Illegally green: ACCC paints ‘greenwashing’ as an enforcement priority

ACCC’s position

In a speech to the Sydney Morning Heald Sustainability Summit last week, ACCC Deputy Chair Delia Rickard, announced that the ACCC will be targeting businesses who greenwash as a key enforcement priority in the coming year.

The decision was made after the ACCC received a growing number of concerns from consumers that some businesses are making false representations about the environmentally friendly nature of their product to profit off changing consumer preferences.

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Ms Rickard noted that consumer demand for more ethical, environmental, and sustainable products has grown exponentially in recent years. Naturally, there has been a corresponding increase in the amount of ‘green’ marketing to advertise goods and services as meeting this demand.

Ms Rickard said that:

“broad terms like ‘environmentally friendly’, ‘green’, or ‘sustainable’ have limited value and may mislead consumers, as they rarely provide enough information about what that exactly means in terms of the product or service consumers are considering purchasing”.

She also said:

“the ACCC won’t hesitate to take enforcement action where we see that consumers are being misled or deceived by green claims”.

We have already seen an example of such enforcement action in late 2019, when Volkswagen was fined $125 million for making false representations about the compliance of its vehicles with the Australian Government’s ‘green’ diesel emissions standards.

The legal position

There are currently no Australian laws that govern greenwashing specifically or define greenwashing. However, section 18 of the Australian Consumer Law (ACL) prohibits businesses from engaging in conduct that is, or is likely to be, misleading or deceptive (including greenwashing).

Greenwashing is a pertinent example of how important it is for businesses to be clear and accurate in their representations and not accidentally mislead consumers in a desire to create succinct advertising slogans. This is especially important because the science behind a ‘green’ claim can be highly complex and difficult for consumers to understand.

Businesses should remember that the legal test is what an ordinary consumer would understand the representation to mean. It is possible for a representation to be technically true whilst also being misleading. Ms Rickard pointed to ‘compostable’ representations as an example. A consumer may understand the term ‘compostable’ to mean that the product will naturally break down in a compost bin. However, the product may only be compostable under specific industrial composting conditions in certain facilities. Because those facilities are not widely available in Australia, it is unlikely that the product will be composted. Therefore, the consumer has purchased a product on the understanding that it is compostable when, in reality, it will end up in landfill.

To make things harder for small businesses, there is no Australian legal standard or benchmark for terms like ‘compostable’, ‘biodegradable’ or ‘recyclable’. Ms Rickard said that the ACCC will consult with relevant industry stakeholders “to consider introducing clearer standards and regulations” and produce more guidance for businesses.

How can a business legally ‘go green’?

In the meantime, Ms Rickard believes there are “many steps that businesses can take to improve their environmental claims”.

Firstly, businesses should use specific and clear language that is easy for the ordinary consumer to understand. Businesses should avoid using vague language (such as ‘green’) and technical language that consumers are unlikely to understand (such as scientific concepts or specific industry standards). Technicalities (like the compostable example) should also be avoided.

Secondly, businesses should consider the entire lifecycle of a product and not attempt to hide or downplay any negative impacts. “For example, if a product uses less water to produce, but the process results in higher emissions [then this should be disclosed]” said Ms Rickard.

Thirdly, it is important for businesses to be transparent about the environmental policies behind the product. This may include making various environmental information (such as information on deforestation to explain the policy behind a deforestation representation) available to consumers through summaries, infographics or QR codes. However, directing consumers to large volumes of complex information should be avoided.

Finally, businesses may consider collaborating with reputable third-party certification bodies whilst being careful not to misrepresent the meaning of such certification.

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This article in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this article.