The ACCC continues its focus on misleading environmental claims, or ‘greenwashing’, with much anticipated draft guidance for business and consumers.
In line with increased global scrutiny, since 2022 environmental and sustainability claims have been a compliance / enforcement priority for the ACCC.
Following an internet sweep of online environmental claims and the creation of a Sustainability Taskforce, the ACCC has now published draft guidance on business obligations under the Australian Consumer Law (ACL) when making environmental and sustainability claims (Draft Guidance).
The Draft Guidance is largely consistent with the ACCC’s 2011 ‘Green Marketing’ Guidelines but helpfully includes several detailed examples and a simple framework of eight key principles. The ACCC Deputy Chair has explained they reflect the ACCC’s expectations of business in this area and are intended to be used as “guard rails” when making green claims.
The key takeaways in the Draft Guidance are:
This publication reaffirms the ACCC’s willingness to pursue perceived greenwashing and shows that even claims that are technically true are at risk of ACCC attention if not carefully explained, qualified and substantiated. The ACCC final guidance is expected to coincide with increased investigation and enforcement activity. Its regulatory toolkit is extensive, with the power to issue statutory notices, substantiation notices, infringement notices, and take court action for significant penalties.
The ACCC is accepting feedback on the Draft Guidance until 15 September 2023.
An environmental claim is any representation in trade or commerce made by a business regarding its environmental impact, including claims that give the impression that its business, products or services:
This includes claims about future environmental performance. The claim need not be limited to the packaging of the item, but also any point of sale, marketing, advertising or corporate reporting materials (including online).
“Greenwashing” is an environmental claim that makes a business, product or service seem better or less harmful for the environment than it really is.
A number of other regulators – such as ASIC – also scrutinise alleged greenwashing conduct. In broad terms, the ACCC’s focus is consumer facing products and services, while ASIC is primarily responsible for financial products and services.
All claims made should be accurate and factually correct. This includes:
Any environmental claim should be supported by evidence – larger businesses with greater access to resources will be under greater scrutiny in this regard.
When considering what evidence to rely on, the ACCC suggestions include:
Giving customers incomplete information, or highlighting one aspect of a claim but neglecting to mention another (less favourable) aspect may give consumers the wrong impression, even if the piece of information they have been given is strictly true.
This applies to the full life cycle of products and services.
When communicating information to support a headline claim, it is also important to ensure any disclaimer or clarification is displayed prominently enough and close to the headline statement.
Any environmental claim should be considered in light of the conditions required for that claim to be true, including how consumers normally use a product, the normal conditions in the place the product is usually sold and the resources needed for environmental benefits to be realised.
For example, stating that a product is recyclable in a place that does not have the appropriate recycling facilities is likely to be false or misleading.
Broad non-specific claims like ‘environmentally friendly’ or ‘choose green’ could be risky - even when some aspect of the product or service has some environmentally beneficial characteristics.
Claims should be specific, and qualified by:
The ACCC cautions that special care should be taken when making emissions-related claims as these can be difficult to calculate with specificity.
Businesses wanting to make claims like ‘carbon neutral’ or ‘net zero’ should be careful to follow best practice in calculating emissions and offsets, and be satisfied that the information, once carefully validated, is communicated clearly to consumers.
Consumers are usually unfamiliar with scientific or technical language.
Care should be taken to use language that can be understood by ordinary consumers and define any technical words that need to be used in making a claim.
Pictures or graphics in marketing, products or packaging can strongly impact a consumer’s overall impression.
Visual features that, if not substantiated, can contribute to a misleading impression include:
The ACCC also warns that the overall impression given by branding, logos and packaging, when taken together, may mislead.
While transitioning from a traditional to a more sustainable business model is likely to take time and involve several complex stages, businesses should not overstate the extent to which they have become more sustainable, and not communicate any plans to do so that are not genuinely and formally committed to.
Specificity in any claims and supporting materials should ensure businesses can communicate to consumers about their improvements in sustainability, while avoid giving an overall impression that is incorrect and apt to mislead.
Consumers increasingly factor environmental considerations into purchasing decisions, but many consumers are time poor and could struggle to verify environmental claims. On the other hand, businesses should be able to realise the competitive benefits of genuine environmental improvements by sharing them with consumers.
The ACCC suggests the basic principle is simple: Businesses making environmental claims should step into the shoes of a consumer who is looking to make a more sustainable purchasing decision:
One key theme emerging from the Draft Guidance is that specific and qualified claims are going to be more likely to produce a “yes” to these key questions. General claims without qualifications – such as “zero emissions”, “sustainable” or “environmentally friendly” – are at higher risk of causing confusion amongst consumers.
What could this mean? For some companies, it could mean walking a fine line in their marketing between cut through messaging and appropriate qualifications.
For example, a manufacturer promoting its electric vehicles (EVs) business as “creating zero emission electric vehicles” risks creating an impression that the vehicle creates zero emissions for its entire life cycle, when emissions may attach to the manufacturing and charging processes. The Draft Guidance suggests that such a claim should be qualified so that it is something like “zero exhaust emissions while driving”.
Even more broadly, how do emissions-intensive businesses appropriately and safely market genuine environmental improvements? General claims without qualifications are identified as particularly high risk for these industries. What qualifications / additional information will be necessary?
No doubt the ACCC will examine such matters on a case-by-case basis, but approaches taken offshore highlight the risks and potential conundrums for business:
As the CEO of the UK ASA has stated, businesses in emissions intense industries “need to be really careful” and “chances are, you’re going to need to add some balance to your ads” in order to avoid scrutiny.
Under the ACL, businesses are obliged to not engage in conduct that is misleading or deceptive (or is likely to mislead or deceive), or to make false or misleading representations about specific aspects of products or services.
The ACCC has a broad regulatory toolkit to investigate and prosecute wrongdoing, including the power to issue statutory notices, substantiation notices, infringement notices, and take court action for significant penalties.
The maximum penalty for a corporation per contravention is the greater of:
Individuals may also be penalised up to $2.5 million for an ACL contravention.
The Draft Guidance sets out the ACCC’s expectations for businesses making environmental claims. Some practical things to consider now include:
The ACCC has said that in deciding on enforcement action, it will consider if genuine efforts and appropriate steps were taken to verify information and do other due diligence, so it is worth taking the time now to check any environmental claims your business makes, and ensure they are being communicated appropriately.
 ACCC, The ACCC's expectations for corporations making green claims (Speech by Catriona Lowe at the General Counsel Summit, 8 August 2023)
 ACCC, Environmental and sustainability claims - draft guidance for business, July 2023 (page 8)
 ACCC, Environmental and sustainability claims - draft guidance for business, July 2023 (page 9)
 ACCC, Senate Inquiry into Greenwashing, ACCC submission, 22 June 2023 (page 19)
 ACCC, Environmental and sustainability claims - draft guidance for business, July 2023 (page 20)
 ACCC, Environmental and sustainability claims - draft guidance for business, July 2023 (page 27)
 ASA Ruling on HSBC UK Bank plc (19 October 2022): https://www.asa.org.uk/rulings/hsbc-uk-bank-plc-g21-1127656-hsbc-uk-bank-plc.html; ASA Ruling on Shell UK Ltd t/a Shell (7 June 2023): https://www.asa.org.uk/rulings/shell-uk-ltd-g22-1170842-shell-uk-ltd.html
 The Straits Times, Britain bans Shell, Repsol and Petronas ‘greenwashing’ ads, 8 June 2023
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