The three S’s of environmental marketing What the revisions to the FTC Green Guides mean for “green” marketing

What the revisions to the FTC Green Guides mean for “green” marketingIn the last few years there has been a sharp increase in the number of “green”1 claims that organizations are making. To help companies avoid making deceptive environmental claims under Section 5 of the Federal Trade Commission (FTC) Act, the FTC adopted its revised Guides for the Use of Environmental Marketing Claims (commonly referred to as the Green Guides) on 1 October 2012. This is the first revision to the Green Guides since 1998, and it was issued “to help marketers avoid deceptive environmental claims.” The Guides explain how consumers are likely to interpret green claims and describe what is necessary to substantiate such claims and to qualify them to avoid deception.

The

S’senvironmental marketing

of Specific. Straightforward.Substantiated.

What’s changed in the revised Green Guides?The FTC modified and clarified sections of the previous Guides and provided new guidance on all the environmental claims that were not common when the Guides were last reviewed. Changes were made both for the use of general environmental benefit claims and for specific claims. In particular, the revision considers how terms such as compostable, degradable, ozone-safe or ozone-friendly, recyclable, recycled content and free-of should be used. The use of the words organic, sustainable and natural was explicitly excluded from the Green Guides. (Organic is regulated by the USDA’s National Organic Program.) In addition, new sections were added to the Green Guides with regard to carbon offsets, certifications and Seals of Approval, renewable energy claims, renewable materials claims and non-toxic claims.

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When a company is looking to make claims about the environmental benefits of its offerings, the FTC requires that all of these claims be specific about both the benefit and the environmental attributes. In particular, the claim must “specify whether it refers to the product, the product’s packaging, a service or just to a portion of the product, package, or service.”2 Similarly, comparisons to other products must specify how they are different. For example, rather than making a broad claim about more eco-friendly packaging, a company should instead make a claim that clearly articulates that the new product packaging uses 10% less plastic than the company’s old packaging.

This specificity also applies to the use of carbon offsets and certifications. In the case of carbon offsets, the Guides advise, 

“Marketers should clearly and prominently disclose if the carbon offset represents emissions reductions that will not occur for two years or longer.”3 For certifications or seals, the seal itself may be misleading to the consumer, so marketers are asked to include language in proximity to the seal “that clearly conveys that the certification or seal refers only to specific and limited benefits.”4

In addition, the FTC notes that “unqualified general environmental benefits” are considered “deceptive” as they are “difficult to interpret and likely to convey a wide range of meanings.”5 In other words, any claims made must be unambiguous and precise.

Environmental claims must also be straightforward. Claims must be contextually appropriate, easily understandable, prominently displayed and not likely to mislead. Making specific claims, in most cases, will help companies be straightforward, but not always. For example, labeling a rug as having “50% more recycled content” after the recycled content is increased from 2% to 3% is misleading, according to FTC Green Guides, because the environmental benefits in this case are “negligible.”6

This criterion also applies to carbon offsets and environmental certifications and seals. In the case of offsets, “It is deceptive to misrepresent, directly, or by implication, that a carbon offset represents emissions reductions that have already occurred or will occur in the immediate future.”7 In addition, the claim cannot be made that a carbon offset represents emissions reductions if those reductions are “required by law.”

When a company uses a label or certification, it must clearly articulate the basis for certification. Specifically, the FTC writes, “A marketer’s use of an environmental certification or seal of approval likely conveys that the product offers a general environmental benefit if the certification or seal does not convey the basis for the certification or seal, either through the name or some other means.”8 In other words, if the basis for the certification is not clear, then the environmental benefit may be misunderstood by a reasonable consumer.

Environmental claims must therefore be not only specific, but also direct and clearly attributable to an environmental benefit that can easily be understood.

Lastly, the FTC makes it clear that all claims must be substantiated. Companies must have sufficient evidence to support any claim that is made, and they must continue to substantiate the claim for as long as it is used. This is particularly challenging at a time when many companies constantly work to improve the environmental performance of their products, product packaging and services. According to the FTC, companies must update their claims with any product changes that they or their competitors make.

Again, there are implications here for both carbon offsets and certifications. For carbon offsets, the FTC writes, “Sellers should employ competent and reliable scientific accounting methods to properly quantify claimed emissions reductions.”9 For certifications or seals, the FTC writes, “Third-party certification does not eliminate a marketer’s obligation to ensure that it has substantiation for all claims reasonably communicated by the certification.”10

The FTC sums up the key idea here on the first page of its Federal Register notice: “The final Guides caution marketers not to make unqualified general environmental benefit claims because ‘it is highly unlikely that marketers can substantiate all reasonable interpretations of these claims.’”11

“Reasonable basis” requirement

The FTC’s policy on substantiation includes a “reasonable basis” requirement. In other words, you must have a reasonable basis for your objective claims before you initially disseminate them. If the claims concern health, safety or product efficacy, the standard is “competent and reliable scientific evidence.”12

Making green claimsGuidance for environmental marketersThroughout the Green Guides, the same three themes appear: green claims must be specific, straightforward and substantiated.

Straightforward SubstantiatedSpecific

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A note on the nature of the Green Guides 16 CFR 260.1 — Statement of purpose

“These guides represent administrative interpretations of laws administered by the Federal Trade Commission for the guidance of the public in conducting its affairs in conformity with legal requirements. These guides specifically address the application of Section 5 of the FTC Act to environmental advertising and marketing practices. They provide the basis for voluntary compliance with such laws by members of industry. Conduct inconsistent with the positions articulated in these guides may result in corrective action by the Commission under Section 5 if, after investigation, the Commission has reason to believe that the behavior falls within the scope of conduct declared unlawful by the statute.”

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521Inventory environmental claims

A first step for many companies is developing an inventory of all of the environmental claims that they currently make on their products, product packaging, promotional materials, etc. Once the universe of claims has been identified, each claim can then be vetted to determine if it is specific and straightforward and if the company has sufficient data to substantiate the claim. 

Conduct an environmental footprint analysisDeveloping a detailed environmental footprint or life cycle assessment of a product, packaging or service and then tracking changes to that footprint over time is one of the best ways for companies to understand the environmental impacts of what they sell and to substantiate any environmental claims they would like to make. This assessment evaluates impacts from the extraction of raw materials to the final disposal by consumers and every phase in between. 

Identify the compliance frameworkIn addition to the considering the advice offered in the Green Guides, companies also need to inventory and assess their legal and regulatory requirements based on the jurisdictions in which their claims are made.

For example, there may be additional requirements issued by the FTC’s counterparts in other countries, such as the Australian Competition and Consumer Commission and the UK Advertising Standards Authority. Other US federal provisions may also apply to environmental claims, such as the EPA labeling requirements under 40 CFR 156.10(a)(5), as well as state requirements such as California’s Environmental Representations Law.

In addition, when companies make claims that reference the products or services of other companies, they need to be aware of other applicable legal and regulatory standards, such as the Lanham Act, which can be used as a basis for civil liability if companies misrepresent the nature, characteristics, qualities or geographic origin of their or another person’s goods, services or activities. Companies are also subject to voluntary self-regulation under the National Advertising Review Council, which is administered by the Council of Better Business Bureaus.

Conduct an environmental claims assessmentCompanies should develop an assessment process whereby they periodically assess the environmental claims that are being made in various channels and assessing if these are in conformance with established compliance frameworks and guides, including but not limited to those in the Green Guides.

Taking actionFive steps to assess and mitigate the risks in making environmental claims

Assess substantiation and test the entire processThe proper controls and procedures can make sure that the data is traceable and accurate, but whether the data is sufficient to substantiate the claim is another matter. Assessing the ability of the data to support the claims that the company would like to make is an essential part of ensuring that the claim is substantiated.

Organizations should implement a process with controls and then periodically assess the performance of both the process and the controls. This additional level of scrutiny and rigor builds trust between the company and its stakeholders.

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© 2012 Ernst & Young LLP.All Rights Reserved.BSC no. 1210-1399305SCORE no. FQ0044

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This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither Ernst & Young LLP nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

ED None

1 The term “green” generally refers to something that supports environmentalism or the quality of the environment.

2 Guides for the Use of Environmental Marketing Claims, Federal Trade Commission website, 16 CFR Part 260, www.ftc.gov/os/2012/10/greenguides.pdf, p. 4., 1 October 2012

3 Ibid., p. 9.4 Ibid., p. 11.5 Ibid., p. 6.6 Ibid., p. 5.

7 Ibid., p. 9.8 Ibid., p. 11.9 Ibid., p. 9.10 Ibid., p. 11.11 https://www.federalregister.gov/

articles/2012/10/11/2012-24713/guides-for-the-use-of-environmental-marketing-claims

12 Guides for the Use of Environmental Marketing Claims, Federal Trade Commission website, 16 CFR Part 260, www.ftc.gov/os/2012/10/greenguides.pdf, p. 4., 1 October 2012

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