Australia: Green Technology In A Regulatory Climate

Last Updated: 10 November 2008
Article by Paul Kallenbach

The central role of technology in most modern companies – from desktop and laptop computers, to server farms, data centres and proliferating mobile devices – means that IT departments are among the largest consumers of energy in the corporate landscape. Indeed, Gartner estimates that the global ICT industry accounts for about 2% of global carbon dioxide emissions, equivalent to the aviation industry.

Many organisations, as users and manufacturers of technology, are beginning to adopt a more environmentally sustainable approach to the use, production, transport and disposal of technology. However, with recent United Nations estimates that 20 to 50 million tonnes of computer and phone waste becomes landfill each year – and with only 12 percent of these products being recycled – green IT is now firmly on the regulatory, corporate and consumer agenda.

Green regulation – three ways

'Green' technologies are those designed, manufactured, developed, distributed and operated in ways that reduce energy consumption and the use of toxic substances, and minimise the impact on the environment during the lifecycle and disposal of a product. Broadly, green technology is regulated in three ways.

The first approach is self-regulation. Consumers and investors are increasingly taking account of organisations' approach to corporate social responsibility, with the result that an organisation's green reputation and environmental programs can directly impact its bottom line. Consequently, many technology manufacturers are implementing internal compliance programs to meet emerging green standards. Concurrently, the rise in energy prices is causing organisations and consumers to become more conscious of the costs of running inefficient products, and to select more energy efficient technologies which reduce day-to-day power consumption.

Second, government regulation through legislation can directly impact a company's environmental profile. Trade practices legislation regulates environmental claims made by companies, and new regulations mandating emissions reporting are likely to impact on technology production and consumption generally.

Finally, organisations are susceptible to indirect regulation. Stringent environmental legislation now applies in certain countries, meaning that a company that wishes to sell its products in those countries must meet their high standards. Companies are also indirectly regulated by monitoring programs conducted by non-governmental and quasi-governmental bodies.

Each of these regulatory approaches is considered below.

1. Self-regulation

The ENERGY STAR voluntary labelling regime, created by the US Environmental Protection Agency, is an example of the self-regulatory approach. This labelling is commonly seen on computer hardware, and was revised in 2006 to include stricter efficiency requirements and a ranking system. Products labelled with 'ENERGY STAR' must automatically switch to 'sleep' mode when not in use, and must reduce the amount of power consumed in 'standby' mode. The Australian Government cooperates with this regime through the national ENERGY STAR programme, which encourages use of energy efficient equipment in Australian business.

Technology manufacturers are also improving energy use and reducing environmental impact through e-waste return and recycling, energy offset initiatives, and the production of lower energy consumption devices and smaller hardware. For example:

  • Nokia has implemented a take-back program spanning 85 countries and providing almost 5000 collection points for end-of-life mobile phones

  • since November 2007, all new Samsung LCD panels are PVC-free (an important milestone as Samsung is the largest supplier of LCD panels globally)

  • Dell has implemented a worldwide product recycling program, as well as a 'Tree for Me' scheme where customers pay to offset their carbon emissions. The company has also launched a competition for engineers to design the world's most environmentally responsible computing system

  • Intel, Google, Microsoft and several other technology companies have launched the Climate Savers Computing Initiative, which commits each company to meeting the US Environmental Protection Agency's ENERGY STAR guidelines for energy-efficient device.

2. Government regulation

Trade Practices Act 1974 (Cth)

Green claims provide a means for companies to differentiate themselves from their competitors. For this reason, it is increasingly common for 'green claims' to form a key component of a company's marketing strategies. However, confusion over the truth and substance of the environmental benefits claimed by companies has led to close monitoring by the Australian Competition and Consumer Commission (ACCC).

There is currently no legislation in Australia that specifically monitors companies' green claims. However, existing consumer protection laws require that all companies be able to substantiate any green benefits claimed. Where companies make misleading or deceptive representations concerning such characteristics, they are likely to face scrutiny from the ACCC, and may find themselves in court in breach of the Trade Practices Act 1974 (TPA). Companies may also be sued for contravention of State and Territory Fair Trading Acts.

The ACCC released two sets of guidelines this year, Green marketing and the Trade Practices Act and Carbon claims and the Trade Practices Act, to assist businesses in ensuring their green-related claims comply with the misleading or deceptive conduct provisions of the TPA. This has coincided with ACCC-instigated enforcement proceedings against a number of companies in relation to green claims.

In May 2008, air conditioner manufacturer De Longhi admitted making misleading representations that its portable air-conditioners were 'environmentally friendly' and contained 'non-harmful' gases. These descriptions were misleading, as they did not accurately describe the environmental benefits of the products. De Longhi gave court-enforceable undertakings to the ACCC to stop using 'environmentally friendly' in its marketing materials and to change its advertising to instead state that its particular products contained the most environmentally friendly gas 'currently available' in portable air-conditioners.

It is important, therefore, for organisations to consider if any green claims (whether concerning the company's products or the company itself) may be false, misleading or deceptive, and to modify the claims accordingly. For example, claiming a product is 'carbon neutral' may be false or misleading if there is a net release of carbon into the atmosphere during manufacturing or disposal. Similarly, 'energy efficient' may be misleading if there is no objective gauge to measure efficiency. Manufacturers need to consider the entire life span of the product when making green claims, and should avoid overly broad representations, as these are likely to be difficult to substantiate.

Manufacturers should also ensure that any endorsing logos used are not misleading or deceptive. In the mid-1990s, a number of Australian battery manufacturers used the recyclable logo on products and, even though this claim was technically true, the ACCC considered this use to be misleading (and a breach of the TPA) as the facilities required to recycle the batteries were not available in Australia. This demonstrates that even where a green claim is technically true, consideration must be given to the overall substance and practicability of the claim.

The emissions trading scheme and other legislation

Following ratification of the Kyoto Protocol, Australia is required to implement measures to reduce its greenhouse gas emissions in order to meet its Kyoto commitment. The Federal Government's preferred mechanism for doing so is a broad based national emissions trading scheme. The scheme is the subject of a detailed Green Paper, and is scheduled to commence in 2010. It is likely to have a significant impact on the technology industry. A description of the scheme will be the subject of a future article in TMT News.

In advance of the scheme, many companies are obliged to report their greenhouse gas emissions and energy use under the National Greenhouse and Energy Reporting Act 2007 (Cth). The first reporting period began on 1 July 2008, and companies are required to provide their first annual report by October 2009.

A number of energy efficiency schemes have been either implemented or proposed. The Commonwealth Energy Efficiency Opportunities Act 2006 requires large energy users to assess and report opportunities for promoting energy efficiency in their operations, but does not mandate energy efficiency savings. However, Victoria has legislated a mandatory energy efficiency target scheme to commence in 2009, which requires electricity and gas retailers to offset their 'emissions liability' by surrendering certificates created through energy efficiency saving activities. The New South Wales and South Australian governments are proposing similar schemes, and there is some prospect they will eventually be rationalised into a national energy efficiency target scheme.

3. Indirect regulation

Non-legislative certification and reporting programs, developed or endorsed by non-profit, private or quasi-government organisations, can indirectly impact on organisations' approaches to green issues.

Every three months, Greenpeace publishes its 'Guide To Greener Electronics', which assesses environmental strategies implemented by technology manufacturers. Companies are assessed, among other things, on their elimination of hazardous materials and recycling regimes. Nokia took first place in the September 2008 report, primarily as a result of its e-waste management initiatives in India. These reporting schemes provide consumers with feedback, give companies information about their competitors' activities and the effectiveness of green programs, and assist in guiding consumer choices.

The 'Green Grid', a global consortium established last year to advance data centre energy efficiency, is another example of an indirect regulator. Its founders include Dell, HP, IBM, Sun Microsystems and Microsoft, and members now include the US government and private sector organisations and the influence of these corporate heavyweights is imposing de facto environmental standards on the data centre industry.

Finally, international import and export regulations may impose obligations on technology manufacturers, as these regulations are increasingly tied to environmental impact. The European Union's Restriction of Hazardous Substances Directive prohibits the use of hazardous materials in the manufacture of various types of electrical equipment. Though not binding in Australia, this legislation still impacts on Australian technology manufacturers, as in order to sell products in the EU, goods must be EU-standards compliant. The Directive bans six substances (lead, mercury, cadmium, hexavalent chromium, poly-brominated biphenyls (PBB) or polybrominated diphenyl ethers (PBDE)) from exceeding certain concentration values in new electrical equipment.

Conclusion – adopting a green approach

The current legal landscape in Australia already imposes obligations on companies in relation to the use and manufacture of green technologies and in relation to any green features claimed. With emerging European Union regulations, increasing green participation by government and private technology players, and growing consumer awareness on environmental sustainability, it is inevitable that Australian companies will be subject to further pressure – both legal and non-legal – in this arena.

When assessing or implementing its approach to green technology, a company should:

  • ensure its green claims, whether used to promote its products or its profile, stand up to scrutiny (as claims must not be misleading or deceptive or otherwise contravene applicable consumer protection legislation)

  • consider whether there are alternative ways of doing business that could reduce the company's energy consumption and therefore its costs

  • consider whether its processes makes it eligible to participate in certification schemes, as this may confer on it a competitive advantage

  • assess how its environmental reputation might be affected (adversely or otherwise) should it be subject to external monitoring and reporting, for example by Greenpeace in its Guide To Greener Electronics

  • ensure it complies with its emissions reporting obligations under Australian law

  • consider whether its products comply with more stringent regulations imposed in other countries (particularly the EU), and the potential effect on the company should similar laws be passed in Australia.

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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