Canada: "Greenwashing" Environmental Claims Give Rise To Legal Liability

Last Updated: October 24 2014
Article by Jacquelyn Stevens and Marc McAree

Originally published by Fabricare Canada, September/October 2014

'Green' products and services are becoming popular in many industries as people become more concerned with environmental protection and climate change. Companies market products as environmentally friendly through the use of words like 'biodegradable', 'green' and 'eco-friendly'. Consumers tend to show a positive response to these claims. However, most consumers give little thought to what these terms actually mean.

This rise in popularity of 'green products' seems to bring with it false advertising claims also known as 'greenwashing'. Greenwashing most often occurs because producers and advertisers misunderstand what qualifies as 'environmentally safe'. False advertising can lead to regulatory liability and damage to the reputation of the company making the claim.

FALSE ADVERTISING CLAIMS

Claims that products are biodegradable must be supported with scientific evidence about decomposition rates. In one U.S. case, Kmart claimed its American Fare disposable plates were biodegradable. The U.S. Federal Trade Commission found Kmart's claims to be deceptive. The plates would not completely break down and decompose within a reasonably short time in normal disposal conditions. Kmart agreed to a consent order that barred Kmart from representing that a product is 'biodegradable' or has an environmental benefit without reliable scientific evidence. Kmart also agreed to reporting and monitoring requirements to ensure compliance.

In Canada, P.V.I. International Inc. claimed that its device increases a vehicle's fuel efficiency by 22% and reduces emissions. The company's ads also state that the product was U.S. government approved and that its environmental claims were confirmed. The Canadian Competition Bureau charged the company and its two officers with engaging in deceptive marketing practices and misleading consumers without adequate testing. As a result, the Canadian Competition Tribunal fined the company $75,000 and the officers $25,000 each, and ordered the owners to not make fuel-saving or emission-reduction claims about the product for 10 years.

In 2013, the City of Santa Monica, California, targeted six dry cleaners about claims that each offered environmentally friendly dry cleaning services. Santa Monica officials relied on federal, state and municipal laws to investigate the six dry cleaners' environmental claims. The U.S. Federal Trade Commission's 'Green Guides' set out standards that businesses should adopt when advertising 'green' or environmentally friendly practices, products and services. The six Santa Monica dry cleaners agreed to drop the use of 'non-toxic', 'environmentally safe' and other green terms. The dry cleaners could not support or substantiate their environmental claims.

RISKS FOR DRY CLEANERS

Solvent traditionally used in dry cleaning, called perchloroethylene (or perc), can be harmful to human health and the environment. Perc is subject to stringent regulations in Canada under the Canadian Environmental Protection Act, 1999 and the Tetrachloroethylene (Use in Dry Cleaning and Reporting Requirement s ) Regulations.

Alternative cleaning processes and agents are becoming more prevalent in the dry cleaning industry. Dry cleaners are switching to alternative cleaning processes and agents such as wet cleaning, CO2 cleaning, liquid silicone and hydrocarbon solvents. Dry cleaners must take care when using terms like 'green', 'environmentally safe' and 'environmentally friendly' to describe alternative cleaning processes and agents.

The environmental impacts or benefits of an alternative cleaning process or agent may not be legally defined or confirmed. Misuse or mischaracterization of 'green' terms or descriptors may subject dry cleaners to liability for false advertising or deceptive marketing claims.

GUIDELINES AND BEST PRACTICES

To avoid false advertising claims, business owners should be aware of relevant statutes and regulations that govern competition and advertising in their jurisdiction and industry.

The Competition Bureau of Canada administer s and enforces three pieces of legislation that affect advertising and liability: the Competition Act, the Consumer Packaging and Labelling Act and the Textile Labelling Act.

The Competition Act is federal law. It governs most business conduct in Canada. Its purpose is to prevent anti-competitive practices using criminal and civil penalties. The Competition Act prohibits false or misleading representations. This includes representations that have not been adequately proven or tested. Business owners are also prohibited from using false tests or testimonials and making those false tests or testimonials available to the public for advertising purposes. Dry cleaners using alternative dry cleaning processes or agents should be aware of these provisions when advertising their services or when naming their business.

The Competition Bureau of Canada will follow the civil regime in most cases unless there is clear and compelling evidence that false claims were intentional and that a criminal prosecution would be in the public interest. The Competition Bureau may impose monetary penalties depending on the type and severity of the of fence. The Competition Bureau may also make orders or issue injunctions, and may require the accused to compensate injured consumers.

In 2008, the Canadian Standards Association, in partnership with the Competition on Bureau of Canada, published Environmental claims: A guide for industry and advertisers (Guide). The Guide provides Assistance to industry and advertisers in complying with the law. The Guide focusses on self-declared environmental claims made by persons who will benefit.

The Guide also provides best practices for companies that use the internationally accepted ISO 14021 Standards for environmental labels and claims. The Guide aims to level the playing field by reducing the risk of misleading environment - al claims, while providing the incentive to companies to improve environmental performance and to meet consumer demand for environment - ally safe products.

The Guide set s out 18 requirements that apply to self-declared environmental claims consistent with the Competition Act. Dry cleaners should Consider a number of the requirements when making environmental advertising claims. Claims must:

  • not be misleading, and shall be substantiated and verified;
  • be specific to the environmental aspect or environmental improvement in claims;
  • be unlikely to result in misinterpretation;
  • be presented in a manner which does not imply that the product is endorsed or certified by an independent third-party organization when it is not;
  • not be made if the claim suggests an environmental improvement that does not exist, nor shall claims exaggerate the environmental benefits of a product to which the claim relates;
  • be re-assessed and updated as necessary to reflect changes in technology, competitive products or other circumstances that could alter the accuracy of the claim.

In practice, labelling a product as 'environmentally friendly', 'green' or 'environmentally safe' gives the impression that the product is benign or beneficial to the environment. There must be greater detail about environmental benefit s to ensure that claims are not misleading or deceptive. Further, business should avoid claims about sustainability (e.g. , 'sustainable dry cleaning'). The concept of sustainability is extremely broad and complex; there are no universally acceptable ways to measure sustainability.

In addition to avoiding broad or unclear environmental claims , it is better to use explanatory statements to accompany environmental claims. Explanatory statements can help to ensure that consumers will not be misled by or misinterpret environmental terms. Explanatory statements may also help to qualify claims of environmentally friendly practices.

Finally, dry cleaners should update environmental claims and modify them as further testing is done or new information becomes available. The increasing popularity of alternative dry cleaning approaches will generate more information about environmental impacts. It is important to remain up-to- speed on changing information, current legislation and guidelines to ensure your business limits it legal exposure to allegations about false advertising.

Although the Guide is not law, the Competition Bureau uses the Guide as a reference for evaluating environmental claims. Breaches of practices in the Guide can constitute indications of misleading advertising in contravention of competition and labelling statutes.

In addition to regulatory risks associated with environmental claims and labelling, dry cleaners should also be mindful about risks to reputation. The benefit your business may derive from using alternative dry cleaning approaches may be lost if your advertising makes unsupportable environmental claims.


Jacquelyn Stevens is a Senior Litigation Associate.

Marc McAree is a Partner and certified as a specialist in environmental law by the Law Society of Upper Canada

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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