Original article by Stephen Drysdale, Senior Lawyer, LegalVision.

In an effort to reduce their individual carbon footprint, consumers are becoming increasingly conscious of the environmental impact caused by the goods and services they purchase. As a result, businesses have become incentivised to be seen as more sustainable than their competitors. However, doing so recklessly could cause issues with the Australian Competition and Consumer Commission (ACCC). The ACCC has published guidance on ‘greenwashing’ claims and how they have the potential to violate the Australian Consumer Law. This article explains what ‘greenwashing’ is, why it is on the ACCC radar, and how you can make environmental claims that comply with the Australian Consumer Law.

What is ‘Greenwashing’?

‘Greenwashing’ is the practice of making false or misleading environmental or sustainability claims about goods or services. Often, ‘greenwashing’ makes a business or product appear more environmentally friendly than it actually is. Although businesses may inadvertently engage in ‘greenwashing’ due to a lack of due diligence before making marketing claims, some businesses engage in deceptive conduct intentionally. In either case, ‘greenwashing’ has the potential to cause both substantial economic and environmental harm.

Is Greenwashing Illegal?

A business that engages in ‘greenwashing’ may violate the Australian Consumer Law, including under the following prohibitions against:

• engaging in misleading or deceptive conduct;
• making false or misleading representations about goods or services; or
• misleading the public as to the nature and characteristics of goods or services.

The ACC has a range of powers under the law that allow it to investigate violations of the Australian Consumer Law and to enforce compliance by businesses, such as by issuing:

• ‘Section 155’ notices to obtain information from businesses and require individuals to give evidence to establish whether a violation of the Australian Consumer Law has occurred;
• substantiation notices to require a business to supply information or documents that could prove or support an environmental claim; or
• infringement notices where it has reasonable grounds to believe a business has engaged in ‘greenwashing’ in violation of the Australian Consumer Law and to which fines are attached.

In serious cases, the ACCC may take court action to seek penalties. The maximum penalty for individuals is $2.5 million. The maximum penalty for corporations is the greater of:

• $50 million;
• 3 times the value of that benefit, if the court can determine the benefit obtained from the violation; or
• 30% of the corporation’s adjusted turnover during the relevant period if the court cannot determine the value of the benefit obtained from the violation.

How Can I Make Trustworthy Environmental Claims?

The ACCC recognises eight principles for making trustworthy environmental claims:

1. Make Accurate and Truthful Claims

Avoid making a claim if it is only partially true. You must ensure that you do not exaggerate any environmental benefits. Furthermore, avoid relying on scientific evidence that is:

• inconclusive;
• in dispute; or
• not peer-reviewed. 

Suppose you are making comparisons to your competitors. In that case, you must make sure that you are relying on up-to-date information and that you are comparing significant features of ‘like-for-like’ products or services. When making promises about the future, such as by publishing ‘net-zero’ targets, you should have reasonable grounds for making the claim.

2. Have Evidence to Back Up Your Claims

Ensure you have reliable and accurate evidence to support your claims. Do not rely on the word of your supplier. You must take reasonable steps to conduct your own investigations into the environmental claims you make. 

The ACCC will look for evidence of this when determining whether to take any enforcement action. Third-party certifications may be a valuable way of supporting your claims, provided that the third party is independent, reputable and transparent.

3. Do Not Hide Important Information

Avoid disclosing important information in the small print to caveat your environmental claims. Any small print should only provide supporting information and should be consistent with the overall message of the principal claim. You should also consider whether any claim you make applies to each component of your product or service.

4. Explain Any Conditions or Qualifications on Your Claims

If your claims are conditional on other factors, ensure you disclose this. For example, make it clear when a claim is only accurate in some locations but not others, such as some areas not being able to recycle certain grades of plastic.

5. Avoid Broad and Unqualified Claims

Phrases such as “sustainable”, “eco-friendly”, “environmentally friendly”, or “green” are sweeping, broad, and very difficult to substantiate. Aim for narrow and tailored claims for which you can provide supporting evidence.

6. Use Clear and Easy to Understand Language

Consumers can easily be misled when claims use a lot of technical or scientific terminology. Therefore, try to avoid this where possible. Ideally, words should be used with their ordinary meaning.

7. Visual Elements Should Not Give the Wrong Impression

Images of plants, animals, the earth, or even the colour green may give consumers the impression that a product or service is sustainable, even when that is not the case. Accordingly, ensure you use these visual elements with care.

8. Be Direct and Open About Your Sustainability Transition

You should be mindful when making claims or promises about implementing certain environmental initiatives. Transitioning to a more sustainable business model can take time. Consequently, making premature claims may lead to issues where unforeseen obstacles during that transition arise. Only make promises when you are confident that they can be fulfilled.

Key Takeaways

Businesses that engage in ‘greenwashing’ may violate the Australian Consumer Law and be subject to investigation and enforcement by the ACCC. Penalties may apply for non-compliance, so businesses should be mindful of any environmental claims that they make.

If you want to know more about making environmental claims, our experienced greentech lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.