New ACCC guidelines are aimed at helping businesses understand their legal obligations when making environmental claims

by Lynne Blundell

As social awareness of climate change grows around the world so does the power of green marketing and branding. But there is growing concern that some organisations promoting their green credentials are engaging in unjustified claims, also known as ‘greenwashing’.

According to law firm, Maddocks, in its latest newsletter on sustainability and climate change, the Australian Competition and Consumer Commission (ACCC) has taken steps to address the risk of greenwashing by issuing a set of guidelines. Entitled Green Marketing and the Trade Practices Act, the Guidelines are aimed at helping businesses understand their legal obligations when making environmental claims.

Under the Trade Practices Act 1974 (Act), the ACCC is responsible for ensuring that consumers of goods and services, including green products, are not misled and deceived.

The Act applies to all forms of marketing and across all mediums, including labelling, packaging, advertising and promotions. The Act contains two main provisions that are relevant for environmental claims:

– section 52, which prohibits misleading or deceptive conduct; and

– section 53, which prohibits false or misleading representations about particular aspects of goods and services.

According to Maddocks, misleading conduct includes situations in which silence could mislead or deceive:

“The conduct does not have to actually mislead or deceive anyone and it does not matter whether a business intends to mislead or deceive. If an environmental claim could mislead or deceive its target audience, the Act is breached.”

False and misleading representations are treated more seriously than general misleading or deceptive conduct:

“The Act prohibits businesses from falsely representing that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use. In other words, it requires that any representations made about a product must be accurate.

Misleading ‘green’ language

The guidelines from the ACCC address some commonly used phrases in marketing that can mislead consumers. Saying a product is ‘green’ is vague, as are phrases such as ‘environmentally friendly’ or ‘environmentally safe’, and is potentially misleading.

According to Maddocks, such phrases risk implying the product causes no environmental harm during its production, usage and disposal.

Claims about energy efficiency must be quantified by using benchmarks or ratings or by supplying sufficient detail.

Terms such as ‘recyclable’ or ‘biodegradable’ are more specific but can also be tricky says Maddocks:

“For recyclable products, it is important that a reasonable number of recycling facilities exist in Australia and that they are not merely pilot schemes in order for a ‘recyclable’ claim to be practically meaningful. As for whether or not a product is biodegradable, it is important that any claim is backed by evidence.

“If a product is labelled ‘recycled’, a consumer may think this refers to the whole product when, in fact, it only refers to one part or simply the packaging. Also, where a product claims to contain recycled material, it may be misleading if the material was actually reclaimed during the manufacturing process.

‘Carbon neutral’ is a term that is increasingly used in marketing. A claim of being carbon neutral, says Maddocks, must be based on fact. In some cases, a comprehensive life cycle analysis to assess the environmental impact of the good or service may be necessary.

“Unqualified use of the term ‘carbon neutral’ could cause consumers to believe that the claim relates to the product’s entire lifecycle when, in fact, it only relates to the manufacturing process up to the point of sale. Furthermore, when using carbon offsets to justify a claim of carbon neutrality, it is important to distinguish between offsets that have already been purchased and those that will be purchased in the future.”

Claims that energy is ‘green’ or ‘renewable’ must also be truthful and, where only part of the energy supplied is green or renewable, this should be stated.

Stiff penalties for false claims

While the ACCC settles the majority of breaches through education and advice, it does have wide enforcement powers including fines of up to $1.1 million for companies and $220,000 for individuals.

It may also seek injunctions, corrective advertising orders, adverse publicity orders, community service orders or other orders as appropriate. It is also possible for the ACCC to bring proceedings against individuals, such as company directors, it believes have breached the Act knowingly.

Maddocks advises substantiating every claim made in marketing or advertising.

“Every claim should be capable of substantiation’” says Maddocks. “Whether this is done on the packaging, in advertising, or elsewhere, it demonstrates good faith in making the claim.

“Substantiating a claim may seem difficult, at least in some cases where there is no universally accepted way of assessing and categorising environmental impact. However, the best protection against claims of misleading or deceptive conduct is to use reliable science.

There are a number of ways to do this but perhaps the most widely accepted both in Australia and internationally is that of a lifecycle assessment. Lifecycle assessment is a comprehensive method for assessing and comparing the environmental impacts of materials, products and services. However, companies must be careful not to overstate the level of certainty or scientific acceptance of a claim if it is still disputed.”

– lblundell@thefifthestate.com.au