The ACCC has released its final guidance for businesses that make claims about the environmental impact of their business, products or services, providing clarifying regulatory guidance to assist them in complying with the Australian Consumer Law (ACL). The release of the final guidance follows feedback from over 150 stakeholders across consumer, business and environmental organisations on the ACCC's draft version of the guidance, released in July 2023.
While the eight principles for trustworthy environmental claims remain largely unchanged from the draft guidance, the final guidance provides further clarification that will assist businesses to take steps to mitigate the risk of greenwashing.
This Insight builds on our previous article and identifies the additional information provided by the ACCC to assist businesses when making claims about the environmental impact of their business, products or services.
Key takeaways
- Consistent with the focus of regulators in the EU and UK, the
ACCC is clearly concerned about the risk of misleading
environmental sustainability claims regarding the energy
transition. It has included guidance on making claims regarding
emissions, transition, the use of offsets to achieve carbon
neutrality and renewable energy. The ACCC anticipates the release
of additional guidance in 2024 on emissions and offset claims and
the use of trust marks.
- While the guidance is a useful blueprint to help organisations
comply with the ACL when making environmental claims, the ACCC has
indicated the principles could also apply to other types of
ethical, social and governance claims. This is consistent with
ASIC's view that greenwashing encompasses broader
sustainability claims beyond environmental claims.
- Adherence to the guidance is not necessarily determinative of
compliance with the ACL. Ultimately, it will be important to
consider whether a particular environmental claim risks creating a
false or misleading impression in the mind of an ordinary and
reasonable consumer.
- The ACCC and ASIC have identified greenwashing as a key enforcement priority. The ACCC has several greenwashing investigations underway, and recently accepted a court-enforceable undertaking from MOO Premium Foods concerning a misleading claim that its yoghurt packaging was made from "100% ocean plastic". It seems likely that the ACCC will follow in ASIC's footsteps and bring further enforcement action in the near future.
Additional guidance on the eight principles
- Make accurate and truthful claims:
- The guidance clarifies that what might be considered
"reasonable steps" for verifying information in support
of a claim will differ for businesses of different sizes.
Businesses will likely be expected to make enquiries and/or
undertake due diligence on a scale that is commensurate with the
resources available to them.
- All businesses should interrogate the strength of third-party
scientific studies or research used to support a claim.
- The guidance clarifies that what might be considered
"reasonable steps" for verifying information in support
of a claim will differ for businesses of different sizes.
Businesses will likely be expected to make enquiries and/or
undertake due diligence on a scale that is commensurate with the
resources available to them.
- Have evidence to back up your claims:
- The ACCC has emphasised that mere compliance with an industry
scheme or standard does not necessarily equate to compliance with
the ACL. A claim may create a false or misleading impression if,
for example, it is based on an industry standard that adopts a
technical definition of a term which differs from its day-to-day
meaning, as not all consumers will be educated about technical or
scientific jargon. Similarly, businesses relying on a third-party
certification to provide credibility to a claim should ensure that
they are not creating a false or misleading impression about what
the certification means or does – particularly when relying
on a certification scheme for offsets and emissions.
- When relying on internal data, the ACCC has encouraged
businesses to retain all relevant records, including audit and
testing results – and implement processes so that if
information or data changes, so as to make a continuing
representation no longer accurate, it is identified as such and
corrected. We anticipate this type of information will be requested
by the ACCC, which will continue to require businesses to
substantiate their claims regarding the environment –
effectively transferring the burden in an ACL investigation of this
type onto the target business.
- When providing consumers with access to information to support
a claim, the ACCC has expressly confirmed it is not necessary to
disclose commercially sensitive information.
- The ACCC has emphasised that mere compliance with an industry
scheme or standard does not necessarily equate to compliance with
the ACL. A claim may create a false or misleading impression if,
for example, it is based on an industry standard that adopts a
technical definition of a term which differs from its day-to-day
meaning, as not all consumers will be educated about technical or
scientific jargon. Similarly, businesses relying on a third-party
certification to provide credibility to a claim should ensure that
they are not creating a false or misleading impression about what
the certification means or does – particularly when relying
on a certification scheme for offsets and emissions.
- Do not hide or omit important information:
- In addition to actively making assertions, businesses should be
careful to avoid omitting relevant information from their
representations to consumers, or otherwise "burying"
important details in fine print or small text, or by flashing brief
disclaimers on screen. Any information directly relevant to
understanding a claim should be available on the product or at the
point of sale, or otherwise in close proximity to the claim.
Supporting information may be accessed through a website or QR
code, but these details should not contradict or qualify the
impression created by the claim.
- In addition to actively making assertions, businesses should be
careful to avoid omitting relevant information from their
representations to consumers, or otherwise "burying"
important details in fine print or small text, or by flashing brief
disclaimers on screen. Any information directly relevant to
understanding a claim should be available on the product or at the
point of sale, or otherwise in close proximity to the claim.
Supporting information may be accessed through a website or QR
code, but these details should not contradict or qualify the
impression created by the claim.
- Explain any conditions or qualifications on your claims:
- The final guidance remains largely unchanged from the draft,
and urges businesses to consider whether claims are true only under
certain circumstances, and if so, to provide enough information
about what conditions are required for the claims to be true.
- The final guidance remains largely unchanged from the draft,
and urges businesses to consider whether claims are true only under
certain circumstances, and if so, to provide enough information
about what conditions are required for the claims to be true.
- Avoid broad and unqualified claims:
- Emissions-related claims continue to be an area of concern for
the ACCC. The ACCC has emphasised the importance of ensuring that
any emissions-related claims (such as "carbon neutral" or
"net-zero") are understood by the ordinary and reasonable
consumer, and that businesses should provide clear information to
consumers about what emissions are included and excluded from any
assessment. The ACCC recommends that businesses should undertake a
thorough emissions baseline assessment using established Australian
or internationally recognised methodologies. The ACCC has also
noted that businesses should factor in emissions associated with
their electricity use when accounting for their total
emissions.
- The ACCC added the term "clean" to its list of terms
that are overly broad and convey sweeping benefits (which also
includes "green", "environmentally friendly"
and "sustainable"), and recommends businesses avoid such
terms.
- Vague assurances are likely to be in the spotlight of the regulators' scrutiny. ASIC has also identified "the use of terms like 'carbon neutral', 'clean' or 'green' that are not founded on reasonable grounds" as one of its 2024 focuses. 1
- Emissions-related claims continue to be an area of concern for
the ACCC. The ACCC has emphasised the importance of ensuring that
any emissions-related claims (such as "carbon neutral" or
"net-zero") are understood by the ordinary and reasonable
consumer, and that businesses should provide clear information to
consumers about what emissions are included and excluded from any
assessment. The ACCC recommends that businesses should undertake a
thorough emissions baseline assessment using established Australian
or internationally recognised methodologies. The ACCC has also
noted that businesses should factor in emissions associated with
their electricity use when accounting for their total
emissions.
- Use clear and easy to understand language:
- While the ACCC recommends that businesses avoid using
scientific or technical language, it has also cautioned against the
over-simplification of language. Businesses should consider whether
the language they use allows consumers to clearly understand the
specific benefit that they are trying to convey. The ACCC has
acknowledged that in certain circumstances, using scientific
language will be the clearest and most appropriate way of
presenting a claim. However, it is unlikely that using a scientific
term will be the clearest way of presenting a claim where the term
has a non-technical alternative.
- While the ACCC recommends that businesses avoid using
scientific or technical language, it has also cautioned against the
over-simplification of language. Businesses should consider whether
the language they use allows consumers to clearly understand the
specific benefit that they are trying to convey. The ACCC has
acknowledged that in certain circumstances, using scientific
language will be the clearest and most appropriate way of
presenting a claim. However, it is unlikely that using a scientific
term will be the clearest way of presenting a claim where the term
has a non-technical alternative.
- Visual elements should not give the wrong impression:
- The guidance now explains that when determining if a visual
element suggests an environmental benefit, the overall impression
given to an ordinary and reasonable consumer is important.
- The guidance now explains that when determining if a visual
element suggests an environmental benefit, the overall impression
given to an ordinary and reasonable consumer is important.
- Be direct and open about your environmental sustainability
transition:
- In addition to encouraging businesses in highly polluting industries to be realistic and transparent in claims about their environmental transition and impact, the ACCC has updated its case studies demonstrating good practice in communicating sustainability transition efforts.
What's ahead in 2024?
It is apparent that emissions-related claims pose unique challenges for businesses and consumers alike, given the complexities in quantifying and understanding environmental impacts. The guidance recommends that businesses:
- account for emissions using reputable methodologies, for all
types of greenhouse gases, and in a manner that an ordinary and
reasonable consumer could understand; and
- clearly and transparently communicate what emissions are included and excluded from any assessment, and be clear about current and past actions underpinning the claim (including in relation to the use of purchased offsets).
In its media release, the ACCC indicated that it will release further guidance for businesses and consumers in early 2024 on emissions and offset claims and use of "trust marks" (visual indications that a product, service or business has been certified by a third-party).
Enforcement trends
Greenwashing is a core enforcement priority for the ACCC and will remain so in 2024. It is also one of ASIC's 2024 enforcement priorities.2
As predicted in our previous Insight, the ACCC has commenced enforcement action against businesses for misleading environmental claims.
The ACCC and AER's 2022-2023 annual report confirmed that the ACCC had initiated several greenwashing investigations following its "internet sweep", which found that more than half of the reviewed businesses made "concerning" claims about their environmental credentials.
On 28 November 2023, the ACCC accepted a court-enforceable undertaking from yoghurt manufacturer MOO Premium Foods Pty Ltd (MOO) following an investigation into its claim about using "100% ocean plastic"; a representation which suggested that MOO's product packaging was made from plastic waste collected directly from the ocean. The ACCC's investigation found that the packaging was made from "reclaimed ocean bound plastic", being abandoned plastic waste that was collected within 50km of the shoreline in regions where waste management is non-existent or inefficient.
Public interest litigation
In addition to enforcement action, organisations are increasingly at risk of private litigation in relation to misleading environmental claims. The ACCC's principles and good practice guidance provide a helpful roadmap for organisations seeking to avoid strategic public interest litigation in relation to greenwashing. For example, in a previous article we made reference to the Australian Parents for Climate Action proceedings against EnergyAustralia for making allegedly misleading statements about carbon neutral energy products.
What you can do to mitigate the risk of enforcement action
- Implement controls to ensure adherence to the
guidance. In determining whether to take enforcement
action against a business, the ACCC will consider whether
"genuine efforts and appropriate steps" were taken by
that business to verify its environmental claims. Developing clear
and robust controls will help demonstrate that businesses have made
good faith efforts to do so. For large businesses, it may be
appropriate to develop internal guidance outlining the specific
criteria used for classifying an activity or product as
environmentally sustainable or the use of other "green
terms" in marketing or advertising materials.
- Keep a clear record of evidence substantiating
claims. Amongst its broad investigative powers, the ACCC
may issue a notice requiring a business to produce information or
documents that could substantiate environmental claims. Consistent
with the guidance, businesses should develop protocols ensuring
that evidence of environmental claims is maintained and
readily-accessible, to seek to ensure that preliminary enforcement
action can be quickly addressed.
- Have reasonable grounds for announcing future
aspirations. When announcing environmental objectives, it
is good practice to:
- Maintain a detailed plan articulating what the
organisation's goal is, how the plan will be implemented, how
progress will be measured, and any key assumptions.
- Base goals on accepted methodologies and technologies available
to the business. Avoid relying on speculative methods of reducing
carbon emissions, such as carbon capture, unless the business has
undertaken meaningful investigation into whether this is a
realistic option. ASIC's first greenwashing enforcement action arose from concerns that a
business had not undertaken any meaningful investigation into
whether its offset method, carbon capture, was actually a feasible
option.
- Monitor progress and provide customers with updates on how the
business is tracking against its goals.
- Maintain a detailed plan articulating what the
organisation's goal is, how the plan will be implemented, how
progress will be measured, and any key assumptions.
- Undertake legal review of environmental statements before publication. Marketing, legal and compliance teams should collaborate to ensure that external announcements and advertisements align with internal operations and adhere to the guidance.
As the ACCC and ASIC continue to scrutinise environmental statements, companies should be on the front foot in confirming whether their claims observe published guidance. Implementing robust internal controls is essential to identify and avoid false, misleading or deceptive environmental claims. If in doubt, seek advice: it seems that 2024 may be the regulators' meanest – and greenest – year yet.
Footnotes
1 ASIC Annual Forum 2023, 'Enforcement session opening remarks' (21 November 2023). Available here: https://asic.gov.au/about-asic/news-centre/speeches/asic-annual-forum-2023-enforcement-session-opening-remarks/
2 ASIC, 'ASIC and greenwashing antidotes', speech by Deputy Chair Karen Chester at RI Australia 2023 annual conference (10 May 2023). Available here: https://asic.gov.au/about-asic/news-centre/speeches/asic-and-greenwashing-antidotes/
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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