ban in the UK. They promoted environmental initiatives but failed to disclose that fossil fuels remain their primary business. Besides the financial penalties companies face from regulators, consumers are becoming less willing to support the brand, and sometimes they even proceed with boycotts.
In North America, the majority of companies have admitted to greenwashing practices, a grim situation showing how widespread deception is in businesses of all types.
Businesses gain competitive benefits through supply chain transparency and traceability. Digital traceability solutions help companies identify affected batches quickly during recalls, which improves crisis management. Detailed traceability data helps understand product performance and consumer behavior better. Nike shows how transparency builds trust by publishing their supplier list and manufacturing map. This gives stakeholders better visibility in their supply base. Yes, it is true that this openness has transformed a simple compliance requirement into a strategic advantage in eco-conscious markets.
The CMA’s new guidance requires companies to revamp their internal processes to avoid greenwashing accusations. Companies need complete policies that go beyond marketing teams and cover all supply chain operations.
Corporate training should include learning how to engage with the six principles of the Green Claims Code, be clear and proven, and show a product’s full lifecycle. Through training, employees understand their responsibilities throughout a supply chain that is truly sustainable while they also learn how to identify situations that need more verification. The Sustainable Supply Chains Management course by EcoSkills teaches teams from different departments how to manage the environmental and social effects in supply chains, ensuring that business practices align honestly with green claims. These teams from operations, finance, marketing, and other departments can bring vital expertise and encourage breakthroughs and accountability, and help companies stay resilient.
Greenwashing is more than just a marketing problem; it sits at the edge of a business; it is a supply chains risk with direct legal, commercial, and reputational consequences. With the CMA’s tougher stance and the enforcement landscape under the DMCCA, responsibility follows the claim through every link in the chain, including retailers simply passing on supplier information. At the same time, courts are increasingly treating environmental promises as meaningful contractual terms, making inaccurate claims capable of triggering warranty breaches, disputes, and damages that factor in reputational harm.
For businesses, it is clear that sustainability claims must be treated with the same rigor as any other compliance obligation. That means tightening supplier contracts, demanding auditable evidence, building verification and review processes into procurement, and being willing to renegotiate or walk away from relationships where claims cannot be substantiated. Done well, these steps do more than reduce legal exposure; they protect consumer trust and brand value in a market where transparency is fast becoming a baseline expectation rather than a competitive advantage.
