“Green” Marketing – How to Avoid Consumer Deception

March 16, 2009

“Eco-friendly,” “environmentally safe,” “carbon neutral,” “biodegradable,” “contains recycled material” – we’ve all read and heard the claims made by advertisers promoting the environmental attributes of a product or service. But what does it all mean and how can you avoid a claim of consumer deception? This advisory provides an overview of the history of “green” marketing, examines the role of the agencies and organizations that are charged with protecting consumers and businesses from false or misleading claims, and presents useful tips for those engaged in, or thinking about engaging in, green marketing.

In the 1980s and 1990s, focus on the environment became more pronounced. With the passage of several federal laws designed to protect the environment,[1] citizens in the United States became increasingly more aware of the impacts of products and practices on the natural environment. With this awareness came a desire to know more about the environmental attributes associated with products and services. Manufacturers and service providers responded by advertising the environmental attributes of their products. Much of this early advertising was aimed at product differentiation: claims that a product was superior to another or offered more or better environmental attributes than another. These early claims were often exaggerated and offered little if any supporting evidence to validate the claim.

In response, in 1992 the Federal Trade Commission (FTC) adopted the Guides for the Use of Environmental Marketing Claims,[2] commonly referred to as the “Green Guides.” While not carrying the force of law, these Green Guides are a weighty interpretation of the legal requirements for environmental advertising[3] The Green Guides do not preempt regulation by other federal agencies or state and local bodies who also can review claims governing the use of environmental marketing claims, but they are given much deference.[4] They apply to all forms of marketing for products and services: advertisements, labels, package inserts, promotional materials, words, symbols, logos, product brand names, and marketing through digital or electronic media, such as the Internet or email.[5] They apply to any claim, express or implied, about the environmental attributes of a product, package or service offered for sale.[6]

The Green Guides contain four general principles related to environmental marketing: (1) qualifications and disclosures; (2) distinction between benefits of product, package and service; (3) overstatement of environmental attribute; and (4) comparative claims. While on their face these principles appear clear and concise, most organizations find themselves caught in the details. For example, consider a product package labeled “50% more recycled content than before.” The manufacturer increased the recycled content of its package from 2% recycled material to 3% recycled material. Although the claim is technically true, it is likely to convey the false impression that the advertiser has increased significantly the use of recycled material and may be considered an overstatement of the environmental attribute[7] and a violation of the Green Guides. Further, the claim does not make clear whether it’s referencing the package itself, or what is inside.

The FTC’s Guides also require marketers to qualify statements whenever an unqualified statement cannot be substantiated. For example, it is deceptive to misrepresent, directly or by implication, that a product or package is degradable, biodegradable or photodegradable, unless competent and reliable scientific evidence substantiates that the entire product or package will completely breakdown and return to nature (i.e. decompose into elements found in nature) within a reasonably short period of time after customary disposal. Also, claims of recyclability should be made only when recycling is widely available and those claims should be qualified to the extent necessary about any limited availability of recycling programs or collection sites to avoid consumer deception.[8]

This lack of qualification was the basis of the FTC’s claim against America’s Favorite Chicken Company (AFC).[9] AFC sold food products that were contained in disposable paper packaging, representing that AFC paper packaging was recyclable after ordinary use. The FTC found that AFC had not substantiated its claim that its packaging was recyclable; and that, while AFC paper packaging is capable of being recycled, virtually no collection facilities accept food contaminated paper for recycling. Therefore, the representation of recyclability was false and misleading. The FTC ordered AFC to cease and desist from misrepresenting, in any manner, the extent to which any such product or package was capable of being recycled.

More recently, lack of substantiation was the basis of the complaint filed with the FTC by the Environmental Affairs Council (EAC) against Whole Foods Market, Inc. (Whole Foods). EAC contended that Whole Foods, by banning plastic bags from its stores, engaged in a comprehensive marketing scheme involving false, misleading and unsubstantiated claims about the environmental benefits of the paper grocery bags it distributes to consumers. Citing the Green Guides,[10] EAC argued that Whole Foods must possess objective, competent and reliable scientific evidence regarding the environmental benefits of paper and the environmental harms of plastic[11] to represent that its paper bags are more friendly to the environment than plastic bags. While the FTC has not yet decided this issue, what is clear is that environmental marketing claims are under close scrutiny by consumers, consumer watch groups, and environmental advocacy organizations.

In addition to the FTC’s general mission to protect consumers, the National Advertising Division (NAD) of the Better Business Bureau is the self-regulatory body created to review national advertising for truthfulness and accuracy and to foster public confidence in the credibility of advertising. It is designed to be a voluntary alternative dispute resolution forum for companies. The claims heard by NAD usually arise when one company challenges another’s advertising for truthfulness. Although the FTC provides a forum for consumers and other advocacy groups regarding environmental marketing, NAD is heavily involved in reviewing environmental marketing claims[12] Relying on the cause of action provided in the Lanham Act,[13] the companies bring their issues to the NAD for review instead of to a court, with a final decision guaranteed within 60 days. NAD review offers an expedient resolution to an issue, though NAD’s findings are not legally binding and do not necessarily prevent further legal action. When parties agree to “litigate” their false advertising claim in this forum, however, they generally do agree to accept the NAD’s decision (including appeal to the National Advertising Review Council). Indeed, if a party declines to abide by the NAD’s recommended resolution, a referral by NAD to the FTC to pursue legal action is usually the next step.

Since 1998, NAD has heard over 30 cases involving environmental claims about products ranging from coffee filters to dishwashing liquid to pet food. In nearly all of these cases, NAD found that the environmental claim was not appropriately substantiated and/or was misleading to the consumer. Many of NAD’s decisions preserve the element of the claim that is truthful while recommending that other more ambiguous or exaggerated terms be changed. For example, in a challenge brought by Sony against Panasonic,[14] Panasonic claimed that its plasma televisions were “environmentally friendly. No lead. No Mercury. No worries. Most LCD TVs have mercury.” NAD, relying on the Green Guides, recommended discontinuing the affirmative statement, “environmentally friendly”, because, although these televisions did not contain the metals listed, they did consume more power than comparably-sized LCD televisions. Thus the affirmative claim of environmentally-friendly was too broad. Nonetheless, NAD did determine that Panasonic was free to tout that its plasma televisions do not contain lead or mercury and that most LCD televisions do contain mercury.

Whether argued before NAD or the FTC or litigated in court with other parties, claims for deceptive environmental advertising can prove costly to the company through direct loss of sales, loss of advertising and promotion dollars, and loss of consumer confidence. To avoid these outcomes, companies should establish internal protocols and mechanisms to ensure that environmental claims are fully vetted and that every express or implied claim is substantiaed prior to release. These protocols should include periodic reviews of all company and product advertising media, including electronic media, packaging, and promotional materials.

In addition to advertising avenues, ensuring that the marketing claims are consistent with information reported to governing agencies is important. For example, a claim in a company’s voluntary corporate social responsibility (CSR) report or mandatory environmental compliance or financial reports must be consistent with the claims made for advertising or marketing purposes. This consistency will become even more critical as regulations regarding greenhouse gas (GHG) emissions emerge. Companies that touted “carbon neutral” or “low GHG emissions” will potentially have their emissions data made publicly available and the consumer will then be empowered to assess the validity of the claim.

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Environmental claims should be specific, precise, substantiated, and avoid unsubstantiated comparative claims that are likely to be misunderstood by or deceptive to the average consumer. You should maintain all of the supporting documentation related to the claim; and you might also choose to have those claims certified or endorsed by reputable third parties. Becoming familiar with the FTC’s Green Guides is advisable, including the anticipated, upcoming revisions. And, seek guidance from external counsel who are monitoring developments in the area and who can provide sound advice on your specific claim or assist in establishing an internal review program.

The lawyers and professional staff of Frost Brown Todd’s Environmental Department and Advertising Practice Group continue to monitor these developments and are available to provide advice on your environmental marketing claims and assist you in developing internal protocols to minimize the potential of a future challenge.  Please contact one of the attorneys in our Environmental Department or Advertising Practice Group for more information.

[1] Clean Air Act Amendments, 1990; Water Quality Act, 1987; Hazardous and Solid Waste Amendments, 1984; Comprehensive Environmental Response, Compensation, and Liability Act – CERCLA (1980); Emergency Planning and Community Right to Know Act – EPCRA (1986).
[2] 16 CFR 260. These guides were updated in 1998 (63 FR 24240) and a request for public comment opened on November 27, 2007 (72 FR 66091) and closed on February 11, 2008.
[3] Complying with the Environmental Marketing Guides, Federal Trade Commission, www.ftc.gov.
[4] 16 CFR Part 260.2.
[5] Id,,p. 1.
[6] Id,,p. 1.
[7] 16 CFR 260.5.
[8] 16 CFR 260.7.
[9] In the Matter of America’s Favorite Chicken Company, Federal Trade Commission Decisions, July 5, 1994 (118 FTC).
[10] 16 CFR 260.7.
[11] Ltr from Steven Hamilton, President, The Environmental Affairs Council to FTC (April 9, 2008). 
[12] Individual consumers, the Better Business Bureaus and even NAD can be the challenger however, companies filing complaints against their competitors is more typical.
[13] 15 USC Section 1125(a) provides civil action for any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact which … in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods or services, or commercial activities. Such an advertiser shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by the act. Generally,,the following are the required elements of a claim under that section: (1) a false statement of fact by defendant in a commercial advertisement about its own or another’s product, (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience, (3) the deception is material, in that it was likely to influence the purchasing decision, (4) the defendant caused its false statement to enter into interstate commerce, and (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a loss of goodwill associated with its products. United Industries Corp. v. Clorox, 140 F. 3rd 1175, 1180 (8th Cir 1998)
[14] Panasonic Corporation of North America, NAD Case # 4697 (July 16, 2007).
[15] In November 2007, FTC announced that it would be soliciting comments on the Green Guides as part of its systematic review of all FTC rules and guides. The comment period closed on February 11, 2008 and revisions are anticipated this spring.