We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
02 December 2010
The Federal Trade Commission's (FTC) Guides for the Use of Environmental Marketing Claims, also known as the Green Guides, aim to prevent 'greenwashing' - the use of unsubstantiated environmental claims - in advertising. As such, they spell out the specific environmental claims that advertisers can and cannot make about their products and services.
The Green Guides were first issued in 1992 and were subsequently revised in 1998. In 2007 the FTC began an extensive review of the guides, focusing in particular on the dividing line between deceptive and non-deceptive speech. It invited public comment, hosted workshops and undertook its own consumer perception study in order to gauge public reactions to specific environmental claims.
Informed by this feedback, the FTC has now formulated draft revisions to the Green Guides and is seeking comments on these proposals. The consultation process is open until December 10 2010.
Changes to claims already addressed in the guides
General environmental claims
According to the FTC's consumer research, about 50% of respondents believe that unqualified 'green' claims communicate a particular environmental attribute. The proposed revisions thus state that advertisers should not make general environmental claims (eg, 'earth-friendly') without qualifying them with the specific attributes that make the product 'green'. Such qualifications must be clear and prominent, and should limit the claim to a specific benefit. Advertisers should further ensure that the context does not imply deceptive environmental claims.
Certifications and seals of approval
Under the proposed revisions, any self-certification must be disclosed as such. A certification or seal of approval may require qualification if it communicates general unqualified 'green' claims - so, for example, the certification 'GreenSmart' might be qualified as 'GreenSmart - biodegradable'. A distinction must also be made in advertisements between mere membership of an organisation and certification by that organisation.
Under the existing guides, advertisers should qualify a degradable claim unless they can prove that "the entire product or package will completely break down and return to nature in a reasonably short period of time after customary disposal". A 2006 survey conducted by the American Chemistry Council revealed that consumers equate a 'reasonably short period of time' to one year. Therefore, the proposed revisions would preclude advertisers from making unqualified degradable claims for items destined for landfill, incineration or recycling, because decomposition will not occur within one year.
The existing guides state that if a product is advertised as 'compostable', "all materials in the product/package" must "break down into, or otherwise become part of, usable compost...in a safe and timely manner". According to American Chemistry Council research, most consumers do not realise that a large-scale composting facility is needed to break down compostable materials. Therefore, under the proposed revisions, unqualified compostable claims cannot be made unless:
The FTC has rejected the definition of 'compostable' established by international standard-setting body ASTM International, as it is not based on consumer perceptions and expectations.
The proposed revisions introduce a three-tiered analysis of recyclable claims to the guides, based on the availability of recycling facilities:
Once again, a 'substantial majority' has been quantified at 60% of consumers or communities. 'Significant majority' has not been quantified, although comments are sought in this regard. Positive statements (eg, "check to see whether facilities exist in your area") are inadequate to qualify recyclable claims.
'Ozone safe' and 'ozone friendly'
The proposed revisions would delete examples in the guides discussing claims that a product contains no chlorofluorocarbons (CFCs), since the Environmental Protection Agency has issued a blanket ban on CFCs in all products. However, the FTC decided not to prohibit advertisers from making such claims altogether, as in its view they can still communicate valuable information.
A new example included in the proposed revisions warns against making broad environmentally friendly claims based on the removal of ozone-depleting substances in products if their replacements themselves produce greenhouse gases or consume a significant amount of energy.
'Free-of' and 'non-toxic'
Even if they are true, claims that a product is free of a substance may be deceptive if:
The proposed revisions permit 'free-of' claims if the product contains "background levels" or "trace amounts" of a substance. However, what constitutes such de minimis levels will depend on the substance at issue and will require a case-by-case analysis.
A new section added to the guides further states that consumers are likely to think that a 'no-toxic' claim means that the product is non-toxic both for humans and for the environment. Advertisers using a regulatory standard to substantiate 'non-toxic' claims must therefore examine the scope and purpose of that standard, to ensure that it takes into account consumer expectations. For example, 'acute toxicity', which measures toxicity over a short period, may not constitute sufficient grounds for a non-toxic claim if the substance may be toxic to humans or the environment over a longer period of time.
Pre/post-consumer recycled content
The guides remain essentially unchanged with regard to pre-consumer or post-consumer recycled content: either form can be used to support a 'recycled' content claim, without any need to disclose which is being used.
To constitute pre-consumer recycled content, materials must have been "recovered or otherwise diverted from the solid waste stream...during the manufacturing process". For example, when spilled raw materials undergo only a "minimal amount of reprocessing, they are not diverted from the solid waste stream and do not constitute recycled content".
The FTC has expressly rejected the ISO 14021 definition of 'post-consumer materials', under which material returned from the distribution chain (eg, overstock magazines) qualifies as 'post-consumer' recycled material. This definition would not work under the guidelines, since the material in fact has never reached the consumer. While such material may constitute 'recycled content', in the FTC's view it is specifically pre-consumer recycled content.
Scraps of fabric have been used in the textile industry for many years, but recent innovations allow industry to put such materials to greater use. The textile industry believes that these higher-end processes should be sufficient to satisfy the requirements for the purposes of making a 'recycled' claim.
The FTC declined to add a specific reference to the guides in this regard, but observed that the materials should be:
The FTC recognises that this is an area in which it does not currently have sufficient evidence and is seeking further guidance in this regard.
The proposed revisions continue to state that using an annual weighted average is not deceptive. However, the FTC recognises that such weighted averages (across several plants) could be deceptive when selling to local consumers who place a premium on products containing recycled ingredients. It is thus seeking further comment in this regard.
Unqualified recycled content claims may be made only where the entire product or package - excluding minor, incidental components - is made with recycled content. This is essentially an 'all or substantially all' standard. Otherwise, the percentage of recycled content should be disclosed.
Responses to a closed-ended question in the FTC's market survey suggested that 52% consumers equate a statement that a product has been made with recycled materials to a 'recyclable' claim. However, in the survey's open-ended questions, just 3% of respondents made this association. Based on this data, the FTC has decided against requiring that unqualified recycled content claims be accompanied by a disclosure of whether the product can itself be recycled. However, it is also seeking comments in this regard.
New guidance on additional claims
The proposed revisions also include guidance on certain claims that are not addressed in the guides in their current incarnation.
'Made with renewable materials'
Advertisers should qualify renewable material claims with information about the specific renewable material used in the product (eg, 'Renewable - made with fast-growing bamboo'). Advertisers should further qualify their renewable materials claims if the product is not made entirely of renewable materials, excluding minor, incidental components - once again, an 'all or substantially all' standard.
No specific definition or test is identified in order to substantiate these claims.
'Made with renewable energy'
Advertisers should not make unqualified renewable energy claims if the power used to manufacture any part of the product was derived from fossil fuels. Claims should also specify the renewable energy source used (eg, wind, solar).
Advertiser should further qualify claims if less than all or virtually all of the significant marketing processes involved in making the product were powered by renewable energy, or by conventional energy offset by renewable energy certificates (RECs) - even though there was no evidence in the market research to suggest that whether renewable claims are based on REC purchases is material to consumers.
Double counting is prohibited. In other words, an advertiser that generates renewable energy (eg, using solar panels), but then sells RECs for the full amount of renewable energy generated, cannot then represent that it uses renewable energy.
One point which is not expressly mentioned in the proposed revisions, but should nonetheless be borne in mind, is that where a particular advertisement implies that renewable energy yields local benefits, the advertiser should inform consumers if this is not in fact the case, in order to prevent deception.
The FTC declined to set any standards for the use of carbon offsets, on the grounds that it is not a standard-setting or policy-setting body, and since the relevant technologies are evolving so rapidly. However, it nonetheless offers guidance in order to contextualise the use of carbon offsets in terms of Section 5 of the FTC Act, which prohibits unfair or deceptive practices.
Under the proposed revisions, advertisers should have reliable scientific evidence to back up their carbon offset claims, including appropriate accounting methods to ensure that they are properly quantifying their emission reductions and are not selling those reductions more than once. Participation in voluntary standards groups, such as the Voluntary Carbon Standards Association (http://www.v-c-s.org), might be important for substantiation purposes going forward. The FTC warns against using RECs as the basis for offset claims, due to the risk of double counting.
According to the FTC's market research, 43% of respondents believe that claims in relation emissions reductions that will not occur within two years are misleading. Therefore, if the emissions reductions reflected by the offsets will not take place within two years, this must be disclosed.
A carbon offset should not be advertised if the activity forming the basis for that offset is already required by law.
Claims on which guidance remains to be issued
The FTC declined the opportunity to offer guidance on certain other popular related claims, which its market research revealed to be somewhat more equivocal.
In its market research the FTC tested this word outside any particular context, finding that it communicated to consumers the concept of durability and contained no general environmental claim. It acknowledged that a company's general environmental philosophy lies outside the scope of the guides, which rather apply only to clear commercial speech. As such, this must be assessed on a case-by-case basis.
These terms are also not addressed in the revised proposals. The FTC noted that a regulatory framework already exists for use of the term 'organic' in relation to agricultural products, in the form of the US Department of Agriculture's National Organic Programme. For non-agricultural products, the record is deemed insufficient for the FTC to offer guidance.
In a similar vein, no consumer perception data is available in relation to the term 'natural', so the FTC will apply a case-by-case analysis in this context.
Once the proposed revisions have become final, there will be no grace period for compliance, because advertisers are already subject to Section 5 of the FTC Act, which prohibits unfair or deceptive practices.
The guides make clear that they apply not only to business-to-consumer advertising, but also to business-to-business advertising. As they do not have the force of law, they do not have pre-emptive effect.
The FTC is actively consulting with other interested bodies, such as the Environmental Protection Agency, the Department of Energy and the Department of Agriculture in order to avoid conflict and duplication.
For further information on this topic please contact John P Feldman at Reed Smith LLP by telephone (+1 202 414 9200), fax (+1 202 414 9299) or email (email@example.com).
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.