Less Gray Area in the Green Guides: FTC Extends Deadline for Comments
Marketing a product or service as being “green” generates green – revenue, that is. Consumers with sufficient resources to be selective are increasingly choosing products and services for their green or environmentally friendly characteristics. In 2022, Businesswire reported that “[d]espite inflation driving price hikes on everyday items, consumers are willing to pay more for sustainable products” and “[c]onsumer awareness of product sustainability has also increased since 2021, indicating that it has become the expectation, not an exception.” Forbes also reported in 2022 that “consumers across all generations—from Baby Boomers to Gen Z—are now willing to spend more for sustainable products.” But as consumer demand for green products and services increases, so do instances of “greenwashing” – a “form of deceptive marketing in which a company, product, or business practice is falsely or excessively promoted as being environmentally friendly.” Where ethics, integrity, or morality may draw the line on greenwashing is one thing. Where regulatory agencies or courts of law may draw the line is another. What should consumers be aware of when selecting green products and services? How do marketers promote green products and services without misleading consumers and risking their brand integrity?
A PRIMARY COLOR – BACKGROUND ON THE GREEN GUIDES
The Federal Trade Commission (FTC) is the federal agency charged with promoting competition and protecting and educating consumers. In 1992, the FTC first released its Guides for the Use of Environmental Marketing Claims (Green Guides). The Green Guides help marketers and sellers avoid making unfair or deceptive environmental marketing claims as defined by Section 5 of the FTC Act through guidance on consumer interpretation of green marketing claims; how to back up environmental marketing claims; and how to qualify green marketing claims to avoid consumer deception. The Green Guides counsel against non-specific, vague terms like “eco-friendly” and warn against the use of terms like “degradable” or “recyclable” unless one can show how and when these things happen. Although not legally enforceable in themselves, the Green Guides are a valuable how-to manual for avoiding scrutiny or liability for misleading environmental marketing claims.
The FTC periodically reviews its rules and guides (1) for efficacy, costs, and benefits; and (2) to determine whether to retain, modify, or rescind them. The FTC reviewed and revised the 1992 Green Guides in 1996, 1998, and most recently in 2012. The 2012 revision sought to make the Green Guides more user-friendly for marketers and included updated guidance related to product certifications and seals of approval; claims related to materials and energy inputs being “renewable;” and claims related to carbon offsets.
In December 2022, the FTC announced that it was seeking public comment until February 21, 2023, on potential updates to the Green Guides in response to “increasing consumer interest in buying environmentally friendly products” and to “both help marketers make truthful claims and consumers find the products they seek.” A month later, on January 31, 2023, in response to requests from “several interested parties,” the FTC announced a sixty-day extension of the deadline – to April 24, 2023. The interested parties requested the extension for reasons including the need to “conduct consumer survey research and account for issues such as the extensive range of issues involved with the review, significant market changes since the last review of the Guides, the fact that the comment period spanned the holiday season, and supply chain disruptions affecting commenting organizations.”
A BRIGHTER SHADE OF GREEN – 2023 CHANGES TO THE GREEN GUIDES
The proposed changes to the current Green Guides include revised guidance on environmental benefit claims, generally; carbon offsets; compostability; degradability; recyclability; and renewables. The overarching theme of the proposed changes? If you cannot back it up, it is not worth the risk of using it as a marketing tool.
Broad claims like “green” or “eco-friendly” are vague, making them difficult or even impossible to prove. Marketing a product as green should follow an analysis of any trade-offs (environmental costs) to ensure that they do not outweigh the marketed environmental benefits. Claims relating to carbon offsets should be supported by science and proper accounting to avoid double (or multiple) counting. If an offset purchase correlates with an emissions reduction set to occur more than two years in the future, this should be disclosed. If a carbon offset is based on an activity required by law, the offset should not be advertised.
Marketers should be able to break down the bases of their degradability claims. An unqualified claim of degradability should only be made if a marketer can prove “that the entire product or package will completely break down and return to nature within a reasonably short period of time after customary disposal.” Within one year, that is, for solid waste products. This excludes, by definition, items “destined for landfills, incinerators, or recycling facilities.”
The availability of recycling facilities is significant to recyclability marketing. Disclaimers should be included if recycling facilities are not accessible to at least sixty percent of the consumers or locations where a product is sold. Marketing claims relating to products made from renewable energy should clearly and prominently specify the source of renewable energy (wind, solar). These types of marketing claims should be avoided unless all, or virtually all, of “the significant manufacturing processes involved in making the product or package are powered with renewable energy, or non-renewable energy matched by [renewable energy certifications].” If a marketer generates renewable energy but sells renewable energy certifications for all of the renewable energy it generates, a claim that it “uses” renewable energy is inappropriate. Unless a product is made entirely with renewable materials, save “minor and incidental components,” marketing claims along these lines should be limited.
WHEN THE GRASS IS NOT GREENER – CASE EXAMPLES
In 2014, the FTC succeeded on efficiency-related claims against a California lightbulb manufacturer (both the company and its two owners) – specifically, that the company overstated the light output, lifespan, and relative brightness of its LED bulbs. The court found the three defendants jointly and severally liable for over $21 million in refunds due to consumers. The defendants claimed their bulbs would last for 30,000 hours, then ratcheted their claim down to 12,000 hours. Both claims were grossly overstated, as all the bulbs tested lasted only a few thousand hours. Among other things, the court concluded that the FTC does not have to show that every reasonable consumer was or would have been misled (only that “material misrepresentations were widely disseminated and that consumers purchased products bearing those deceptive claims”); and, in advertising, there must be proof (“not just for express statements but for all reasonable interpretations”).
More recently, in 2022, the FTC hit Kohl’s and Walmart with multi-million dollar civil penalties ($2.5 million and $3 million, respectively) for selling household products like sheets, pillows, towels, and bath mats made of rayon while marketing them as entirely or partially made of bamboo and describing them using words like “sustainable,” “highly renewable,” and “environmentally friendly.” Kohl’s even went so far as to market some of the products at issue online as part of its “Cleaner Solutions” offerings, which included a direct link to a “Sustainability at Kohl’s” webpage touting Kohl’s commitment to environmental sustainability.
The two major retailers’ false marketing claims were deemed greenwashing by the FTC because the rayon products were in no way the eco-friendly products consumers were deceived into thinking they were. The above-referenced penalties were part of settlements reached based on violations of the Textile Products Identification Act (Textile Act) (in addition to Section 5 of the FTC Act), which addresses “mandatory content disclosure in the labeling, invoicing, and advertising of textile fiber products.”
Rayon, as defined by the Textile Act, is a fiber made from cellulose through a manufacturing process that includes hazardous chemicals. Cellulose can come from bamboo fiber, but the hazardous chemicals emitted during the manufacturing process are far from the environmentally friendly processes associated with the word “bamboo” when used in marketing. The Textile Act requires advertisements containing fiber content to include disclosure of FTC-recognized generic fiber content names and prohibits misrepresentation related to fiber content. Because the products at issue contained derivatives of cellulose fiber and did not contain bamboo fiber, the advertisements should have contained the words “rayon” or “viscose.”
Actual knowledge was no question here because the FTC had officially warned Kohl’s and Walmart in 2010 via detailed Notices of Penalty Offenses why their rayon-as-bamboo marketing misrepresentations were illegal and what could happen if they failed to change their practices to align with the law. The $5.5 million combined penalty agreement was reached via settlement with the FTC and the U.S. Department of Justice. In response to the controversy and settlement, Deputy Assistant Attorney General Arun G. Rao, head of the Justice Department’s Consumer Protection Branch, stated, “[c]onsumers should be able to trust retailers’ representations about the materials from which their clothes and linens are made.” Director Samuel Levine of the FTC’s Bureau of Consumer Protection, stated, “[f]alse environmental claims harm both consumers and honest businesses, and companies that greenwash can expect to pay a price.”
GREENER PASTURES AHEAD
The anticipated updates to the Green Guides are much-needed in light of the dramatic increase in green marketing since 2012. The Green Guides cannot and will not eliminate greenwashing, but they do provide user-friendly, impossible-to-ignore information to help reduce honest or negligent mismarketing and to empower consumers. As marketers work to design and sell green products and services transparently, they should also be working to develop ways to offer environmentally friendly products to a broader range of consumers. Despite the increase in demand for green products across all generations and without regard to price, consumers who cannot afford to be selective are excluded from the green market and significant potential environmental savings are not being achieved as a result. Consumers with the financial ability to be selective can help force a bridge over this gap by voting with their wallets and demanding that the companies they support offer affordable options for resource-strapped consumers to go green on a budget. Only then will investing in the green industry provide more than feel-good benefits to consumers and increased revenue for producers.
Stinson Woodward Ferguson is a South Carolina attorney and businesswoman with over a decade of experience in law, business management, government service, and non-profit. She is a Certified Lean Six Sigma Green Belt; a Certified Sustainability Consultant; a Certified Sustainability ESG (Environmental, Social, and Governance) Practitioner; and Certified in Sustainable Management. In addition to a Bachelor of Arts (B.A.) and a Juris Doctor (J.D.), she has a Master of Laws Degree in Environmental Law (LL.M.), with a concentration in Energy Law and Policy.
