‘Greenwashing erodes consumer trust’ – the ACCC tells business to clean up its act on misleading environmental claims

The ACCC has delivered a clear and strong message to businesses in a speech by its Deputy Clair, Delia Rickard, to The Sydney Morning Herald Sustainability Summit on 20 September 2022 – “Environmental claims and sustainability are a current priority for the ACCC”. The ACCC “won’t hesitate to take enforcement action where we see that consumers are being misled or deceived by green claims”.

What does this mean?

Businesses should be on notice that the ACCC is actively monitoring green claims and will be working with other regulators, including ASIC and the Clean Energy Regulator.

The ACCC has provided a strong warning that it will not hesitate to take enforcement action where consumers are being misled, referencing their enforcement against Volkswagen where the business was ordered to pay $125 million in penalties.

Background

In recent years, businesses have become aware of a customer preference for purchasing products that they believe are sustainable or have a reduced impact on the environment.

Advertising and marketing trends have reflected this change in customer attitudes, with a boom in environmental claims, ranging from representations that products are ‘green’, ‘eco’ or ‘environmentally friendly’ to specific claims regarding a company’s target to reduce emissions or that a product not contain certain chemicals.

The ACCC has stated that it has a growing concern that businesses are engaging in greenwashing – a practice of falsely promoting environmental or green credentials, which it says ‘reduces confidence in the market – something the ACCC is keen to guard against’.

Such conduct may be inadvertent, through a lack of understanding or proper diligence by the business, or through an attempt to bend the truth to appeal to consumers looking to choose, and even pay more for, an eco-friendly option. The ACCC has highlighted that the average consumer will not be able to or have the time to verify such claims and is therefore putting their trust in the brands that the claims made are true.

What is the ACCC going to do?

The ACCC has stated that its particular focus regarding greenwashing will be on everyday consumer goods, such as items you might find on your supermarket shelves, rather than luxury goods such as electronic vehicles or renewable energy products.

The ACCC will soon be commencing an internet sweep of various environmental claims made by Australian businesses.  A previous review by an international consumer protection body found that 40% of claims of this nature on the internet were potentially misleading and required further investigation. Surveys will also be conducted to understand how consumers interpret common green claims.

The ACCC has stated it will then use the information to update guidance for businesses. It will also consider the introduction of clearer standards and regulation in consultation with stakeholders including, if necessary, greater regulation around the meaning and use of specific environmental claims.

What steps can businesses take when making environmental claims?

In her speech, the Deputy Chair of the ACCC gave some helpful guidance for businesses to consider when making environmental claims. Businesses should:

• Ensure claims are clear and specific, and avoid using vague language to describe products or services. Broad terms such as ‘environmentally friendly’, ‘green’ and ‘sustainable’ were highlighted as having limited value and may mislead consumers if additional information is not provided.
• Ensure claims or details are easy to understand. Consider the use of QR codes or infographics.
• Avoid technical language (such as scientific concepts) where possible – consider whether using the technical definition misleads the consumer. For example, technical definitions of ‘compostable’ or ‘biodegradable’ may differ from what an ordinary consumer may expect.
• Make sure claims can substantiated. Businesses should be able to back up the claims they are making with reliable scientific reports, supply chain information, certifications from reputable bodies and other information.
• Be cautious when referring to standards to substantiate environmental claims – the ACCC warns that some standards have been developed by interested parties and are not independent. Some may also be out of date.
• Consider the entire lifecycle of your product. If the claim relates to one aspect of the product lifecycle, this should clearly be stated.
• Ensure claims are clear and specific, and avoid using vague language to describe products or services. Broad terms such as ‘environmentally friendly’, ‘green’ and ‘sustainable’ were highlighted as having limited value and may mislead consumers if additional information is not provided.
• Ensure claims or details are easy to understand. Consider the use of QR codes or infographics.
• Avoid technical language (such as scientific concepts) where possible – consider whether using the technical definition misleads the consumer. For example, technical definitions of ‘compostable’ or ‘biodegradable’ may differ from what an ordinary consumer may expect.
• Make sure claims can substantiated. Businesses should be able to back up the claims they are making with reliable scientific reports, supply chain information, certifications from reputable bodies and other information.
• Be cautious when referring to standards to substantiate environmental claims – the ACCC warns that some standards have been developed by interested parties and are not independent. Some may also be out of date.
• Not attempt to hide or downplay negative impacts through claims (such as claiming that a product uses less water to produce, although the production process also results in higher CO2 emissions).
• Information provided must be truthful and robust.
• Avoid broad statements about corporate sustainability which may not align with the specific products or services.
• Be careful when using trademarks that are not independent certification marks (e.g. symbols) to promote green credentials. For example, the recycling triangle symbol is widely known, therefore the use of visually similar symbols may mislead consumers to believe a product is recyclable.
• Collaborate with reputable third party certification bodies. Ensure you qualify for certification and be cautious not to misrepresent any certification or its significance.
• Be cautious when promoting progress toward environmental goals – make sure to state what you have actually achieved. Announcements regarding future aspirations (e.g. carbon neutral by 2030) should have a plan in place to meet that goal.
• Not overstate the status of your business’ transition to sustainable practices.

The Deputy Chair of the ACCC called upon businesses to step into the shoes of their customers who are looking to make more sustainable purchasing decisions and ask themselves:

1. What does an ordinary consumer understand these claims to mean?
2. Does your product or business live up to this understanding?

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Authored by:

Antoine Pace, Partner
Eve Lillas, Associate