Greenwashing — it's not sustainable
Over the past three years, Maddocks has reported on the ACCC’s Court actions against Woolworths and Kimberly-Clark Australia for product claims made by them on the environmental impact of their products. While the ACCC was unsuccessful in both proceedings, it has not deterred its ambitions, having recently announced a crackdown on false marketing claims about the environmental pedigree of products. The practice, often referred to as ’greenwashing‘, is on the rise around the globe as sustainability and environmental impacts continue to grow in importance for consumers and businesses alike. Research by the Consumer Policy Research Centre (CPRC) recently found that less than one-third of 'green' claims made about products have supporting evidence easily accessible to consumers.
With increased scrutiny of green claims expected, businesses should take this opportunity to review their marketing, ensuring they can substantiate any claims about the environmental impacts they make about their products.
What has happened?
Since early October 2022, announcing its review, the ACCC has been conducting checks of over 200 company websites to identify misleading claims concerning the green credentials of products - targeting particular sectors, including household appliances and goods, food and beverages, clothing, cosmetics, energy and automotive vehicles. In announcing its greenwashing crackdown, the ACCC highlighted a lack of government regulation of commonly used green terms and expressed concern that the lack of clarity around their meaning was causing issues for businesses and consumers.
In its 20 September 2022 press release, the ACCC explained that the data it collects from its internet sweep will be used to provide updated guidance to businesses and consumers concerning the making and interpretation of environmental claims. Importantly, the ACCC has also indicated that it is prepared to bring enforcement proceedings against businesses suspected of engaging in greenwashing. To fulfil these aims, we expect the ACCC will utilise all of its investigatory powers, including substantiation notices and investigatory notices under section 155 of the Competition and Consumer Act 2010, to compel businesses to produce key documents and key employees to be examined where the ACCC considers representations to be misleading. Where these investigations suggest a lack of proper basis for environmental claims, we can expect the ACCC to bring proceedings against high-profile targets in different sectors to reinforce its stance against greenwashing.
ACCC's historical challenges for environmental claims
Of course, the ACCC does have some form in this area – though not particularly in its favour. In its 2018 action against Woolworths, the ACCC alleged that claims made by Woolworths that a particular line of its home-brand disposable crockery line was ‘biodegradable and compostable’ were misleading and deceptive. The ACCC was concerned that consumers were highly motivated by these types of claims, which it felt were problematic due to its belief that the crockery did not compost in domestic composting systems or biodegrade in conventional Australian landfill within a reasonable period of time. However, the Federal Court rejected those allegations – instead finding that these claims were largely true as the crockery did biodegrade and turn into compost over a longer period.
We expect that the ACCC will learn from its previous losses and take a more aggressive and proactive approach to future litigation. In particular, by adducing evidence concerning the falsity or inaccuracy of greenwashing claims. Consequently, businesses should not be comforted by the ACCC’s prior lack of success in this area to date and should be particularly cautious about their green marketing.
Businesses should also be aware that, for conduct occurring after November 2022, maximum penalties for breaches of the Australian Consumer Law have increased five-fold to:
- For corporations - the greater of:
- $50 million, or
- three-times the benefit obtained by the corporation as a result of its conduct, or
- 30% of the adjusted turnover during period of breach
- For individuals - $2.5 million
What does this mean for businesses?
As consumers become increasingly environmentally conscious, businesses are increasing their range of sustainable and environmentally-friendly products. However, consumers are also becoming increasingly aware of the prevalence of greenwashing, with research suggesting that up more than half of all consumers are concerned about the truthfulness of “green” claims. The ACCC’s announcement suggests it too is concerned with ensuring the accuracy for these claims. While businesses seeking to promote their products’ genuine green credentials should not be unduly concerned, all businesses should expect increased scrutiny of any green claims they make about their products.
Businesses should take this opportunity to review their green marketing and complete their product due diligence to ensure that they can adequately substantiate any green claims and that the claims about their products are true and accurate. Where such claims have some future or predictive element, businesses need to ensure that they have reasonable grounds to make those claims, including by undertaking independent, objective testing against recognised metrics conducted by reliable experts or taken from recognised sources. Businesses should be particularly cautious with representations concerning:
- properties of their products after use, such as whether a product is recyclable, biodegradable, compostable or flushable
- the emissions or other environmental impact of the manufacturing process or supply chain, including phrases like ‘made from sustainable materials’, ‘net-zero’, ‘natural’, or ‘carbon neutral'
- claims about profits being donated to green causes, including carbon offsets or charities focussing on mitigating the effects of climate change
- using green images, such as plants, colours and other imagery that could be interpreted to imply that a product is environmentally-friendly.
Some practical tips are:
- Precision – avoid making broad claims about products, such as ‘green’ or ‘eco-friendly’ and instead explain particular characteristics making the product sustainable or otherwise low impact in an environmental sense. For example, products free from particular harmful chemicals, such as sulphate, businesses should state ‘free from sulphate’ rather than more general phrases such as ‘free from harmful chemicals’.
- Consistency – disclaimers should only qualify the primary claim, not contradict it. For example, if the key product claim is that it is ‘not tested on animals’, a disclaimer could not be applied to state that the product was only tested on a particular animal.
- Clarity – businesses should display disclaimers prominently and clearly, making sure they are easily accessible and visible to consumers. For example, if an advertisement is on a webpage, any disclaimers should be on the same page. The greater the significance of the disclaimer, the more prominent it needs to be.
- Rely on objective or third-party evidence – if possible, have products tested or certified by an objective third-party to establish that product claims are accurate. For example, if a product is marketed as organic, ensure it is Regenerative Organic Certified.
We expect to see the ACCC taking some enforcement action about greenwashing in the coming months, albeit with a different legal strategy than its previous unsuccessful Court actions in this space. Further, we expect that the ACCC’s focus on greenwashing will continue for some time and predict that the new ACCC chair, Gina Cass-Gottlieb, who took over from Rodd Simms earlier this year, will include this area in the Commission’s enforcement priorities for 2023.
Looking for more information on green marketing claims?
Maddocks stands ready to assist and advise businesses on green marketing claims, with a wealth of experience and expertise in this area.
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