Regulators are zeroing in on false or misleading claims of ‘greenness’
Consumers and investors are increasingly conscious of climate change risks, and more demanding of businesses to adopt sustainable business practices. This has led to an increase in 'green marketing', which includes statements about environmental sustainability, carbon neutrality, recycling or impact on the environment. As a result, there has been growing regulatory scrutiny of, and enforcement against, potentially misleading environmental claims.
Courts have recently considered a number of cases brought by the Australian Competition and Consumer Commission (ACCC) relating to environmental claims. These cases, by analogy, are illustrative of the court's likely attitude to similar claims being made in relation to climate-related risks or carbon neutrality. Recent actions include:
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- ACCC v Volkswagen AG: In December 2019, the Federal Court ordered Volkswagen AG to pay $125 million in penalties for making false representations to the Federal Government about compliance with Australian diesel emission standards. This is the highest penalty ordered by the court for contraventions of the Australian Consumer Law.
- ACCC v Woolworths Limited: In March 2018, the ACCC brought proceedings against Woolworths Limited alleging that environmental representations, in particular the label 'Biodegradable and Compostable', made on the packaging of its disposable cutlery and dishes products were false or misleading. The Federal Court dismissed the ACCC's allegations. The ACCC has appealed this decision.
- ACCC v Kimberly-Clark Australia Pty Ltd: In December 2016, the ACCC brought proceedings against Kimberly-Clark alleging it made false or misleading representations that its Kleenex Cottonelle wipes were 'flushable'. The ACCC argued that the wipes were not compatible with sewerage systems and that the international guidelines relied on by Kimberly-Clark to demonstrate compliance with 'flushability' standards were not established by an independent testing regime, and therefore not a credible standard. In June 2019, the Federal Court found there was insufficient evidence to establish that the wipes caused harm to sewerage systems, and that it was reasonable for Kimberly-Clark to rely on the guidelines. The ACCC has appealed this decision.
The penalties for breaches of the Australian Consumer Law are significant. The ACCC's decision to appeal the findings in ACCC v Kimberly-Clark Australia Pty Ltd and ACCC v Woolworths Limited demonstrate its willingness to hold businesses to account for environmental representations made about their products and services.
Some common traps businesses may make in making environmental claims include:1
- making broad, vague or general environmental statements such as 'safe for the environment', which could have more than one meaning without further explanation. Unqualified statements can be misleading if they do not adequately explain the environmental benefits of the product or service;
- overstating the environmental benefit. Representing that a product has significant environmental benefits (eg 'now with 50% more recycled content') may be misleading if the benefit is actually negligible (eg the product was previously only 1% recycled content);
- overstating the level of scientific acceptance; and
- failing to consider the whole product life cycle when making claims. For example, a claim that a product is carbon neutral may mislead consumers if it only relates to the carbon produced in the manufacture of the product and not its actual use and operation. Businesses should make clear if the claimed benefits relate only to one part of the product (eg packaging, content, production process etc).
Before making environmental claims, an organisation should consider the following questions:
- Does your organisation rely on environmental claims as part of its marketing strategy? If so, what is the overall impression given to the consumer by the environmental claims?
- Are the representations appropriately qualified?
- Is there evidence to support the environmental claims being made? Have the claims been independently audited or verified? Is there a scientific authority that can be used to justify the basis of the claim?
- Do the claims overstate the level of scientific acceptance?
- Have you considered the whole product life cycle?
See ACCC, 'Green marketing and the Australian Consumer Law' (11 March 2011) https://www.accc.gov.au/publications/green-marketing-and-the-australian-consumer-law