Promoting the environmental benefits of your products or services can be a powerful marketing strategy. As consumer awareness around sustainability grows, businesses are increasingly highlighting eco-friendly features in their branding and trade marks, leading to a surge in so-called “green claims”.
The rise in these claims has prompted regulatory scrutiny. Recently, the Australian Competition and Consumer Commission’s (ACCC) has taken action against a number of businesses for misleading green claims or “greenwashing”. This follows a 2020 UK review that found 40% of websites made misleading green claims.
For businesses launching environmentally friendly products in Australia, it is now more important than ever to understand the legal requirements around green marketing to avoid substantial penalties.
This article explores the potential pitfalls for businesses making green claims in Australia, example cases enforced by the ACCC, and what you need to consider to avoid legal trouble down the track.
What are green claims?
Green claims refer to any statement or term businesses use in their branding or marketing to suggest that a product or service is environmentally responsible, beneficial, or sustainable. This includes claims that give the impression that the product or service has a neutral or positive effect on the environment, is less harmful for the environment than alternatives, or has specific environmental benefits.
Such claims range from stating a product is made from recycled materials to stating it is biodegradable or sustainable. Common terms include “eco-friendly,” “green,” “carbon neutral,” “biodegradable,” “100% recyclable,” or “sustainable.”
These claims can drive consumer demand for environmentally responsible products or services. However, recently countries have actively started scrutinizing such claims, and businesses risk legal repercussions if they cannot substantiate the environmental claims made in their branding or marketing. Failure to do so may result in the claims being classified as misleading or deceptive advertising.
The ACCC and the crackdown on greenwashing
The ACCC’s role is to ensure that businesses don’t make misleading claims under the Australian Consumer Law set out in Schedule 2 of the Competition and Consumer Act 2010 (ACL). Under the ACL, misleading or deceptive conduct and false or misleading representations about products or services are prohibited.[1]
In 2023, the ACCC published its finding of its internet sweep of environmental claims being used by almost 250 businesses or brands. This sweep resulted in the ACCC publishing a new guide for businesses of making environmental claims – see the ACCC website.
The ACCC has followed up on these new guidelines by taking action against a number of traders using misleading green claims. This includes three Court actions based on misleading or deceptive environmental claims resulting in penalties of AUD$32.45 million collectively.
The ACCC has, over the years, also obtained a number of enforceable undertakings from traders in relation to green claims including:
- A yoghurt company promoted its yoghurt packaging as being made from “100% ocean plastic” when it was made from plastic waste collected within 50km of the shoreline in places with non-existent or inefficient waste management practices. The company admitted its conduct was likely to have contravened the ACL and undertook to publish a corrective notice, update the packaging design of its yoghurt products and review its website and social media to ensure all ”ocean plastic” claims were removed. It also conducted internal audits relating to the nature and location of the ”ocean bound plastic” used in its packaging and establish and implement a compliance program.
- A motor sports company claimed that its carbon emissions would be entirely offset by the planting of trees. The company admitted that this was a breach of the Trade Practices Act (now replaced by the ACL) because there was no explanation that it is likely to take the life-time of the trees before those emissions are absorbed. The company undertook that any future claims about green marketing will be considered by a solicitor with experience in trade practices law before being made, any future claims about trees being planted to offset carbon emissions will include an explanation about the period of time before those emissions would be offset, and that it will place an acknowledgement of the ACCC’s concerns on its website for a period of no less than two months.
- A company falsely claimed that a power-saving device, which plugs into a standard electricity outlet, would reduce electrical consumption and lower electricity bills when it could not. The company acknowledged that these claims were likely to contravene the Trade Practices Act. The company undertook that they will not engage in the retail sale, marketing or distribution of the device or re-open their website for a period of three months. In addition, they displayed the corrective notice for a period of 12 months at each trade fair, agricultural fair or home show that they attended, sent a copy of the corrective notice to all consumers and agents that purchased the device, and implement a Trade Practices Compliance Program.
Being found to be “greenwashing” by the ACCC not only results in reputational damage and a decrease in consumer trust, but businesses can also face hefty penalties, and trade marks may be cancelled. Under the ACL, these penalties can include fines up to AU$10 million or three times the profit made from the misleading product.
Key considerations when making environmental or green claims
When deciding to make an environmental or green claim, there are a number of key considerations to ensure it is not found to be misleading or deceptive. These are well set out in ACCC’s guidelines as:
- Make accurate and truthful claims
Any environmental claim should be “accurate, true and factually correct”, should not be overstated or exaggerated, and should only be made if it represents a genuine environmental impact. - Have evidence to back up your claims
The evidence that is independent and scientific is the most credible. The evidence should be made easily accessible to consumers. If you are making a future representation, then you need to have a reasonable basis for making that representation. - Do not hide or omit important information
Full transparency is important. Any information should be upfront and centre and information in the small print should not conflict with the overall message of the claim. - Explain any conditions or qualifications on your claims
If the claim is only true is certain circumstances, this should be clearly and prominently displayed to consumers. - Avoid broad and unqualified claims
Broad claims are easier to misinterpret than clear, specific, and proven claims. Avoid terms like "eco," "green," or "natural" that can be easily misinterpreted and difficult to substantiate. - Use clear and easy to understand language
Claims should use clear and easy to understand language and avoid technical terms. - Visual elements should not give the wrong impression
Business should not use graphics or visual elements that would create the wrong impression about the environmental benefits of the product or services. It is important to consider the overall impression created by the packaging, advertising, or promotion. - Be direct and open about your environmental sustainability transition
If you are on a journey to improve environmental status, you should be direct and open with consumers about the journey and where you are on it. You should only make claims if there are legitimate plans in place to meet those goals.
How we can help
If you are looking to make environmental or green claims, AJ Park can provide your business with tailored expert advice on how to avoid “greenwashing” in your branding in Australia. We are experts who can help ensure your branding and marketing reflects your legitimate environmental claims while ensuring it does not cross into misleading territory.
[1] Sections 18 and 29 of Australian Consumer Law
