Green claims and corporate criminal liability: managing new risks for businesses

The question

What are the developing criminal risks that companies need to be aware of when making green claims or representations and how can they take steps to mitigate those risks?

The key takeaway

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) increases the risk that allegations of greenwashing against a company may carry criminal, not just civil or regulatory, consequences for businesses. Since September 2025, large organisations may commit a criminal offence if an employee or other person performing services on their behalf commits a fraud offence. This may include making green claims or representations which are known to be misleading or untrue. The only defence is to show "reasonable fraud prevention procedures" were in place at the time of the alleged offending, making it vital that businesses review, consider and where necessary enhance their internal controls relating to fraud.

The background

ECCTA introduced a new corporate offence of failure to prevent fraud. Under this provision, a company or partnership that meets certain size-related thresholds (namely having two or more of 250 employees, £36m  turnover, or £18m in assets), will commit an offence if an "associated person" commits a UK fraud offence intending to benefit that company or partnership. “Associated person” is defined widely and includes employees, agents, subsidiaries, and contractors performing services for or on behalf of the company.

The offence applies to businesses wherever in the world they are established, although a necessary element of establishing the offence will be to demonstrate that a UK fraud offence has been committed (which will generally require either UK based victims or some part of the fraud to have been carried out in the UK). Penalties can be severe with potentially unlimited fines.

While the underlying fraud offences have not changed, the effect of the new offence is to make it significantly easier for the UK's criminal enforcement agencies to open investigations into and prosecute businesses for the allegedly fraudulent conduct of their staff, agents and other third parties. Importantly, there is no requirement to prove that senior management knew of, approved of or directed the conduct. Liability can arise from even the most junior employees or, in some cases, external marketing partners.

Greenwashing as a criminal risk

While greenwashing, ie making misleading environmental claims, has long presented risks of litigation or regulatory enforcement to businesses, this new offence greatly increases the potential criminal risks that they should be alive to when making green claims or representations. If green claims are known to be dishonest by the person making them and intended to make a gain for the business (or cause a loss to someone else), they may meet the threshold for a criminal offence. This can be the case even if the person acting dishonestly is a very junior employee or even an external consultant engaged to perform services for the business (such as an external marketing agency).

As to whether the green claim may be intended to make a gain for the business, there are multiple circumstances in which this may be the case. At its simplest, including green claims, such as stating a product is "fully recyclable" or "carbon neutral" in advertising or marketing materials with the aim of inducing consumers to purchase goods or services would clearly demonstrate an intention to benefit. However, green claims are often also made in other ways, such as in applications for funding or financing, in statements to investors or the market, in representations to regulators or in internal communications to employees on the state of the business. All of these types of statement could be made with the intention of benefitting the business, even if not in a direct financial way.

Why is this important?

Making green claims across a wide range of business areas is increasingly common. With this change in law, ensuring those statements are accurate and supported by data is increasingly important to ensure criminal risks do not materialise.

Any practical tips?

While businesses may already take steps to ensure the accuracy and substantiation of green claims in line with regulatory guidance from the Competition and Markets Authority and the Advertising Standards Authority, there may be further steps that can be taken to mitigate the specific criminal risks under ECCTA.

The only defence to the failure to prevent fraud offence is for a company to demonstrate that it had in place "reasonable" prevention procedures at the relevant time. Therefore, businesses should consider the controls and processes they have in place to identify and prevent fraud, including with respect to green claims, to determine their adequacy. The government has issued guidance to assist businesses in implementing procedures that meet the required standard. That guidance sets out the key elements of "reasonable" fraud prevention procedures. They will be based on six core principles, namely, risk assessment, due diligence, proportionate procedures, top-level commitment, communication and training and monitoring and review.

From a practical perspective, the key starting point is for a business to conduct a fraud-focused risk assessment to determine where its risk might lie and whether controls already in place are suitable to manage those risks. Depending on the outcome of that assessment, businesses may deem it appropriate to provide additional training to employees (for example relating to making green claims), update compliance polices and implement updated clauses in contracts with third parties to provide fraud-related protections.

Spring 2026