The Australian Competition and Consumer Commission (ACCC) recently published draft guidance on what businesses should do when making environmental and sustainability claims to comply with the Australian Consumer Law (ACL). The guidance follows the ACCC's recent greenwashing internet sweep where 57% of businesses reviewed were potentially making misleading environmental claims.
Greenwashing refers to environmental and sustainability claims which are "false, misleading, or have no reasonable basis."1By doing so, businesses may be in contravention of the ACL such as:
- Section 18 - Misleading or Deceptive Conduct
- Section 29 - False or misleading representations about goods or services
- Sections 33 and 34 - Misleading conduct as to the nature of goods or services
- Section 56 - Guarantee relating to the supply of goods by description
What are environmental and sustainability claims?
As defined by the ACCC, environmental and sustainability claims are "any representation made by a business in relation to its environmental impact, including claims that give the impression that your business, products, or services:
(a) have a neutral or positive impact on the environment
(b) are less harmful for the environment than alternatives
(c) have specific environmental benefits."2
What are the key points to be aware of?
The ACCC draft guidance includes eight core principles. Businesses should follow these principles when making any environmental and sustainability claim.
Principle 1: Make accurate and truthful claims
Any environmental and sustainability claims should be "accurate, true and factually correct."3 Businesses shouldn't overstate or exaggerate claims on the environmental impact of their goods and services. If an environmental claim has yet to be proven, it should be avoided in its entirety as it may contravene the ACL.
The ACCC also expects businesses to only make environmental claims when there is a "genuine environmental benefit associated with your product, service or business."4 In other words, if the goods or services aren't unique to a business, such a claim should avoid being made as it may mislead consumers.
Principle 2: Have evidence to back up your claims
For every environmental and sustainability claim that is made, businesses must perform proper due diligence. They must ensure that the evidence accurately reflects their claim. This is particularly important for businesses that rely on the claims of their suppliers.
The ACCC will "consider whether genuine efforts and appropriate steps were taken by the business to verify the accuracy of any information that they relied on. The scope and extent of due diligence undertaken will vary depending on the size of the business."5
Principle 3: Don't leave out or hide important information
Any environmental claim should point consumers to the relevant information. Businesses should aim to be completely transparent; providing positive, negative and grey information. They should also avoid hiding the negatives through the use of disclaimers, small prints or disclosures.
Principle 4: Explain any conditions or qualifications on your claims
If the environmental and sustainability claim can only be realised under certain conditions, methods or qualifications, then businesses must identify them and provide any relevant instructions to enable consumers to make the claim true.
Principle 5: Avoid broad and unqualified claims
The ACCC recommends against the use of any broad, vague, or unqualified wordings such as 'go green', 'eco-friendly', or 'sustainable.' These words can be interpreted differently consumers. As such, the lack of clarification will likely mislead consumers to overestimate the positive environmental impacts of the goods and services.
If a claim is only partially true, businesses should be transparent by clearly stating that information. For example, a water bottle with 50% recycled materials shouldn't be advertised along the lines of 'our water bottles use recycled materials'. This wording could mislead consumers into believing that 100% of the materials used are recycled. The best practice is to clearly state that information - such as 'our water bottles use 50% recycled materials'.
Principle 6: Use clear and easy-to-understand language
The ACCC recommends that businesses should "only use words according to their ordinary, common meaning." In instances where words can create misunderstandings, be interpreted in multiple ways, have different meanings, or are too technical for the average consumer, it is good practice to explain the terms.
Principle 7: Visual elements should not give the wrong impression
Although visually appealing, businesses should be careful when using visual elements (symbols, trust marks, third-party labels and certifications) without a proper assessment of their potential meaning and implication. Even simple images - such as plants and animals - can imply that there is an environmental benefit associated with the goods or services.
Principle 8: Be direct and open about your sustainability transition
Both the ACCC and consumers encourage businesses to improve their environmental performance and share their progress. In sharing the transition to becoming 'greener,' businesses should provide consistent updates, refrain from making vague and ambiguous statements, and be transparent.
It is also important that the transition is actioned, and not merely statements to attract consumers. Providing consumers with a detailed roadmap is great practice.
Being 'eco-friendly' is, in its own right, a successful and profitable business model. However, it is important that businesses don't fall into the bad practice of 'greenwashing'. The ACCC's draft guidelines are clear, easy to follow and informative.
For those businesses tempted to greenwash, the ACL's penalty can be a significant deterrent.
1 ACCC, 'Greenwashing by businesses in Australia - Findings of the ACCC's internet sweep of environmental claims' (March 2023), page 3.
2 ACCC, 'Environmental and sustainability claims - Draft guidance for business' (July 2023), page 8.
3 Ibid page 11.
4 Ibid 11-2.
5 Ibid page 16.
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.