By David Baggs, ecospecifier

13 October 2011 – FAVOURITES: Green marketing has increased dramatically in recent years as marketeers have become more aware of the increased importance consumers are placing on the effects of their purchases on their health and the environment.

In 2010 the Canadian Organisation TerraChoice undertook a survey into green marketing in Australia and found almost all products carrying environmentally friendly claims are guilty of greenwashing. TerraChoice, an environmental marketing firm, has released its Seven Sins of Greenwashing report, which scrutinises the environmental claims companies put on products to see if they are misleading.

In Australia, 1937 “green” claims were recorded on 866 products showed that not only are more companies are using environmental claims but that 98 per cent have committed at least one of the seven sins[i].

In response to the rise in the number of environmental claims, especially false claims or greenwash in marketing, the ACCC released in 2010 its report Green marketing and the Australian Consumer Law relating to what constitutes legal environmental claims under the new Competition and Consumer Act 2010.

With the introduction of the National Greenhouse and Energy Reporting Act, the National Carbon Offset Scheme and the impending Emissions Trading Scheme together with the intense media coverage surrounding these issues, being carbon friendly is playing a significant role in a marketplace where consumer awareness of environmental issues is at an all time high.

The green industry and the availability of carbon neutral, carbon friendly or carbon offset products are in increasing demand. However, as there is currently no widely accepted definition of these terms, there are some concerns about claims made by businesses  that market and promote such products.

The ACCC has not only warned it will take action against companies it considers to be greenwashing but when it becomes aware of false or misleading environmental claims, it has shown its willingness to take manufacturers and businesses to court and is quite aggressive in the defence of consumers’ rights to correct and clear information.

According to ACCC chairman Graeme Samuel in a statement relating to a 2008 action against GM Holden, “Companies risk breaching the Trade Practices Act if they give an overall impression to consumers that their product is environmentally friendly when it isn’t. The ACCC will continue to be vigilant on greenwashing and will not hesitate to take enforcement action, including Federal Court action, against traders who make false or misleading representations to consumers, as has been demonstrated by this case.”.

GM Holden was ordered to train the marketing staff of its subsidiary, Saab Australia, in relation to misleading and deceptive  “green” marketing claims after the Federal Court declared that its “Grrrrrrreen” advertising campaign was misleading. [ii]

As early as 2005, the ACCC successfully took action against two manufacturers of polyester insulation batts that were alleged to have overstated the rating of some of their products. Subsequent testing conducted to Australian Standards disclosed a lower rating than that stated on the packaging. The companies were issued with substantial six figure fines and had to provide undertakings relating to representations made concerning the R Value of their batts.[iii]

There are many actions that actually don’t make it to court but result from threatened actions of the ACCC to court action. In a recent example an acoustic polymer based wallboard manufacturer used a green leaf icon along with the claim that the product was “eco-preferred” in their brochure on the basis that the product was recyclable. Because recyclability is an inherent and obvious feature of the polymer involved, this was deemed to be misleading and while the company escaped fines because it had already willingly begun to withdraw the claims from its brochures, it was required to take corrective action by the costly withdrawal of all marketing collateral including the green icon and all written claims.[iv]

Within ecospecifier, we weekly if not daily see companies that have no idea they are in breach of the ACCC’s guidelines. One recent example was an aluminium window company whose name was along the lines of ‘Clean and Green Aluminium Windows’. The sole basis of this name (and false claim) was that the aluminium used was recyclable.

So what is it that constitutes misleading or deceptive conduct under Australian Law? The ACCC’s Green marketing and the Australian Consumer Law guide states:

Misleading and deceptive conduct

The ACL contains a broad prohibition of misleading and deceptive conduct. Businesses have an obligation not to engage in any conduct that is likely to mislead or deceive consumers. Note that the conduct only needs to be likely to mislead or deceive; it does not matter whether the conduct actually misled anyone, or whether the business intended to mislead—if the conduct was likely to mislead or deceive, the ACL is contravened. Broadly speaking, the conduct will be considered likely to mislead or deceive if there is ‘a real or not remote possibility’ that members of its target audience have been misled. Plainly put, if part of the audience to which it is directed could be misled, there may be a contravention of the ACL.

The class of people likely to be affected by your advertising can be relatively wide. Therefore, it is important to carefully consider your audience when making environmental claims. Not all members of your audience will be especially educated, so claims should be clear and unambiguous. This also makes the use of technical or scientific jargon especially risky.

The nature of the product is an important consideration. A consumer may be unlikely to go through a lengthy decision-making process when buying a small household item, so you should consider the immediate impression made on them by your environmental claims.

Misleading conduct can include silence if in all the relevant circumstances there is an obligation to say something or if a reasonable expectation is created that matters will be disclosed, if they exist. For example, putting ‘made from recycled material’ on a product when only a part of the product (such as the packaging) is made from recycled material could be misleading by silence.

Misleading conduct can include predictions if the maker had no reasonable ground for making it, or if the prediction should have been qualified and was not. A marketer making a statement about something that will happen in the future, such as “by 2010 this product will be made entirely from wood pulp from plantation trees”, could be found to be misleading if the marketer could not show there were reasonable grounds for making the statement at thetime it was made.

Misleading conduct can also include advertising. The law will allow a degree of latitude when statements are clear puffery on the basis that most reasonable consumers are aware that some vague or generalised exaggeration occurs in advertising. For example, a claim such as “world’s best pies” would likely be mere puffery. However, you should still exercise caution when making such claims, as you may be in breach of the law if consumers could be misled by your statements.

Business names could be misleading if they imply green credentials that do not exist. For example, a business that promotes itself as an environmentally responsible energy company using a name such as “Completely Clean & Green Energy” may be at risk of misleading its customers if it in fact produces energy from an unclean source.

In addition to the general rule against misleading or deceptive conduct, the ACL prohibits a variety of false or misleading representations about specific aspects of goods and services. False and misleading representations are more serious than general misleading and deceptive conduct and, where criminal proceedings are taken, can carry serious penalties –see below..

There are two specific forms of prohibited misrepresentations that are especially relevant to environmental claims. The ACL requires that a business not falsely represent goods as being of a particular standard, quality, value, grade, composition, style or model or having a particular history or previous use. Put simply, goods must comply with any description that is provided in advertising or labelling. This is especially relevant to claims regarding recycled and recyclable content or the environmental impact of components used in the product, such as refrigerants.

The ACL also requires that a business not represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have. Those most relevant to environmental claims are:

  • Sponsorship—this connotes some form of backing by another party. The unauthorised use of a trademark may breach this provision.
  • Approval—this provision is mainly used when a business claims to have approval from a government agency or licensing board for its products, when no such approval has been given.
  • Performance characteristics—companies should not falsely claim that their goods or services have certain capabilities or effects they do not have.
  • Benefits—companies should not claim that a particular good or service has certain environmental benefits if these claims cannot be substantiated.

Fines and Penalties

The ACCC’s enforcement powers and remedies are extensive and include monetary penalties of up to $1.1 million for companies and up to $22,000 for individuals, as well as injunctions, adverse publicity orders, corrective advertising orders, community service orders, disqualification orders and ancillary orders of various kinds. These orders are wide ranging, and will generally vary depending on the circumstances and conduct in question.

ACCC Suggested Solutions

Avoid using terms like “safe” and”‘friendly” and unqualified pictures or graphics. At best they are unhelpful and encourage scepticism; at worst they are misleading.

  • Spell out exactly what is beneficial about a product in plain language that consumers can understand.
  • Link the environmental benefit to a specific part of the product or its production process, such as extraction, transportation, manufacture, use, packaging or disposal.
  • Make sure any claims you make about your product can be substantiated. Think about how you would answer a query regarding the environmental benefits you are claiming about your product. For example, what scientific authority could you use to justify the basis of your claim[v]

Practical Risk Management for Directors and Executives

What do the ACCC, the Australian Procurement and Construction Council the National Carbon Offset Standard and the Federal Government’s Environmental Procurement Guidelines have in common? They all espouse a life cycle analysis approach to quantifying environmental and health benefits to product procurement and as a way to ensure that there is a scientific basis behind environmental claims. Life cycle assessment is also a way to ensure that the claim to any specific benefit is able to be linked to “a specific part of the product or its production process, such as extraction, transportation, manufacture, use, packaging or disposal”.

LCA therefore is a key, if not the key to managing corporate and executive risk around environmental claims for anything from products to companies or entire networks.

What is LCA?

The Australian Life Cycle Assessment Society defines LCA as a tool which considers the entire life cycle of a product, giving a “cradle-to-grave” approach for assessing industrial systems. It enables the estimation of cumulative environmental impacts resulting from all stages in the product life cycle, often including impacts not considered in more traditional analyses, such as raw material extraction, material transportation and ultimate product disposal. LCA therefore provides a more accurate picture of the true environmental trade-offs in product and process selection[vi].

The practice and content of LCA are covered by a range of international standards including ISO 14040-44. Because LCA covers all environmental and health issues associated with all materials and processes at all stages of a product or organisation’s life or operations, it can become quite complex and technical. To miminise the need to deal with these complexities directly, executives are wise to consider using experts to collect and interpret the data to enable reporting in ways that can be more easily understood by all stakeholders whether they be regulators, shareholders, professionals or consumers. ISO 14040-44 compliant LCA is peer reviewed to ensure accuracy and consistency.

LCA Product Reporting and Ecolabels

The leading global format to report LCA for products is via an Environmental Product Declaration or Type 111 Environmental Claim. These EPDs are summary LCA reports with content and format covered by international standards (ISO 14025 and ISO 21930 [Building Product Specific]) and are therefore to some extent transportable.

Even though EPDs are designed primarily for Business to Business communication, the system does allow for EPDs to be used for communication with consumers and applies additional rigour in this context by requiring peer review. However, at best it is only a very small percentage of consumers or even professionals who would take the time to actively compare and select products based on EPDs with the market showing a preference for the use of LCA within reputable third party ecolabels.

Third party, or independently assessed environmental claims are called Type 1 claims or Type 1 ecolabels. LCA based ecolabels represents the ideal risk minimisation strategy for any executive or product manager looking to understand what claims can be legally made without exposing the company and individual employees to the risk of making unintentional, ACCC actionable, environmental and health claims relating to their products by embodying complex data within simple, intuitive graphics based communication icons that will not trigger the ire of the ACCC watchdog.

The ‘take home’ message for manufacturers is – LCA is the key process to engage in assessing and measuring the impacts of your products to enable quantification of the environmental and health benefits. This effectively mitigates risk of action by ACCC while at the same time as creating positive connections for your products with the key procurement strategies of the APCC, NCOS and Federal Government’s Environmental Procurement processes.


References:

[i] Accessed 13.9.11 at https://www.theage.com.au/business/consumers-face-wave-of-greenwash-20090629-d2m0.html#ixzz1XtBC7fkX

[ii] Accessed 13.9.11 at https://www.goauto.com.au/mellor/mellor.nsf/story2/8066541E44E036E3CA2574CA004653FE

[iii] Accessed 13.9.11 at https://goliath.ecnext.com/coms2/gi_0199-4278096/ACCC-puts-insulation-industry-on.html

[iv] Personal Comment

[v] ACCC, (2010),  Green marketing and the Australian Consumer Law, Australian Government accessed 12.9.11 at https://www.accc.gov.au/content/item.phtml?itemId=815763&nodeId=90c89998139b822f949e69e227917455&fn=Green%20marketing%20and%20the%20ACL.pdf

[vi] Australian Life Cycle Assessment Society accessed 5.4.07 at https://www.alcas.asn.au/intro-to-lca

David Baggs is chief executive officer ecospecifier Pty Ltd. He is also a GreenTag program and technical director and was recently elected president of the Australian Life Cycle Analysis Society and is its chartered architect.

References:

[1] Accessed 13.9.11 at https://www.theage.com.au/business/consumers-face-wave-of-greenwash-20090629-d2m0.html#ixzz1XtBC7fkX

[1] Accessed 13.9.11 at https://www.goauto.com.au/mellor/mellor.nsf/story2/8066541E44E036E3CA2574CA004653FE

[1] Accessed 13.9.11 at https://goliath.ecnext.com/coms2/gi_0199-4278096/ACCC-puts-insulation-industry-on.html

[1]  Personal Comment

[1]  ACCC, (2010),  Green marketing and the Australian Consumer Law, Australian Government accessed 12.9.11 at https://www.accc.gov.au/content/item.phtml?itemId=815763&nodeId=90c89998139b822f949e69e227917455&fn=Green%20marketing%20and%20the%20ACL.pdf

[1] Australian Life Cycle Assessment Society accessed 5.4.07 at https://www.alcas.asn.au/intro-to-lca

David Baggs is chief executive officer ecospecifier Pty Ltd. He is also a GreenTag program and technical director and was recently elected president of the Australian Life Cycle Analysis Society and is its chartered architect.