Gold standard for green claims: ACCC’s much anticipated environmental and sustainability draft guidance released

On Friday the Australian Competition and Consumer Commission (ACCC) published its long-awaited draft guidance on environmental and sustainability claims. This guidance contains recommendations from the ACCC on ‘best practices’ when making environmental claims and includes a number of practical examples to help businesses deliver clear, accurate, and reliable information to consumers regarding their environmental performance. The guidance has been released in draft form and is currently open to feedback from consumers, businesses, and other stakeholders until September 15, 2023, following which the final guidance will be published.

The release of this guidance is a significant milestone, as it has been some time since the ACCC published its ‘Green Marketing’ guide in 2011. This follows many requests from practitioners for updated guidance, especially since environmental claims and sustainability were added to the ACCC’s enforcement priorities last year, where they have remained ever since.

Snapshot

Environmental and sustainability claims are often discussed together with ‘greenwashing’ - where a business makes environmental claims that are false or misleading. Such conduct risks contravening the ACL, with potential penalties being the greater of $50 million or three times the value of benefit obtained or 30 % of adjusted turnover (where the gain from the greenwashing conduct can’t otherwise be calculated).

Environmental claims can come in many forms, and relate to products or services, as well as a businesses’ operations and the overall environmental impact. These claims can focus on environmental benefits, environmental ‘neutrality’ or could be comparative claims about a business’ operations or products relative to others in the market.

The ACCC is particularly aware of the information asymmetry between businesses and consumers when it comes to environmental claims. This asymmetry underscores the importance of consumers being able to trust the accuracy of information provided by businesses. It is not surprising then, that the ACCC’s draft guidance focuses on ensuring businesses have sufficient evidence to back up their claims and are clear, transparent and specific in making their environmental claims.

The ACCC’s draft guidance includes eight key principles when making environmental claims are:

Make accurate and truthful claims
Have evidence to back up your claims
Don’t leave out or hide important information
Explain any conditions or qualifications on your claims
Avoid broad and unqualified claims
Use clear and easy-to-understand language
Visual elements should not give the wrong impression
Be direct and open about your sustainability transition

These are explored in more detail below.

Next steps

Consultation

The ACCC is seeking feedback on the draft guidance from various stakeholders.

The consultation includes questions for businesses and industry associations regarding uncertainties around making environmental claims, clarity of such claims, evidence to support them and what influences a business’ decision to make certain claims. It is also keen to understand if businesses have noticed any concerning claims in their industry.

The ACCC has also invited feedback from consumers and consumer advocates and is keen to understand which types of claims are most confusing for consumers, what kind of information consumers require to make informed purchasing decisions, the preferred methods for businesses to provide environmental or sustainability information (such as product labels, websites, or QR codes) and the role of certified trademarks and certification schemes in enhancing consumer understanding.

Enforcement action

While greenwashing has been an ACCC priority for some time now, the ACCC has yet to bring its first public enforcement action for greenwashing. Now that it has completed its internet sweep and released this guidance, we expect the ACCC is gearing up for such action. In its guidance, the ACCC has indicated it is focussing on conduct which could potentially harm the competitive process or cause widespread consumer and small business detriment. Interestingly:

The ACCC has said that some weight will be given to ‘genuine efforts and appropriate steps’ taken by businesses to verify claims. However, the ACCC is clear that it expects more from larger businesses who have the resources to go further in checking accuracy and substantiating claims.
The ACCC has also highlighted that it is more likely to take enforcement action in respect of representations about future claims where a business did not have reasonable grounds for making the representation, does not have an intention or plan to implement initiatives, or knew or was reckless about whether the claim was misleading.

The ACCC's key principles explored

Make accurate and truthful claims	Businesses should ensure all their claims are factually correct and true – partially true or exaggerated claims (e.g. overstating the scientific basis of the claim or exaggerating the environmental benefit) can be misleading. Avoid advertising claims that are irrelevant, insignificant or where they simply observe the law. When comparing the environmental benefits of products, ensure the comparison is transparent, accurate and can be verified. Be extra cautious in making representations about future matters. Businesses should clearly explain the specific benefits of the product or service, quantify the benefit where possible and avoid claims of ‘overall positive effect’ of the product. Bear in mind the overall impression created by the claim, including through use of visual elements.
Have evidence to back up your claims	The ACCC has advised that it is good practice to ensure that there is clear evidence to back up all claims being made, i.e., always have reasonable basis to make and support the claim. ACCC is likely to assess whether appropriate steps were taken to verify the accuracy of claims and whether the research, evidence, or data being relied upon was made easily accessible to consumers to help them understand and trust the claims. When re-supplying third party products, separately verify accuracy and truthfulness of the information provided by the supplier. Similarly, when using third-party certifications as evidence, ensure adequacy and integrity, verify independence and absence of conflicts of interest, align claims with the certification's scope and accurately reflect the certified attributes in your claims. The ACCC rightly points out that certification is not a once-off achievement and businesses need to check that their products continue to meet the certification rules.
Don’t leave out or hide important information	Consumers will not be able to make informed decisions if they do not have all the relevant information; ACCC therefore recommends being transparent with the consumers and providing complete information relating to the claims. Businesses are also advised to not hide the truth in small print (such as, disclaimers, disclosures or clarifications). Consider the complete life cycle of your product or service when making environmental claims, and accurately represent the specific part of the life cycle the claim relates to (such as, manufacturing, transport, recycling etc.).
Explain any conditions or qualifications on your claims	If claims are only true under certain circumstances, the conditions should be clearly and prominently explained to consumers – provide enough information about what is required for the claim to be true.
Avoid broad and unqualified claims	The broader the claim, the greater the risk of it being misleading. Unqualified broad claims such as ‘Green’, ‘Environmentally friendly’ or ‘Sustainable’ can be misleading, and the ACCC advises against using such overly broad or vague terms. It has also advised that common terms such as, ‘Recyclable’, ‘Recycled’ or ‘Free’, should be further explained as they are unlikely to be meaningful on their own. For example, consumers generally interpret ‘recyclable’ to mean that the product can be recycled in their local recycling facilities - so it is important to ensure that the product can indeed be recycled through household or local council waste collection programs, or that further clear qualifications and explanations are provided. Also, the ACCC has specifically called out emissions related claims, and that businesses should be careful when making such claims – among other things, they should undertake thorough baseline assessment, clearly and transparently communicate actions underpinning the claim, and provide information about the types of projects from which offsets have been generated.
Use clear and easy-to-understand language	Given most consumers will not have specialist scientific or industry knowledge, the ACCC advises the use of clear and easy-to-understand language and avoiding technical terms.
Visual elements should not give the wrong impression	Visual elements, such as, logos, trust marks, symbols or green-coloured packaging should be used with care as they convey certain messages to consumers and can be misleading if not true – consider how these can influence a consumer’s overall impression of the environmental impact of product or service and avoid using if they could give the wrong impression.
Be direct and open about your sustainability transition	Consumers can be misled if claims about a business’ environmental improvements give the impression that they are further along in the sustainability transition than is actually the case. Businesses are advised to be cautious in making aspirational claims about future environmental objectives unless clear and actionable plans have been developed, detailing how those objectives will be achieved.