ACCC issues guidance on greenwashing

Green consumers and greenwashing

The term ‘greenwashing’ refers to environmental and sustainability claims which are “false, misleading, or have no reasonable basis”.¹

Greenwashing may (among other things) constitute a contravention of the Australian Consumer Law (ACL)), including prohibitions against:

• Misleading or deceptive conduct (section 18);
• False or misleading representations about goods or services (section 29); and
• Misleading conduct as to the nature of goods (section 33) or services (section 34).

Cross-sector trends of greenwashing have coincided with increased awareness of, and demand for, sustainable products and services by Australian consumers. In 2022, an annual consumer survey conducted by Monash University found that consumers were “increasingly contemplating the social and environmental impact of their purchases before they buy”, exhibiting “a high level of awareness when it comes to making non-grocery purchases, with more than half (52 per cent) of Aussie shoppers telling us this was an important factor”.²

ACCC focus

The draft guidance comes as part of the ACCC’s sustained focus on greenwashing in recent months. Additionally, the Senate Standing Committee on Environment and Communications is currently undertaking an inquiry into greenwashing. Regulators nationally and globally are also developing guidance on this issue - see our articles here about ASIC's guidance and here regarding the International Sustainability Standards Board’s global framework for sustainability and climate related financial disclosures.

Earlier this year, the ACCC warned business that environmental and sustainability claims are a top priority. In late 2022, the ACCC conducted an internet sweep to identify misleading environmental and sustainability marketing claims. The findings of the sweep, released in March 2023, identified 57% of the 247 businesses reviewed as having made concerning claims.

We recently discussed these issues in this article here, which addressed the way in which businesses can approach the need for limited collaboration in order to further ESG goals and mitigate “virtue washing” risk.

In light of the ACCC’s recent findings and the significant risks that greenwashing presents for Australians, the ACCC has repeatedly stated that it will continue to undertake enforcement action.³ To this end, the ACCC has also “established a new internal taskforce focused on sustainability that will build…expertise, inform and coordinate [the ACCC’s] efforts across the agency.”⁴

What does the ACCC’s Greenwashing Guidance recommend?

The Greenwashing Guidance coincides with the ACCC’s submission to the ongoing Senate Inquiry into greenwashing.

Central to the Greenwashing Guidance are the ACCC’s ‘Eight Principles’ for “trustworthy environmental and sustainability claims” which are designed to assist businesses in determining what ‘environmental claims’ constitute greenwashing.

The term ‘environmental claim’ is defined by the ACCC as including “any representation made by a business in relation to its environmental impact, including claims that give the impression that your business, products or services:

1. have a neutral or positive impact on the environment;
2. are less harmful for the environment than alternatives;
3. have specific environmental benefits”.

Principle 1: Make accurate and truthful claims

The ACCC has warned that environmental claims that “overstate the level of scientific acceptance” or “exaggerate environmental benefit” may contravene the ACL.⁵

The ACCC views it as essential, and we agree, that environmental claims should be “meaningful” and supported by “a genuine environmental benefit associated” with companies’ products, services or businesses. Any comparisons made between products (i.e., comparing environmental or sustainability credentials with other brands’ products) should be transparent and a “true reflection of the impact” of the compared products.

Finally, the Greenwashing Guidance also contains specific warnings about future representations (e.g., proposed future reductions in greenhouse gas emissions or net-zero commitments), with the ACCC affirming that businesses who seek to make such statements must have reasonable grounds for doing so or have the intention or plan to implement initiatives to meet future representations.

Principle 2: Have evidence to back up your claims

The ACCC recommends that businesses who seek to make environmental claims undertake proper due diligence and research to ensure they are able to substantiate any such claims.⁶

In the case of third-party certifications, which have become increasingly prevalent in environmental claims across most consumer sectors, the ACCC specifically warns businesses against (among other things):

• mischaracterising the nature of the relevant certification scheme;
• failing to accurately reflect what the certification is in fact for and its scope;
• making claims in relation to certification schemes which are not independent or that have conflicts of interest with the business; and
• failing to comply with the ongoing requirements of a certification scheme once having achieved such certification.

Principle 3. Do not hide important information

The ACCC has also warned against obscuring key, relevant details.

Consistent with ACL case law, the ACCC has reiterated that ‘small print’ via the use of disclaimers or clarifications cannot be used as a general protection against otherwise misleading environmental claims.

Interesting too is that the ACCC has stressed the importance of businesses taking into account “the full lifecycle” of their products or services so that any environmental claims do not fail to consider or reflect their overall environmental impact.

Principle 4. Explain any conditions or qualifications on your claims

Connected to Principle 3 is Principle 4, which stresses the need for businesses to “provide enough information about what is required for [their] claims to be true”. False environmental claims in relation to this Principle may include claims that products have a certain environmental benefit, when this is only true in specific contexts or locations.

Principle 5. Avoid broad and unqualified claims

The ACCC strongly recommends against businesses making “broad or unqualified claims” or using “overly broad, vague terms” which can include terms such as “green” or “sustainable”.

Principle 6. Use clear and easy to understand language

The ACCC has highlighted the importance of using phrasing and terms that can be understood by ordinary consumers when they are making purchasing choices. Conversely, the ACCC warns that using scientific or technical terms which are not defined in the claims themselves or that have more than one meaning may create risks of misleading or deceiving consumers which can in turn constitute greenwashing.

Principle 7. Visual elements should not give the wrong impression

The ACCC cautions against the use of symbols, trust marks, third party labels and certifications where their use could give rise to misleading impressions in the context of environmental claims. Using such symbols, trust marks and third party labels without properly substantiating the particular product, service or aspect that has been certified or, in circumstances where the business no longer meets the certification criteria, can contribute to a misleading interpretation in consumers’ minds.

Principle 8. Be direct and open about your sustainability transition

Finally, the ACCC urges businesses to be honest and transparent when making representations to the market about their progress towards their sustainability targets and commitments. While the ACCC “encourages businesses to take genuine steps to improve their environmental performance and share their progress with consumers”, environmental claims that are unrealistic, overly ambitious and unsubstantiated, may attract the attention of ACCC’s enforcement actions.

Observations

To those practising in the law of ACL compliance, this guidance is largely unextraordinary. In short, it remains critical that companies have:

• clear and accurate claims;
• sufficient recent, credible information to support those claims, which will often be assisted by independent certification and/or audit processes;
• even where independent certification is available, confidence in the quality of those reviews and take care in how the relevant certification is then promoted; and
• in relation to future stated ESG aspirations – clear plans to achieve them – including setting measureable goals, identifying practical changes required to achieve the goals, actively monitoring progress and reporting on achievement over time.

However, it gives business some very practical guidance and concrete examples.

Action

To progress the draft Greenwashing Guidance, the ACCC is inviting stakeholders, businesses and consumers to submit their feedback on its contents by 15 September 2023.

If you require assistance preparing a submission on the draft Greenwashing Guidance or require advice on whether proposed claims could raise greenwashing concerns, please contact a member of our team.