The ACCC’s Much Awaited Guidance on Environmental and Sustainability Claims

On 14 July 2023, the ACCC published draft guidance to educate businesses on how to improve the integrity of their environmental and sustainability claims, to maintain compliance with the Australian Consumer Law. The draft guidance aims to address the issues raised during the ACCC’s recent greenwashing internet sweep, which found that over half of businesses surveyed were making potentially misleading environmental claims.

According to the chair of the ACCC, Gina Cass-Gottlieb, “As consumers become more environmentally conscious, businesses need to be honest and transparent when making environmental or sustainability claims so consumers are not being misled.”

The ACCC is seeking feedback from businesses, consumers and other stakeholders on the draft guidance. The consultation period closes on 15 September 2023.

The ACCC’s Eight Commandments

The ACCC has distilled eight principles in its draft guidelines to help businesses comply with their obligations under the Australian Consumer Law when making green claims.

1. Make accurate and truthful claims: The ACCC’s deputy chair, Catriona Lowe, was recently reported by the Australian Financial Review as saying that the most common cause of concern with greenwashing is “overreach”, as companies and brands are often effectively “doing 5 per cent but claiming 95 per cent”. To avoid falling foul of the Australian Consumer Law, you must avoid overstating the level of scientific evidence for your claims, refrain from exaggerating any environmental benefits, only make meaningful claims and ensure that any comparisons in your claims are transparent and fair. Whilst all claims need to be properly substantiated, you should take particular care when making future representations (e.g., “carbon neutral by 2050”). This is because, unless you have reasonable grounds for making that claim, the claim will be deemed false and misleading under the Australian Consumer Law.
2. Have evidence to back up your claims: You must have credible, up-to-date, and relevant evidence for all your claims. Where some or all of that evidence is provided by third parties, such as an overseas manufacturer, you need to apply an independent mind to determine whether or not it is sufficient to support your proposed claim. The ACCC has indicated that, when deciding whether to take enforcement action against a business for making non-compliant environmental claims, it will consider whether the business took “genuine efforts and appropriate steps” to verify the accuracy of any information upon which it relied.
3. Don’t leave out or hide important information: In 2013, the ACCC successfully challenged TPG in the High Court for failing to adequately disclose certain fees in its Unlimited ADSL2+ advertisements. According to the High Court, “The tendency of TPG’s advertisements to lead consumers into error arose because the advertisements themselves selected some words for emphasis and relegated the balance to relative obscurity.” In the case of green claims, you need to consider the environmental impact of your product or service across its full life cycle. If you cannot verify your claim by reference to every stage in that life cycle (e.g., an energy efficient product that cannot be disposed of in an environmentally responsible way), then you need to clearly limit your claim upfront.
4. Explain any conditions or qualifications on your claims: This applies to all claims but especially to claims such as “recyclable” and “compostable”. To reduce the risk of misleading consumers, you need to explain upfront what consumers need to do to take advantage of those advertised qualities. For instance, if the products can only be recycled if they are personally deposited at an industrial or designated recycling facility rather than simply left in kerbside recycling, then you need to call that out.
5. Avoid broad and unqualified claims: The ACCC tagged vague and unqualified claims as the biggest red flags to arise out of its greenwashing internet sweep. Accordingly, the ACCC has blacklisted the use of overly broad, vague claims including “green”, “environmentally friendly”, “eco-friendly”, and “sustainable”, on the basis that these are too general to convey information accurately to consumers about environmental qualities. The ACCC has also put businesses on notice that it expects claims such as “recyclable”, “recycled”, “renewable energy”, and “free” to be clearly qualified and explained upfront. For specific guidance on emissions related claims, see the ACCC’s draft guidance.
6. Use clear and easy-to-understand language: Avoid using technical or scientific language when making environmental claims, especially where there may be a gap between the ordinary meaning of that word and its technical meaning. If a term has multiple potential meanings, then you need to clarify that term upfront.
7. Visual elements should not give the wrong impression: Remember the saying, “a picture is worth a thousand words”? Keep this in mind when designing non-verbal marketing cues, such as colours (e.g., green, blue), images (e.g., trees, oceans, endangered animals), and symbols (e.g., the mobius loop for recycling). If the visual elements used on your product labelling or advertising materials are likely to give rise to an overall impression about environmental qualities which cannot be fully supported, then you need to pare back or modify those representations. For more on the potential risks of using trust marks or third-party labels or certifications, see our earlier article here.
8. Be direct and open about your sustainability transition: You should avoid making statements about the intentions of your business to implement environmental initiatives until your business has properly scoped and committed to those initiatives. When preparing communications about switching to a “more sustainable” operating model, you need to make sure that you have realistically portrayed the environmental harm associated with your business. This may involve preparing an environmental audit and risk assessment as part of your supporting evidence for the claim.

What does this mean for you?

There’s no getting around the fact that making environmental claims has the potential to pose significant risks for businesses in Australia. As the ACCC confirmed earlier this year, environmental and sustainability claims are at the top of its compliance and enforcement priorities list for 2023-24.

We recommend keeping the ACCC’s eight commandments (and this handy summary of those principles) at the top of your marketing sign-off checklist, so you can stay “golden” in your green claims.

If your business needs help getting their marketing claims in order, contact the Addisons Competition, Consumer & Antitrust team.

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