Greenwashers must scrub up

The ACCC has today released its report on ‘greenwashing’ activity by Australian businesses, finding 57% of the businesses they reviewed made ‘concerning’ environmental or sustainability claims, following its internet sweep in October last year.

247 businesses were surveyed across eight sectors:

1. Energy
2. Motor vehicles
3. Electronics and home appliances
4. Textiles, garments and shoes
5. Household and cleaning products
6. Food and beverages
7. Cosmetics and personal care
8. Takeaway packaging

The report calls out the cosmetic, clothing and footwear and food and drink sectors in particular as consistently having the most concerning claims.

So what is greenwashing?

Greenwashing is a misleading claim about the environmental benefit or impacts of a product or service. While there’s no specific laws against ‘greenwashing’ in Australia, greenwashing can amount to misleading and deceptive conduct or false representations under the Australian Consumer Law (ACL). See our further insights here.

Problematic practices that businesses should avoid are:

• Vague or unclear claims such as ‘green’, ‘eco-friendly’ and ‘responsible’ which the ACCC says have little value for consumers as they can have a variety of different meanings and don’t provide enough information to allow consumers to make an informed purchasing decision.
• Lack of substantiating information, or providing consumers with links to further unqualified claims or outdated information.
• Absolute claims such as ‘100% plastic free’ or ‘zero emissions’ which may be false (if for example, a product contains some plastic).
• Comparing the benefits of the product with competitor products or other materials which may not allow consumers to accurately assess the merits of one product over another.
• Exaggerating benefits or omitting relevant information – for example, making zero emissions claims that only consider the emissions associated with the use of the product and not emissions from the production, transport, or disposal of the product.
• Environmental goals that don’t have clear plans for how they’ll be achieved through practical changes.
• Third-party certifications and symbols which are used in a confusing way – for example not clearly describing the nature of the certification scheme, or how it applied to their product or business.
• Using ‘trustmark’ symbols that aren’t associated with a certification scheme – for example leaf, tree or planet symbols, or the colour green.

ACCC’s areas of focus

As a result of its internet sweep, the ACCC appears particularly concerned about the following types of greenwashing claims:

Claims	Examples
Claims about manufacturing processes and materials	purporting to present products as using less raw materials or plastic packaging or other resources to manufacture. claiming that products are made from ‘100% recycled’ materials or ‘sustainable’ materials, which it says will need to be examined further for accuracy. claiming that packaging contains ‘post-consumer recycled plastic’ without providing information about the proportion of post-consumer recycled plastic used. making claims that a product was made using ‘sustainable’ materials without further qualifying information about which materials are being used, and why they are more sustainable.
Claims about characteristics of products	claiming that a product is recyclable or compostable when there is no system in place to collect it. vague claims that a product is ‘green’, ‘kind to the planet’, ‘eco-friendly’, ‘responsible’ or ‘sustainable’ without qualification or substantiation.
Claims about the business itself	making claims relating to emissions reduction, offsets, or carbon neutrality without explaining how emissions reductions and offsets were calculated, steps being taken to reduce their carbon footprint, or types of offsetting projects being funded. making statements about the environmental protection measures the business is taking, when these actions are required by law. promoting investments in renewable energy projects while still sourcing most of products from fossil-fuel based industries

Greenwashing is not only a consumer protection issue but also a competition issue.

• From a competition perspective, the ACCC made clear that businesses who are genuinely investing heavily in becoming more sustainable are disadvantaged by false or misleading sustainability claims by their competitors. ‘This undermines effective competition and can create a disincentive for businesses to invest in sustainability’ the report stated.
• From a consumer perspective, new ACCC Deputy Chair Catriona Lowe stated that greenwashing is critical as ‘consumers are now, more than ever, making purchasing decisions on environmental grounds’. ‘Environmental or sustainability claims will only help consumers make informed purchasing decisions if the claims are clear, are not misleading and do not omit relevant information. A misleading, meaningless, or unclear claim breaches consumer trust and hurts confidence in both the claim itself and sustainability claims in general’ the report stated.

The recent internet sweep aligns with the ACCC’s 2022/23 enforcement priorities. Back in March 2022, then ACCC chair Rod Sims announced that the ACCC would look at claims made in the manufacturing and energy sectors because the ACCC was concerned about businesses seeking to gain an advantage through misleading claims relating to carbon neutral production processes. This was reinforced by new chair Gina Cass-Gottlieb the same month, who restated the ACCC’s commitment “to investigate and take action in relation to greenwashing, [including] claims of sustainability [and] environmentally friendly manufacturing processes, given that consumers are increasingly very concerned and want to take into account the environmental impact of their purchases.”

What can we expect next?

 Investigations

The ACCC has announced that several businesses will be investigated in relation to their green claims following this report, including across the packaging, consumer goods, food manufacturing and medical devices sectors.

Businesses can expect to receive substantiation notices where the ACCC is concerned about the accuracy of their green claims. Businesses making broad environmental claims are obligated to back these up with ‘reliable scientific reports, transparent supply chain information, reputable third-party certification or other forms of evidence’.

This is an ongoing pursuit – we expect greenwashing will continue to be an ACCC priority in 2023, with the ACCC is continuing to conduct further targeted reviews and asking Australian consumers to report instances of greenwashing.

Litigation

The ACCC report comes in the same week as ASIC issued proceedings against superfund Mercer, alleging the fund misled its members by marketing ‘Sustainable Plus options’ as suitable for members who ‘are deeply committed to sustainability’ as they didn’t invest in companies involved in fossil fuels, alcohol production or gambling. ASIC alleges that despite this representation, the Sustainable Plus options held investments in companies involved in fossil fuels, alcohol and gambling. ASIC issued guidance to super funds on greenwashing back in June 2022 and investment products in November 2022.

Private action is also gaining momentum in this space (including well-funded public interest groups). In 2021, the Australasian Centre for Corporate Responsibility sued Santos for alleged breaches of the Corporations Act 2001 and ACL for representations in its 2020 Annual Report that Santos’ gas is a ‘clean’ fuel or energy source, and blue hydrogen is ‘zero emissions’ or ‘clean’, which we’ve previously discussed here.

The ACCC has also announced that following this sweep, it will take enforcement action where appropriate. So we expect to see ACCC litigation in the next year or so as it looks to deliver concrete outcomes on its priorities.

Guidance

The ACCC intends to roll out economy-wide guidance to help businesses ensure they’re not misleading consumers when they make environmental or sustainability claims – as well as sector-specific guidance where ended. It will also conduct other ‘education activities’ and engage directly with businesses to improve ACL compliance.

Overseas, guidance has been issued in the past 6 months by regulators such as the Competition and Markets Authority in the UK and the Federal Trade Commission in the US.

By Peta Stevenson, Jessica Waters and Kat Armstrong.