ACCC flags tougher standards for environmental claims in upcoming greenwashing sweep – Knowledge

Australian businesses should review their environmental claims to be prepared for an upcoming review by the Australian Competition and Consumer Commission (Acc) to identify misleading and deceptive environmental claims. Although details are yet to be released, businesses dealing with Australian consumers should be aware of this action, as a similar action abroad in 2020 revealed that 40% of environmental claims are potentially misleading and warranted further investigation.

Summary: What is greenwashing?

When a company gives a misleading impression about its net-zero ambitions, carbon neutrality, or other green credentials, it is “greenwashing” — that is, applying a “green” glow to steer away from the growing demand for green corporate behavior benefit

As consumers demand more ethical and sustainable practices from companies, and are often willing to pay more for them, claims such as “eco-friendly”, “sustainable production” and “compostable” are becoming increasingly important. As Vice Chair Delia Rickard noted, in addition to price and non-price factors: “[c]Consumers also look to environmental and ethical standards to make their choices.”

Importantly, a “green” commitment or claim without proper basis may breach Australian Consumer Law (ACL), in particular the prohibitions against:

  • misleading or deceptive conduct in commerce or business; and or
  • provide false or misleading information about any aspect of goods and services.
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Key areas of focus for the ACCC – and other regulators

Sustainability encompasses a wide range of practices and environmental initiatives, and the ACCC has nominated claims on:

  • reduced consumption of materials;
  • lower emissions;
  • improved disposal; and
  • increased circularity,

as a special concern.

According to the vice chair, the ACCC is hearing growing concerns that some companies are falsely promoting environmental or eco-labels to capitalize on changing consumer preferences:

“Sometimes, despite the best of intentions, companies can accidentally mislead consumers for a variety of reasons, such as: But there is also an element of the market that intentionally “falsifies or twists the truth” and gives a misleading impression in order to meet consumer expectations.”

Ms. Rickard pointed out that there has been a significant increase in companies seeking their own brands around the world rather than seeking independent certification. According to the ACCC, this poses a risk that trademarks and other symbols will be used in a way that can confuse or mislead consumers.

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A competition, as well as a consumer protection concern

The ACCC’s focus on greenwashing has typically been framed as a consumer protection or fair trade issue. However, as Ms. Rickard noted in her address, improving the accuracy of environmental and sustainability claims is “also about ensuring competitive behavior in the market”.

From a competition perspective, this includes promoting incentives for companies to innovate and invest in sustainable initiatives (without these investments being undermined (or “running free”) through misleading or deceptive behavior by competitors: “This can have a dissuasive effect on investments in this area as companies are unable to realize the full benefits of environmental improvements”.

ACCC’s four-step guide

In addition to growing global pressure for mandatory disclosure regulations, and scrutiny by consumer protection agencies, the ACCC works closely with other regulators on these issues, including ASIC and the Clean Energy Regulator, and will take a coordinated approach to address the wide range of sustainability-related issues. For example, ASIC is working closely with the International Sustainability Standards Board, an internal standards-setting body unveiled at COP26, to develop a new framework for green finance in 2022.

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For now, companies should look at the four steps that ACCC has proposed to improve their environmental claims and that the ACCC will work through:

  1. Make sure there are claims clear and concreteand avoid what the vice chair called “vague language” (e.g., “green”) when marketing any product or service.
  2. Make sure the entire life cycle of a product is taken into account when making environmental and sustainability claims. If a claim relates to only one aspect of the product life cycle, this should be made clear to consumers.

    For example, if less water is used to manufacture a product, but the process results in higher emissions, Ms Rickard stressed that companies should not try to “hide or downplay” such negative impacts.

  3. Be transparent on products and environmental policies to enable consumers to make informed choices.
  4. Work with “respectable third parties” whenever possible certification bodies“. Still, when companies receive a certification, they should be careful not to misrepresent its meaning or importance.

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