What Happens When Green Marketing Goes Too Far – A Legal Perspective

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What Happens When

Green Marketing Goes Too Far – A

Legal Perspective

Bren School of Environmental Science & ManagementNovember 3, 2011 Workshop

Brooks M. Beard - Morrison & Foerster LLP

Greenwashing

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Presentation Overview• What is “Greenwashing”?• Enforcement Tools in the United States• International Enforcement• What’s Coming Next?• Avoiding “Greenwashing” Allegations• Questions and Answers

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Premium Paid for “Green” Products

• Recent Mintel report revealed that more than one-third of U.S. consumers would pay more for environmentally-friendly products

• Result• increase in marketing campaigns using words such as

“environmentally friendly,” “sustainable,” and “biodegradable”

• price premiums for such products • Effect

• increased scrutiny• increased risk of litigation or enforcement actions

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feedstock

zero-impactfeedstock content

ECO-SMART

eco-friendly

sustainablesustainability

renewable

renewable resourcelife cycle

recycled

recyclable

biodegradable

degradable

photodegradable

compostable

RENEWABLE

BIO-BASEDNATURAL CONTENT

environmentally friendly

earth-friendly

ozone-friendly

cradle to cradlecradle to

grave CARBON OFFSETS

renewable energy credits

carbon neutral carbon

footprint

CLEAN ENERGY

environmentally preferable

environmentally safe

environmentally safe

naturally derived non-

toxic

energy intensity

energy efficient

Bioenergy

greenhouse gases

environmental management systems (EMS)

alternative fuels

green purchasing

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Definition of Greenwashing• “Greenwashing” is generally viewed as the use of marketing claims

or statements — whether words, names, seals, or other symbols — that deceive or mislead consumers as to the environmental benefits or attributes of a company’s product or service, or, more broadly, as to the company’s environmental practices as a whole.

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Examples of Greenwashing• Fluffy Language: Words or terms with no clear meaning

• Ex. “sustainable” or “eco-friendly”

• No Proof: It could be right, but where’s the evidence?• Suggestive Pictures: Images that indicate an unjustified green impact

• Ex. Flowers blooming from smoke stacks

• Green Products vs. Dirty Company: Such as efficient light bulbs made in a factory that pollutes rivers

• Best in Class: Declaring you are greener than the rest, even if the rest are pretty terrible

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* The Greenwash Guide, Futerra Sustainability Communications

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U.S. Enforcement Tools

• Federal Trade Commission Act• Lanham Act• State Consumer Protection Statutes• BBB’s National Advertising Division• FTC Enforcement Actions

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FTC Act• “[U]nfair or deceptive acts or practices in or affecting commerce are

declared unlawful” (15 U.S.C. § 45(a)(1))

• Is the claim likely to mislead a reasonable consumer?• Viewed from the consumer’s perspective• FTC will not attempt to interpret the claim language• Prohibits ads that are likely to mislead a reasonable consumer

• Was the claim material to the consumer’s decision to buy or use the product or service?

• Substantiation – competent and reliable evidence

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FTC’s Green Guides• What are the Green Guides?

• Provide examples of how using particular environmental claims could conform or run afoul of the FTC Act

• Discourage use of broad unqualified statements such as environmentally friendly, eco-friendly, green, or sustainable

• Must be able to substantiate claims with “competent and reliable evidence”

• Guidance document• Substantial weight by courts

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Status of FTC’s Green Guides• In the process of revising Green Guides

• draft guidelines have already issued• Key issues in draft:

• general environmental benefit claims• certifications and seals• degradable and compostable claims• recyclable claims• renewable claims• carbon offsets• sustainability claims

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The Lanham Act• Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a))

• Creates liability for misrepresenting in commercial advertising the “nature, characteristics, qualities or geographic origin” of goods or services

• Only competitors permitted to bring suit under Section 43(a)

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State Consumer Protection Statutes• Many states have their own consumer protection statutes (“Little FTC

Acts”)• California:

• Unfair Competition Law (Bus. & Prof. Code § 17200 et seq.)• False Advertising Law (Bus. & Prof. Code § 17500)• Consumer Legal Remedies Act (Civil Code § 1750 et seq.)

• May be enforced by both government and private citizens• Remedies can include damages, restitution, attorneys’ fees,

injunctions, and civil penalties• Beware of class actions

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NAD Proceedings

• National Advertising Division of the Better Business Bureau

• Alternative to litigation• NAD routinely refers cases to FTC• Self-regulation by advertising industry

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NAD Proceedings — Continued

• Can be used only for review of national advertisements• Compliance with ruling is voluntary (there is no formal

enforcement mechanism)• 95% compliance rate

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Seventh Generation Household Cleaning Products

• Advertiser’s Seventh Generation claims that its products were “as gentle on the planet as they are on people” was puffery

• NAD noted the efficacy and benefit of the advertiser’s product

• NAD recommended advertiser discontinue claims linking household bleach to • environmental risks; and• posing potential environmental or

health hazards

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Church & Dwight (Arm & Hammer Essentials)

• “Harnessing the Power of Nature”

• More Sensible for the Environment

• 100% Naturally Derived Surfactants

• NAD found “natural” claims unsupported

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Clorox “Green Works”

Clorox claimed its “Green Works” product “cleans

with the power of Clorox”

NAD recommended discontinuing this claim to avoid conveying

message that product has disinfectant capability

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Mythic Paint

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Mythic Paint - Continued• Involves claims that product is non-toxic, free of carcinogens and volatile

compounds (VOCs), and slogan “Safe for People, Safe for Pets and Safe for Earth”

• NAD determined that manufacturer had substantiation for claim that contains no VOCs, toxins, or known carcinogens and for its slogan

• NAD concerned about claims that traditional paints are dangerous and recommended manufacturer • discontinue comparative safety claim; and • modify advertising to avoid message of exaggerated risks of

competitive paint products

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Elanco Animal Health DivisionElanco Animal Health Division

> award does not supportgeneral claim that product isenvironmentally friendly

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Dispoz-O “Enviroware”“Enviroware” tableware products

“Enviroware cutlery, straws, hinged containers, plates, bowls and trays are 100% biodegradable and come with a certificate of biodegradability.”

biodegradability claim unsupported

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Your Examples Of Green Marketing• Discuss examples of green marketing you brought

• Do they seem overbroad?• Do they constitute greenwashing?• Or are they sufficiently focused?

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International Enforcement• United Kingdom• France• Scandinavian Countries• Canada • Australia

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United Kingdom • Advertising Standards Authority

• Independent body used by the advertising industry to resolve private disputes• The number of complaints to the ASA about green claims was four times higher in

2007 than 2006

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United Kingdom —Continued • Advertising Standards Authority (cont.)

• ASA’s 2007 Annual Report found:• “[C]onsumers were most confused about ads for carbon emission claims and

green tariffs as well as green terms like sustainable and food miles”• “Consumers said they typically did not read the fine print or explanatory text in

ads”

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United Kingdom — Continued

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Claim that Shell “use[s its] waste CO2 to grow flowers” and its “waste sulphur to make super-strong concrete”

MISLEADING because only small amount of waste CO2 used to grow flowers and only small amount of sulphur used to make concrete.

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United Kingdom — Continued

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United Kingdom — Continued

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ASA found that there was not yet an accepted definition for “sustainable” and disagreement exists regarding what constitutes “sustainable”ASA evaluated data relating to cotton production in the USASA concluded that:• “the meaning of the term

‘sustainable’ in the CCI ad was likely to be ambiguous and unclear to consumers[;]” and

• “CCI had not justified the claim”

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France

• Charter of Commitment and Objectives for Eco-Responsible Advertising

• led by advertising professionals • can impose fines and call for the withdrawal of offending material

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France — Continued

• Advertisers should not make claims that are unsubstantiated, use exaggerated language, overstate the environmental benefit, or give the impression that the product has qualities other than is actually the case.

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Scandinavian Countries

• Joint guidelines for ethical and environmental marketing claims

• Claims must be clear, indicate whether they apply to the product or the packaging, verifiable, and substantiated by scientific data

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Scandinavian Countries — Continued

• Claims must also be accurate and balanced, and may not exaggerate a product’s positive impact on the environment

• Enforced against car manufacturers to prohibit claims that cars are “green,” “clean,” or “environmentally friendly”

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Scandinavian Countries—Continued

• Norwegian senior government official has stated:• “If someone says their car is more ‘green’ or

‘environmentally friendly’ than others then they would have to be able to document it in every aspect from production, to emissions, to energy use, to recycling.”

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--Alister Doyle, “Norway Says Cars Neither Green Nor Clean” (Sept. 6, 2007), available at www.reuters.com/article/email/idUSL0671323420070906

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Canada

• Recent guidelines issued jointly by the Canadian Competition Bureau and Canadian Standards Authority

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• The core principle of the Guide is that businesses should only make claims that are substantiated and verified.

• Substantiation means the existence and availability of supporting information for environmental claims

• Verification means the accuracy or reliability of such information

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Canada — Continued

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• Terms such as “green”, “environmentally friendly”, “all natural”, “environmentally safe” and “eco” are discouraged because they do not convey a precise or specific meaning to consumers and are difficult to effectively substantiate.

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Canada — Continued

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Canada — Continued

• No claim of “sustainability” should be made because the concepts involved in sustainability are complex and under study.

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Canada — Continued

• Substance “free” claims need to be literally true and cannot convey a general impression that is false or misleading (e.g., a product claiming that it is free of a certain chemical and is safe for the environment but fails to disclose that it contains a different harmful chemical could be considered false or misleading).

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Canada — Continued

• Claims should take into consideration all relevant aspects of the product life cycle.

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Australia

• Australian Competition and Consumer Commission recently released: “Green Marketing and the Trade Practices Act”

• Guidelines for compliance with Trade Practices Act • Penalties under the Act:

• Fines up to $1.1 million for companies and $220,000 for individuals • Injunctive relief

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Australia — Continued

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• Claims must only be made for a real benefit (e.g., “CFC free” has no real benefit because use of CFCs is prohibited in almost all aerosols)

• Claims must be specific and qualified (e.g., “safe for the environment” is not specific)

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Australia — Continued

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• Claims should consider whole product

• Claims must not overstate a benefit (e.g., “now 50% more recycled content” is overstated if previously contained only 1% recycled content)

• Claims should make clear whether claimed benefit refers to packaging or content

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European Union’s Eco-Label

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• Voluntary labeling program

• The label is awarded to goods and services that are “genuinely a better choice for the environment,” based on criteria established by the EU

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Group Exercise• Select a product or service for which you want to tout environmental

attributes through advertising• existing product or service• fictional product or service

• Consider what environmental attributes you can tout• Create ad or label copy that includes the environmental claim

• 20 minutes, then we will discuss

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WHAT’S COMING NEXT?• ... more enforcement!

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FTC Enforcement History• The FTC brought 37 enforcement actions involving environmental

marketing claims between 1990 and 2000 • Most of the environmental claims were challenged on the basis

that the company did not have sufficient substantiation for the claim it made

• No enforcement actions from 2000 until 2009• In June 2008, FTC Commissioner Rosch stated there have been

no recent enforcement actions because:• The industry has been abiding by the Green Guides; and• Private enforcement under the Lanham Act and self-regulation have

developed into effective alternative enforcement mechanisms

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Recent FTC Enforcement Actions

• Under the Federal Trade Commission Act, “unfair or deceptive acts or practices in or affecting commerce are declared unlawful” (15 U.S.C. § 45(a)(1))

• 2009 saw first series of FTC enforcement actions for green claims in a decade

• biodegradability claims• bamboo fiber claims

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Biodegradability Actions

• FTC viewed biodegradability claims as false or misleading because products did not biodegrade under normal disposal circumstances

• Can only make such claims if:

• supported by competent and reliable scientific evidence

• tested under normal disposal circumstances for product

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Bamboo Fiber Actions

• Labels and advertisements claimed products were made of bamboo fibers, but they were really made of rayon

• FTC also took issue with claims that products were• manufactured using an environmentally

friendly process• contained the natural antimicrobial properties

of bamboo• biodegradable

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Increased Enforcement Action at State Level

• State Attorneys General• District Attorneys• Regulatory Agencies• New Legislation• Consumer Class Actions

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State of California Action

• California Attorney General going after “biodegradability” claims on plastic water bottles• lawsuit filed October 26, 2011• referred to as “first-of-its-kind ‘greenwashing’ lawsuit”• claim: bottles are “100 percent biodegradable and

recyclable”

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California Restricts Claims On Plastic Bags

• AB1972 prohibits the sale of plastic bags and food and beverage containers that are labeled “biodegradable” or “degradable” until the legislature defines the terms

• Prohibits labeling a product as “compostable” or “marine degradable” unless the manufacturer can substantiate their product meets a specific ASTM standard

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California Environmental Representations Law

• California Business and Professions Code §17580-17581• Under this law, marketers utilizing terms such as "environmental

choice," "ecologically friendly," "earth friendly,“ "environmentally friendly," "ecologically sound," "environmentally sound," "environmentally safe,“ "ecologically safe," "environmentally lite," "green product," or any other like term, shall maintain documentation supporting the validity of the representation

• Provide to requesting public

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Consumer Class Actions• Plaintiff’s bar has referred to this as the next “big ticket” issue• Several recent class actions filed challenging greenmarketing claims

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S.C. Johnson “Greenlist” Litigation

• Two nearly identical class actions regarding S.C. Johnson’s “Greenlist” label on its Windex® and Shout® products

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• Petlack v. S.C. Johnson & Son, Inc. (E.D. Wis., filed Sept. 29, 2008)

• Plaintiff alleged Windex® “Greenlist” label is deceptive because it conveys that: • Windex® is “environmentally friendly”• Windex® has “been subjected to a neutral,

third-party’s testing regime”

S.C. Johnson “Greenlist” Litigation Cont.

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• Koh v. S.C. Johnson & Son, Inc.(N.D. Cal., filed March 2, 2009)

• Plaintiff alleged Windex® and Shout® “Greenlist” labels are deceptive

• Plaintiff would not have bought Greenlist-labeled products at premium price if he had known that Greenlist was a label applied by S.C. Johnson and not a third party

S.C. Johnson “Greenlist” Litigation Cont.

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Fiji Water Litigation• Hill v. Roll Int’l Corp.

(S.F. Superior Court, filed April 20, 2009) • Plaintiff alleged Fiji Water’s label was false

and misleading because:• “misrepresented . . . to consumers that Fiji Water is anenvironmentally sound product.”

• contained a Green Drop “seal of approval”

• included the word “FijiGreen” • used the phrase “Every Drop is Green”

• Plaintiff alleged that the labels trick consumers into paying more for a product that is not actually environmentally superior

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How to Avoid Greenwashing Accusations?

• Pick the products or services you promote on green grounds with care

• Be specific with word choices • Be specific about what part of your product or packaging is green • Substantiate, substantiate, substantiate • Do not overstate the benefit• Don’t forget that images can give misleading impressions

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Can You Make a Green Claim?• Conduct a Life Cycle Examination

• Natural resources• Manufacturing process• Packaging• Transportation• Distribution chain• Consumer Use• Recycling and waste stream

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Can You Make a Green Claim? - Continued• Determine Your Marketing Objective

• Product Claim?• Packaging Claim?• Company Claim?

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Effective Messaging• Establish Credibility

• Have the facts and figures ready to back-up your green claim• Message your green claim credibly • Make certain your green claim is relevant to what your customers value• Differentiation: Can you market yourself so that your customers can identify what

you do as green that is unique to you or your products?

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Dealing with Competitors• Are they making misleading green claims?

• “Cease and desist” letter• File a complaint with the appropriate agency• Lawsuit (only if necessary)

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Dealing with Competitors - Continued

• Are you doing better than they are?• Comparative advertising

• “Our product is 25% more energy efficient than our leading competitors”• “ Unlike our competitors, we use 100% recyclable packaging”

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...

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“Sorry, Harold, but I’m reducing our carbon footprint.”

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What Are Companies Doing?• Patagonia

• The Footprint Chronicles• http://www.patagonia.com/web/us/footprint/index.jsp

• Timberland• Green Index Rating• http://responsibility.timberland.com/?lang=en

• Walmart• Sustainability Index• http://walmartstores.com/Sustainability/9292.aspx

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Questions?

• Have more questions?

• Brooks Beard, Morrison & Foerster LLP• [email protected]• (415) 268-7339

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• SF-3062945

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