FTC’s Modernized Green Guides Clarify Environmental Marketing Standards
Clean Energy, Climate Change & Sustainability Law Alert 10/03/12 Cynthia A. Faur, Nicole M. Murray, Gregory T. Everts
On October 1, 2012, the Federal Trade Commission (the "FTC") finalized the long-awaited revisions to its environmental marketing guidelines known as the Green Guides. Last revised in 1998, the Green Guides became outdated as "green marketing" exploded over the last 12 years. The Guides address what marketers can say in advertising about the use of renewable materials, renewable energy and carbon offsets. The Guides address general environmental marketing claims, such as "green" and "environmentally friendly," and more specific claims, such as recyclable, renewable, compostable and degradable. With the issuance of this guidance, the FTC's message is clear: The FTC will continue to be aggressive against false or misleading environmental claims. FTC enforcement against false or unsubstantiated environmental claims has increased in the last few years and will likely continue to be an FTC priority in the future.
What are the Green Guides?
Under Section 5 of the Federal Trade Commission Act, the FTC has the authority to penalize unfair or deceptive acts related to commerce, including false or misleading advertising. The Green Guides outline the FTC's view of what is permitted and not permitted, when environmental benefits are claimed in advertising or product packaging. The Guides both outline general principles and provide specific guidance, with examples, about consumer perception and how to substantiate and qualify claims. The Guides have no legal authority, but environmental claims that comply with the Green Guides are less likely to be found by the FTC to mislead consumers or otherwise be viewed as deceptive.
The FTC's revisions to the Green Guides are the result of significant public and corporate input over the past five years. In October 2010, the FTC proposed revisions to the guidelines. Following the proposal, the FTC reviewed and considered almost 340 unique comments and more than 5,000 total comments.
The FTC's general advertising principles are unchanged. All advertising claims, including environmental claims, must be specific, substantiated, and not misleading or deceptive. The revised guidelines clarify the steps companies will need to take to substantiate and qualify their environmental claims. For the most part, the finalized guidelines are similar to the 2010 proposal, but there have been some revisions based on public comments.
Proposed Revisions to Guidelines for Common Environmental Marketing Claims
The Green Guides address numerous types of environmental marketing claims, including the use of carbon offsets, compostable claims, degradability claims, free-of and non-toxic claims, and refillable, recyclable, and renewable materials claims. The following is a short discussion of the Green Guides provisions relating to some of the most the common types of environmental claims seen in today's marketplace: general environmental claims; use of seals of approval and certifications; recycling claims; biodegradability claims; and renewable energy claims.
General Environmental Claims
Many products claim to be "environmentally friendly," "eco-friendly" or "green." Advertising for products may also feature nature scenes that in context could imply the product has environmental benefits. These types of claims are considered general environmental claims, and they are closely scrutinized by the FTC because many consumers interpret a general claim like "green" or "eco-friendly" to indicate that a product has no negative environmental impact at all. In the vast majority of cases that would not be true, and in any event, would be almost impossible to substantiate. In the final Guides, however, the FTC finds that marketers, in many instances, can effectively qualify a claim by providing clean and prominent language limiting the claim to a specific and limited benefit. The FTC added two clarifying points about the qualification of general environmental claims. First, marketers should not qualify a general environmental claim by highlighting a specific attribute of the product that provides only a negligible environmental benefit. Second, marketers making a qualified general environmental claim will need to have sufficient substantiation to support an implied claim that the advertised product is overall more environmentally beneficial because of the stated qualifier. In certain instances, this may require a review of the tradeoffs associated with the advertised attribute - like increased transport distance associated with use of a recycled material, for example.
Seals of Approval and Certifications
Another type of environmental claim that has become more prevalent in marketing is the use of seals and third-party certifications. Because the use of seals and certifications has increased dramatically, the FTC added a new section of the guides to address this topic. Among other things, the FTC clarifies that environmental seals and certifications are subject to the "Endorsement Guides" at 16 C.F.R. Part 255, which provide the administrative guidance for the proper use endorsements in marketing. Marketers should disclose any material connections to the certifying organization that could impact the credibility of the certification. The FTC also finds that seals and certifications that are general in nature should be used in connection with qualifying statements that disclose the specific environmental benefit. In the event the certification is based on attributes that are too numerous to disclose on the actual product packaging, the marketer may, in certain circumstances, refer the consumer to a website for a full discussion of the basis of the certification.
Claims regarding the ability of a product to be recycled or the recycled content of a product are not new to marketers, consumers or the Green Guides. Nevertheless, consumer perception and the need to qualify and substantiate such claims remains an issue, and in the revised Green Guides, the FTC clarified its already extensive discussion of recycling and the use of recycled material. Of particular note is the FTC's requirement that an unqualified "recyclable" claim may only be made for products for which a substantial majority (approximately 60 percent) of consumers are able to recycle the material within the distribution area for the product. If recycling is not available to at least 60 percent of consumers, a marketer should emphasize the limited availability of recycling for the product. The fewer available locations for recycling, the stronger the additional qualification should be.
A different subset of recycling claims, involving the recycled content of products, resulted in few revisions from the 1998 guidelines. When making recycled content claims, marketers should make claims for only those materials that have been recovered or diverted from the waste stream either during the manufacturing process or after consumer use. Additionally if products are made partly from recycled materials, the claim should be qualified to specify the amount of recycled content. If only the packaging (or the product) contains recycled content, this limitation should also be made clear.
Claims that products or packaging are biodegradable have been the subject of enforcement actions, proposed bans, and regulation under the Green Guides. In 2009, the FTC took enforcement action against three companies for selling products that were labeled "biodegradable" but that the FTC believed were routinely disposed of in landfills, where it is extremely unlikely that the products would actually degrade within any reasonable period of time. The FTC will carefully scrutinize biodegradability claims because of concerns that such claims could be misleading or deceptive. Under the revised Green Guides, marketers may only make unqualified biodegradability claims if they can substantiate that the entire product or package will completely breakdown within one year after customary disposal. For products generally disposed in landfills, incinerators or recycling facilities, the Guides provide that marketers should not make unqualified environmental claims at all because the FTC does not believe that complete decomposition of the product will occur within one year in those environments.
Renewable Energy Claims
Renewable energy claims were not specifically addressed in the 1998 Guides. In recent years, however, many companies have begun to use renewable energy as a component of their production processes or have begun to purchase renewable energy credits ("RECs") to offset their fossil fuel-derived energy usage. The new Guides contain several recommendations to ensure that renewable energy claims are not misleading. The key takeaway, however, is that companies should not claim that a product is made with renewable energy unless all or virtually all of the product's components were made with renewable energy, and the company retains ownership of the RECs associated with that renewable energy. Where a company hosts a renewable energy project at its manufacturing facility but transfers the RECs to another party, the company can advertise that it "generates renewable energy but sells it for use by others."
The Green Guides do not apply just to consumer-based advertising and product packaging; they also apply to business-to-business marketing. Additionally, the Guides do not just apply to a manufacturer of a product that advertises its environmental benefits. Depending on the circumstances, the Guides may also apply to certifiers, auditors, third-party endorsers, and wholesale and retail sellers.
While the Green Guides are not law, they clearly indicate what the FTC considers acceptable and what it considers misleading, with regard to claims of environmental benefit. Companies that fail to comply with the revised Guides run the risk of being targeted by the FTC for enforcement or of drawing false advertising complaints from state consumer protection agencies or private parties. Thus, current environmental claims should be reviewed for consistency with the final Green Guides. A copy of the complete Green Guides can be found here.
For assistance evaluating environmental claims about your company's product or service in light of the new and revised Green Guides, contact Cindy Faur at (312) 715-5228 / [email protected] or Nicole Murray in Chicago at (312) 715-5241 / [email protected], Greg Everts in Madison at (608) 283-2460 /[email protected] or your Quarles & Brady attorney.