Go ahead. Ask us what's new and exciting.
The big news, of course, is that on October 1, 2012, the Federal Trade Commission ("FTC") finally released its final revised Guidesfor the Use of Environmental Marketing Claims ("US Guide"). The revisions went into effect on October 11, 2012.
That wasn't all though. The granddaddy of international green guidelines, ISO 140211, was also updated on December 15, which may affect the countries that look to those guidelines for their rules. Canada is one of them, as the Competition Bureau's guide, Environmental Claims: A Guide for Industry and Advertisers ("Canada's Guide") is based on ISO 14021. Further steps would need to occur before our guidelines reflected the ISO 14021 amendments. The 2010 Green Claims Guidance of the UK Department for Environment, Food and Rural Affairs ("UK Guide") also draws on ISO 14021. It already contemplated and referenced the ISO 10421amendments.
Brazil has extensively revised its green provisions as well. They went into effect in August 2011. New Zealand's self-regulator issued a revised Code for Environmental Claims, coming into force January 2013. The final guideline news we'll mention is Australia's new Carbon Price Claims: Guide for Business. This was introduced on November 15, 2011 (and updated in May 2012) in light of the carbon-pricing regime that went into effect in Australia on July 1, 2012. What's a carbon-pricing regime? It requires some large businesses to buy carbon credits to offset their emissions. That means their costs will go up and some consumer prices will also go up as the costs are passed down the chain. Having a vivid imagination, Australia's false advertising regulator thought some companies might want to raise their prices and (falsely) blame the full hikes on the carbon price. Or perhaps scare consumers into thinking that electricity prices were going to go sky high so they should waste no time in buying low-carbon energy alternatives like solar panels. The Guide was brought in to head them off at the pass.
The Skinny: What's New?
1. US Guide – Most notably:
- Six sections have been added: Carbon Offsets, Certifications and Seals of Approval, Free-of, Non-toxic, Made with Renewable Energy, and Made with Renewable Materials.
- Six sections have been substantively modified: General Environmental Benefit, Compostable, Degradable, Ozone, Recyclable, and Recycled Content. (Certain non-substantive changes were made as well for purposes of simplification and easier reference.)
2. IS O 14021 – Most notably:
- Definitions have been added for "biomass", "greenhouse gases", "life cycle GHG emissions", "offsetting", "sustainable development" and "traceability".
- Direction has been given on the terms "renewable", "renewable energy", "sustainable", "product carbon footprint", and "carbon neutral", such as: how to use these claims, required qualifications, and/or evaluation methodology to substantiate them.
- The new provisions in Brazil's self-regulatory code include green guideline basics seen everywhere – truth and accuracy, verifiability, the need to consider the whole life cycle, etc., but also address corporate social responsibility and sustainability advertising. See the side bar box, which addresses Brazil's guidelines in more detail.
4. New Zealand
- See the revised Code for Environmental Claims at www.asa.co.nz
- If you're interested in more detail on the Carbon Price Claims: Guide for Business have a look at the Australia section of our article below on Green Cases Around the World.
So Who Now Has The Strictest Standards In The Land (World)?
It depends which issues you're looking at, but the US is the front runner on strictness on a number of important issues. To put matters into perspective, we highlight below some comparisons between the new US Guide, Canada's Guide, ISO 14021 and certain other guidelines, so you can get a slightly larger sense of how issues may be handled in various places. (Obvious note: we have only focused on certain aspects of the claims referenced below, so please check with local counsel and see the relevant guidelines themselves.)
Where The US Guide Is Stricter or More Exacting in Specifics
So far as we've seen, the US Guide is the only green guide providing the following:
a. Degradable: To be called "degradable" (without qualification), products entering the solid waste stream (e.g., in contrast with liquids) must completely decompose into elements found in nature within a specified time period (one year) after customary disposal. If beyond a year, the US Guide says you should specify the rate and extent of degradation, among other things.
Having said that, Canada's Guide, ISO 14021 and others such as Finland's, focus on an aspect of degradability that the US Guide doesn't. These guides state that if a product/package/component releases substances in concentrations that are harmful to the environment when it degrades, it shouldn't be marketed as "degradable" without an appropriate qualification. With respect to liquids, Canada's Guide provides the example that a biodegradable claim for cleaners with phosphates that can promote algae growth (which can wipe out ecosystems in waters) can be deceptive. (Note that the UK's Department for Environment, Food and Rural Affairs put out specific Guidance on "Biodegradable" and other environmental claims in the Cleaning Products Sector.)
b. Recyclable: To be called "recyclable" (without qualification) under the US Guide, recycling facilities have to be available to a "substantial majority" or "60%" of the population where the product is sold. That's more than the "reasonable proportion" required under IS O 14021, which has been interpreted as at least "50%" in Canada's Guide. New Zealand uses "most", which is apparently also the position in Australia.
c. Compostable: To be called "compostable" (without qualification) under the US Guide, commercial composting facilities must be available to "60%" of the population, where the item is sold, versus "50%", "most" or a "reasonable proportion" elsewhere.
d. Renewable energy: Under the US Guide, these claims must disclose the type of renewable energy - e.g., solar, etc., as well as the percentage if it is less than all or virtually all. Other jurisdictions just require the percentage where it is less than 100%, not the type of energy.
On the other hand, the US Guide may be a little more liberal, specifically allowing a "made with renewable energy" claim when you've actually used fossil fuel energy, but purchased a renewable energycertificate to match the amount of fossil fuel used. We haven't seen thatelsewhere as yet.
e. Renewable materials: With "renewable material" claims, the US Guide recommends disclosing what the material is AND explaining how it is renewable - in addition to disclosing the percentage of renewable material. (Other guidelines just require the percentage.) This is interesting. The FTC found through consumer perception studies that consumers may understand "made with renewable materials" to mean that the product is made with recycled content, recyclable and/or biodegradable. It therefore set out sample disclosures that could head off that misunderstanding – i.e., "Our flooring is made from 100 percent bamboo, which grows at the same rate, or faster, than we use it." Or even more elaborately, "Our packaging is made from 50% plantbased renewable materials. Because we turn fast-growing plants into bioplastics, only half of our product is made from petroleum-based materials."
f. Certificates and seals of approval: As consumers have come to trust companies' own claims less and less, certifications by trusted, independent parties have become increasingly important. However, these can also be confusing for consumers. Which seals and certificates are meaningful and trustworthy, which are less so, and what attributes do the trumpeted certifications cover?
The US Guide has the most detailed requirements of any guidelines we've seen on this issue, aiming to obliterate the ambiguity and deceptiveness that has had consumers throwing up their hands in confusion. Was the seal awarded by an independent, authoritative party (most trusted), a trade association (often less trusted) or the company itself (query how many of these we will even see going forward)? This is an issue that has spawned litigation as well – e.g., the class actions launched against SC Johnson in connection with its Greenlist" logo, which was developed by the company itself.
Does the company have a material connection with the entity whose seal or certificate displayed, such that its credibility or weight might be affected? Which certifications are based on solid, consensus-based and exacting requirements as opposed to being not-so-rigorous endorsements by trade associations or others? Which environmental aspects of the product were actually evaluated and what was the specific basis for a certification? Here it also gets interesting. Anticipating the obvious question of 'how do you explain the basis of complex, multi-attribute certifications on a little label', the FTC allows you to refer consumers to a website for the details. Don't get excited, though. Even though you can reference a website, you would still have to accompany the seal with a statement like, "Virtually all products impact the environment. For details on which attributes we evaluated, go to [a website that discusses this product.]"
The FTC has tackled all of these potential devices for ambiguity and deception – and more, it provides numerous recommendations and examples. It also spells out that, use of the name, logo or seal of approval of a third-party certifier or organization may be an endorsement, which should meet the criteria for endorsements provided in the FTC's Endorsement Guide. The name of the new game, then, is to disclose, disclose, disclose.
On this front, IS O 14021 and Canada have been left a little pale, with only a few general principles laid out, mainly under the part dealing with "symbols."
Where The US Guide Is Less Extensive
a. Carbon Claims: While the US Guide focuses on carbon offsets, other guidelines cover not only that but also "carbon neutral" and similar claims – namely, New Zealand , Australia , Norway , the UK and ISO 14021.
Guidelines in the latter jurisdictions specify what you need to put in your ads by way of qualification – for example, identifying: i) which elements of the life cycle you have "offset"; ii) which "Scopes" of emissions have been offset (Scopes 1, 2 and/or 3, under the Green house Gas Protocol); iii) what offset scheme you've used; and/or iv) sources of further information about the offset scheme.
b. Public Access to Your Substantiation: The US Guide doesn't recommend, as do ISO 14021 and jurisdictions like Canada and the UK, that companies either release to the public information that verifies a claim or at least provide access to the information on request.
Indeed, ISO 14021 and the UK add the strict kicker that if your claim relies on confidential information for its verification, you shouldn't make the claim. Canada's Guide doesn't go quite that far. It says that if your claim is based on confidential information, you should be prepared to make the substantiation available to a regulator, if asked.
c. Encouraging Bad Environmental Practices: The US Guide doesn't prohibit ads from showing scenes that would encourage pollution or harm to the environment, as some European guidelines and Brazil's guidelines do.
d. Making Consumers Feel Guilty: The US Guide doesn't prohibit, "techniques which manipulate consumers' emotions or conscience," as Norway's guidelines do. Examples of unfair claims in Norway are, "Think of the polar bears: buy energy efficient insulation." and "Drink coffee with a better conscience."
e. Guidelines for Specific Products: The US Guide doesn't include special guidelines directed to certain product categories, as some other countries have done for vehicles, electricity, energy for house heating, decorative coatings, growing media, greeting cards and cleaning products, for example.
f. Sustainability Claims: The FTC declined to delve into claims of "sustainability." Not so in some other guides. ISO 14021 was clear in its original form that no claim of achieving sustainability should be made. The amendments to ISO 14021 say that no "unqualified" claim of sustain-ability should be made (though without offering any details on the kinds of qualifications that would be appropriate).
Granted, "sustainability" is a bit of a thicket. A good illustration comes from a 2008 case in which Cotton USA was told by the UK selfregulatory Advertising Standards Authority ("ASA") not to call its cotton "sustainable". The advertiser argued that its cotton was natural, biodegradable and renewable and met the criteria of sustainability put forward by a number of major organizations (including the UN) – namely, economical viability, environmental protection and social responsibility.
The challenger was not having any of it and submitted that cotton was a pesticide and insecticide-intensive crop that could seriously deplete groundwater; and, furthermore, that cotton growers in West Africa were having a terrible time because of subsidies granted in the US cotton industry.
The advertiser came back saying that current pesticides were more targeted, less toxic and less persistent in the environment, that the vast majority of cotton was genetically modified, which reduced its need for intensive agriculture, that cotton was not water-intensive, and, furthermore, that there were a number of reasons the cotton growers in West Africa were having a terrible time apart from US subsidies. Of course, there was a division of scientific opinion on a lot of these issues and ASA wasn't sure how clear it was that genetic modification of the cotton, which had allowed some of these benefits, wasn't harmful – etc., etc. One can see why the FTC would say – OK, this is a quagmire; we're not going there (at least yet).
US Coming On Boar d With Other Guidelines
Trade-Offs - Net Environmental Benefit
The US has now come on board with most other guidelines in requiring you to consider whether an improvement you've made on one environmental front (e.g., reducing the amount of petroleum-based plastic you use) has worsened other environmental impacts your product has. Let's not paraphrase this important wording, which is: "If a qualifiedgeneral claim conveys that a product is more environmentally beneficial overall because of the particular touted benefit(s), marketers should analyzetrade-offs resulting from the benefit(s) to determine if they can substantiate this claim." (US Guide, §260.4(c); emphasis is ours.)
Canada's Guide provides, among other related principles, that, "It is not permissible to shift the environmental burden from one stage of a product's life to another and then make a claim concerning the improved stage without considering whether there is, in fact, a net overall environmental benefit." (Emphasis is ours.) It also incorporates the ISO 14021provision saying that claims must not only be true for the finishedproduct, but must also consider all relevant aspects of the life cycle, "to identify the potential for one impact to be increased in the process of decreasing another."
Trade-offs...shifts of environmental burden...increasing one impact while decreasing another – what they are asking is whether the change you're touting really yields a net environmental benefit or whether your product is now LESS environmentally friendly.
And by the way, your general claim may still be sunk if misleading in the larger picture
In most places, even if the specific change you've made hasn't resulted in any particular environmental downsides itself, you could still get into trouble saying, "Eco friendly: 30% less plastic". When? Say the materials you use – and have always used - are sourced from incredibly polluting plants and shipped from overseas when everyone else sources them locally, you pillage local water supplies that are scarce, and commit all sorts of other environmental sins. In that scenario, do you think that giving a specific attribute (30% less plastic) to explain your general "ecofriendly" claim will save your general claim from being misleading?
Green Advertising Practices Have Changed
The changes discussed above are part of the rush of activity we've seen around the world over the last five to seven years. At least 17 countries and two international organizations have introduced or updated their green advertising provisions (sometimes product or issue specific) since 20052. These have certainly influenced the way green claims are being made in the marketplace these days, although not so much that we can't still find a LOT of cases to tell you about in our article below on "Green Claim Cases Around the World".
1 ISO 14021:1999, Environmental Labels and Declarations - Self-declared environmental claims (Type II environmental labeling)
2 2012 - US; 2011 – Brazil and ISO 14021; 2010 – UK , Costa Rica and International Chamber of Commerce; 2007-2009– Canada, Greece, Ireland, Malaysia, Singapore, the Netherlands, Norway, Australia, New Zealand, Finland, France, Hungary; 2005 – Denmark and Iceland.
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.