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Environmental, social, and governance risks and opportunities

Guidance on Avoiding Greenwashing while Providing Input Down Under 

The best checklist, we are aware of, for mitigating the risk of greenwashing claims

The Australian government has issued draft Environmental and Sustainability Guidance describing the obligations under Australian consumer law which businesses must comply with when making environmental and sustainability claims.

The Guidance released on July 14, 2023, sets out what the Australian Competition & Consumer Commission considers to be good practice when making such claims, to help businesses provide clear, accurate, and trustworthy information to consumers about the environmental performance of their business.

The Guidance is hugely instructive not only for companies that engage in business in Australia but given the global nature of commerce, to companies worldwide, including those in the United States; and in particular at a time when companies doing business in the U.S. do not have the benefit of the out of date, and in many respects no longer useful, Federal Trade Commission Green Guides for Environmental Claims last updated in 2012.

As we described in our recent post, H&M Wins Dismissal of Greenwashing Lawsuit, in an era when allegations of greenwashing are de rigueur it is significant to note, properly vetted and drafted environmental marketing disclosures can successfully withstand a challenge. This Guidance provides a literal checklist for that vetting. 

Environmental or sustainability claims will only help consumers make informed purchasing decisions if the claims are clear, are not misleading, and do not omit relevant information. A misleading, meaningless, or unclear claim, no matter whether made for marketing purposes or as a required government disclosure, breaches consumer trust and hurts confidence in both the claim itself and sustainability claims in general.

Businesses genuinely pursuing more sustainable products and services often incur additional research or production costs. This fact combined with consumers’ increasing interest in purchasing sustainable products results in false or misleading sustainability claims unfairly disadvantage businesses making genuine claims. This undermines effective competition and can create a disincentive for businesses to invest in sustainability.

In preparation for this updating of the then existing 2011 Guidance, the ACCC conducted a sweep of environmental claims finding that of the 247 businesses across a wide range of sectors viewed with a presence on the Internet, more than 57% of those businesses have potentially made misleading and deceptive environmental or sustainability claims. Companies making vague and unqualified claims topped the list of most common issues, with many businesses describing their products as “green”, “kind to the planet”, “eco-friendly”, “responsible” or “sustainable”. Of the sectors studied in the sweep, cosmetic, clothing and footwear, and food and drink industries had the highest proportion of concerning claims.

The Guidance released from Canberra articulates the following principles and then provides real world examples:

Principle 1: Make accurate and truthful claims

Principle 2: Have evidence to back up your claims

Principle 3: Don’t leave out or hide important information

Principle 4: Explain any conditions or qualifications on your claims

Principle 5: Avoid broad and unqualified claims

Principle 6: Use clear and easy-to-understand language

Principle 7: Visual elements should not give the wrong impression

Principle 8: Be direct and open about your sustainability transition

All businesses, Australian or not, can learn a great deal about mitigating risk in making environmental claims from this new document and, in fact, use it as a checklist.

Moreover, additional information can be garnered from participating in the ACCC online survey, available through September 15, 2023, being conducted so that the agency can assess common difficulties businesses face when making environmental claims before finalizing the Guidance, but also as part of the education process for businesses. Participate in the Aussie online survey here.

Legal experts warn the number of greenwashing claims will continue to grow in the coming years. With the ever expanding support for a transition to a decarbonized economy to solve problems relating to climate change, emissions reduction, recyclability, and the like, consumers are increasingly interested in purchasing sustainable or environmentally friendly products and services. Concomitantly, the use of environmental and sustainability claims, today estimated at more than $240 Billion annually, will continue to be increasingly utilized in advertising.

Sustainability is a topic of importance not only in Australia but internationally and certainly including in the U.S. We have chosen to blog about this legal development some 10,000 miles away, not only because of the surprise that more than half of Australian businesses reviewed were found to have made misleading environmental claims but because assisting businesses in mitigating risk from greenwashing claims (.. often an innocent misrepresentation by a company associated with genuinely pursuing some sustainable action) has become a significant part of what we do.

While American businesses continue to wait for the update to the 2012 FTC Green Guides this draft Guidance from Down Under is the best checklist, we are aware of, for mitigating the risk of greenwashing claims.

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