On October 1, the U.S. Federal Trade Commission (FTC) released its finalized update to its Environmental Marketing Guides, a.k.a. "Green Guides," touting a central message that companies making environmental benefits claims about their products will need to have reliable, competent evidence to support them.
First published in 1992, the Green Guides set forth how truth-in-advertising principles apply to green marketing claims. They were last revised in 1998 before terms like "carbon offset" and "renewable energy" were commonplace, so the Guides were well overdue for a makeover when the FTC released a draft revision for comments in 2010. The final version takes into account more than 5,000 submissions filed in response to that draft, as well as information gathered during three public workshops and a consumer perception study.
While the Green Guides do not have the weight of federal rules or regulations, they embody the FTC's current view of the types of environmental claims it may find deceptive under the Federal Trade Commission Act, and therefore may prohibit or fine. Moreover, several states, including California, incorporate the Green Guides into their laws. Legal experts predict that the release of the revised Green Guides will lead to greater enforcement by the FTC, as well as an increase in actions between competitors to compel compliance with the guidelines.
The Guides emphasize consumer perception by focusing on whether a claim misleads a reasonable consumer to believe the product is "greener" than it actually is, a practice commonly referred to as "greenwashing." The latest version of the Guides addresses the treatment of general environmental benefit claims and clarifies the acceptable use of old and new terms, including six new sections covering: certifications and seals of approval, carbon offsets, "free-of" claims, "non-toxic" claims, "made with renewable energy" claims, and "made with renewable materials" claims. As in the 2010 draft, the final version does not propose guidance on the commonly used terms "sustainable," "natural," and "organic," but does address what constitutes appropriate "recyclable" claims. While previous versions of the Green Guides have declared that environmental claims must be specific and supported by reasonable and competent scientific evidence, as you will read, the new version raises the bar considerably for what constitutes sufficient evidence.
In a significant change from the 1998 version, the new Guides warn companies not to make broad unqualified environmental benefit claims or blanket statements such as a product is "environmentally friendly," "eco-friendly," or "green." As the FTC notes, consumer perception tests revealed that "very few products, if any, have all the attributes consumers seem to perceive from such claims, making these claims nearly impossible to substantiate." To address this, companies are advised to use "clear and prominent qualifying language" to limit claims to specific benefits of a product and not to imply that a benefit is significant if it is in fact only negligible. Moreover, before a general claim of environmental benefit can be made, the company should be able to prove that there are no negative environmental impacts throughout the product's life cycle.
Meanwhile, the FTC equates seals of approval and certifications with unqualified blanket marketing claims. The Commission advises companies not to use unqualified certifications or seals of approval that do not specify the basis for the certification and says companies must disclose if it has a relationship, or "material connection" with the certifying organization. A certification referencing an industry standard is permitted if the standard is developed and maintained by a voluntary consensus standard body. The final version states that certifications and seals "may" also be subject to the FTC's Endorsement Guides, so companies are advised to consult the Endorsement Guide for a determination as to whether a certifications or seal must meet those criteria as well.
Companies who make carbon offset, "free-of" and "non-toxic" claims must have strong evidence to support their assertions. For carbon offsets, the company must have accounting to back up the claim. For "free-of" claims, the company must be able to show that the product contains only a "trace amount" rather than a "de minimis" amount of the substance. "Trace amount" is defined as no more than an "acknowledged trace contaminant or background level," present in an amount that does not cause material harm to consumers, and which cannot be added intentionally. Moreover, an otherwise truthful "free-of" claim can still be considered deceptive if the product contains a substitute substance that poses similar risks to the "free-of" ingredient, or if the substance the marketer claims the product is "free-of" would never have been used in the product in the first place. For "non-toxic" claims, companies should have strong scientific evidence substantiating any claim, including evidence that the product is non-toxic for both humans and the environment, with any qualifying statements displayed clearly and prominently.
For renewable energy and materials claims, as throughout the Guides, businesses are advised to be specific and measured in their marketing. Companies are cautioned not to make unqualified "renewable energy" claims if the power used to manufacture any component of their product comes from fossil fuels, unless the company can balance out any non-renewable energy with renewable energy certificates. The Guides suggest that companies specify the percentage of renewable energy used for a qualified "made with renewable energy" claim. With respect to "made with renewable materials" claims, companies should specify the materials used and why they are considered renewable.
The Green Guides contain specific guidance for recyclable, compostable, and degradable claims. For recyclable claims, the Guides require that the marketer avoid deception regarding the product as well as the availability of recycling programs. Companies may make unqualified recyclable claims if appropriate recycling facilities are available to 60 percent of consumers or communities where the product is sold. When recycling facilities are not available to at least 60 percent of product consumers, companies should qualify the recyclable claims by identifying the percentage of consumers or communities that have access to the facilities. A product should not be touted as "compostable" or "degradable" unless it will completely decompose in a safe and timely manner. For compostable claims, the product should decompose in a similar amount of time to other items that a consumer could be expected to compost at home. Products claimed to be degradable should decompose within one year after customary disposal. Items destined for disposal in landfills, incinerators, or recycling facilities should not be claimed as degradable because the product, in all likelihood, will not decompose in one year.
The FTC made few changes to language addressing recycled content claims. Despite requests from SMART and other industry groups, the Guides still require companies that make recycled content claims based on the inclusion of pre-consumer material to be able to show that this material would have otherwise entered the waste stream. As was the case in 1998, companies are free to distinguish between pre- and post-consumer materials when making recycled content claims but must still substantiate the percentage of each in a product.
The bottom line is that marketers should take a critical look at their "green" claims, and consult the Guides for examples of acceptable and unacceptable statements to make sure these assertions are defensible. The FTC had increased enforcement in the area of environmental marketing claims even before the release of the Guides. With the new revisions, the FTC has raised the bar for the evidence marketers need to have on hand before claiming environmental benefits and you can expect an even greater effort by the FTC to combat deceptive green marketing.
To view the 2012 Green Guides, visit: www.ftc.gov/sites/default/files/attachments/press-releases/ftc-issues-revised-green-guides/greenguides.pdf