Australia: ACCC Focuses On Carbon Claims

As more businesses make claims about being 'carbon neutral' or 'low carbon', consumers and businesses are finding it difficult to assess the true carbon credentials of these claims. Claims about carbon neutrality, low carbon products and carbon offsets are not universally understood, largely unregulated and can easily mislead. The ACCC's guidance paper "Carbon claims and the Trade Practices Act" seeks to improve the accuracy of information about carbon-related claims and assist compliance with the Trade Practices Act 1974 (TPA). This legal update outlines some key principles in the ACCC paper to keep in mind when making carbon-related claims.

Carbon claims and misleading or deceptive conduct

The TPA applies to all types of marketing, including carbon claims made in print, TV, radio and internet media, and any claims made on packaging and labelling. The main concern of the ACCC is that consumers are able to rely on the truthfulness or accuracy of any claims made.

The guidance paper gives examples to highlight the practical operation of the TPA, which applies in two main areas to carbon claims:

  • Misleading or deceptive conduct: Businesses have an obligation not to engage in any conduct in business that is likely to mislead or deceive consumers.
  • False or misleading representations: The TPA prohibits a variety of false or misleading representations about specific aspects of goods and services. This is more serious than general misleading or deceptive conduct, as contravention of these provisions may lead to a criminal conviction.

When determining whether conduct may be misleading or deceptive, the key consideration is the overall impression formed in the mind of your target audience. It is the consumer's impression that is important, not your intention when crafting your advertising message. The conduct only needs to be likely to mislead or deceive, and it does not matter if you did not intend to mislead. When making representations about the future, there is a reversal of the onus of proof so that the representation will be deemed to be misleading. This requires you to substantiate your future claim with reasonable grounds for making the representation.

Carbon offsets

Carbon offsets are any type of environmentally positive credit obtained through projects which reduce emissions. Projects such as tree planting, methane flaring from landfills, distribution of compact fluorescent light bulbs and other energy efficiency projects are used to generate credits which can be purchased by consumers to offset their own emissions. A well known example is where people pay for credits when booking plane tickets to offset their travel emissions.

Both providers and purchasers of carbon offsets need to be aware of certain considerations when making claims about a business' green credentials, including the following:

  • Additional to 'business as usual': Ensure carbon offsets are additional to what would have occurred during 'business as usual'. For example routine equipment upgrades or changes required by legislation or regulations cannot be claimed as a carbon offset.
  • Forward credits: It should be disclosed at the time of purchase if offsets are not already realised because the emissions reductions may take some time, for example with tree planting. Purchasers of forward credits should contract for replacement credits with the offset provider in case the project fails to deliver anticipated emissions reductions.
  • Double counted offsets: Ensure offset credits have been retired at the point of sale. This means that 'double counting' of offsets by contracting to sell offset credits to two businesses does not occur. For example, a provider cannot sell credits for the planting of 1000 trees to one customer, fail to retire them, and then mislead a second customer by selling those same credits to the second customer.
  • Quality of offsets: Different types of offsets provide different offsetting results. It should be clear whether an offset is immediate or slow, permanent or temporary. While there is no mandated standard for offsets, there are many recognised standards for comparing offsets.
  • Co-benefits: Co-benefits such as reductions in other pollutants, increased biodiversity, and reduced fossil fuel reliance are important aspects of an offset's environmental credentials, but may mislead if they are claimed to compensate for poor quality offsets.

Carbon neutrality

'Carbon neutral' is a term widely used by businesses keen to present themselves as environmentally conscious. As there is no universal definition of what it means to be carbon neutral, businesses should be cautious with the overall impression a claim of carbon neutrality might create in the consumer. A similar issue with an undefined term has arisen in proceedings over the meaning of the term "organic". In recognition of this difficulty, the paper highlights a few principles to consider when making claims of carbon neutrality including:

  • Claims about a business: Only make carbon neutral claims about your business if the entire business is carbon neutral. If not, specify which aspects of the business are carbon neutral. For example, emissions from the building are offset, but not the production facility.
  • Claims about a product: Ensure carbon neutral claims about a product are fully substantiated. For example, instead of claiming an entire car is carbon neutral, it is less likely to mislead if you say that only emissions in the production of the car have been offset. Similarly, a bottle of juice labelled 'low carbon' could mislead because it is not clear which aspect of the content, production, packaging or otherwise is low carbon.
  • Scope of emissions: The scope of emissions sources may need to be disclosed when making a claim. Distinguishing between Scope 1 (direct emissions), Scope 2 (indirect energy emissions) and Scope 3 (other indirect emissions) may be necessary to avoid giving the false impression that you have taken all three scopes into account.
  • Footprint calculators: As there is no legislated methodology for the calculation of carbon footprints, be sure you understand or communicate how a calculator works and what has been accounted for in any calculations.

How to reduce your risk when making claims about carbon

  • Consider the impression made in the consumer's mind: Are your claims likely to mislead? It does not matter that your claims were not intended to mislead. Ensure claims are accurate and truthful.
  • Make clear and specific claims: When making claims about carbon offsets, clarify what project was undertaken, what measurements were used and where consumers can find out more information about the offsets.
  • Justify carbon neutral claims: As there is no universal definition of carbon neutrality, spell out exactly what is included in your claim to avoid misleading consumers. Be as specific as possible about why your goods or services are carbon neutral or low carbon.
  • Be able to substantiate future claims: Have a clearly defined implementation strategy and/or evidence to back-up claims about current or aspirational carbon goals (eg 'Carbon neutral by 2020'). Without one, it may place your business at risk of engaging in misleading or deceptive conduct.
  • Be truthful about sponsorships and associations: Only represent that goods or services have sponsorship, approval, performance characteristics, uses or benefits that they actually have.

For our legal update on general 'green' marketing and the ACCC, click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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