Beveridge & Diamond
 

FTC Issues Revised Green Guides for Environmental Marketing

Beveridge & Diamond, P.C., October 11, 2012

On October 1, 2012, the Federal Trade Commission (FTC) issued final revisions to the Guides for the Use of Environmental Marketing Claims, known as the Green Guides.  The Green Guides inform marketers and others of how the FTC applies Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts, to environmental marketing claims.  The long-awaited revision provides important new and modified guidance to companies making or planning marketing claims related to the environmental attributes of their products or services.

The FTC’s announcement marks the first revision of the Green Guides since 1998.  The changes were proposed in 2010 (see our Oct. 7, 2010 Alert). The final version of the Green Guides generally adheres to the 2010 proposal, with some changes in response to the 340 unique comments received by the FTC.  The October 11, 2012 Federal Register notice announcing the final updates to the Guides is available here. A four-page summary of the Green Guides is available here.  A detailed discussion of the comments and the FTC responses is available here.

The final revised Green Guides contain new sections on certifications and seals of approval, “free-of” claims, “non-toxic” claims, “made with renewable energy” claims, “made with renewable materials” claims, and carbon offset claims.  They also clarify the FTC’s guidance on several existing sections, including those related to claims of general environmental benefits, "compostable" claims, "degradable" claims, and "recyclable" claims.

Background

First adopted in 1992, the Green Guides apply to claims about the environmental attributes of a product, package, or service in connection with the marketing or sale of the product or service.  Generally, they require marketers to possess competent and reliable scientific evidence that substantiates an environmental claim that appears in a label, advertisement, promotional materials, or other marketing media.  The Guides apply to both express and implied claims, including those made through symbols, logos, depictions, brand names, and other means. 

The Guides apply to business-to-business marketing as well as to marketing that targets individual consumers.  Depending upon the circumstances, the Green Guides may apply to manufacturers, certifiers, auditors, wholesale and retail sellers, and their advertising companies, any of whom may be held liable under Section 5 of the FTC Act for making or disseminating deceptive claims.   

The Guides are in the form of interpretive regulations, 16 C.F.R. Part 260.  They are not independently enforceable regulations, but the FTC may consider practices that are inconsistent with the Green Guides to be violations of the FTC Act, subjecting violators to enforcement.

New Additions to the Green Guides  

The revised Green Guides add new sections to provide guidance on environmental claims that were not common when last revised in 1998.

  • Certifications and Seals of Approval.  The Green Guides now provide that it is deceptive to misrepresent that a product or service has been endorsed or certified by an independent third party.  The 1998 version included a single example related to environmental certifications and seals of approval, which illustrated that the use of certifications and seals may constitute a claim that a product is environmentally superior to other, uncertified products.  In 2010, the FTC proposed adding a new section on environmental certifications and seals of approval, which the final Green Guides largely adopted.  The final Green Guides (1) emphasize that certifications and seals may be considered endorsements that are subject to the FTC’s Endorsement Guides, 16 C.F.R. Part 255; (2) caution marketers that they must disclose any material connection between the marketer and the certifying body that might affect the weight or credibility of an endorsement, unless the seal or certification does not convey that the certifier is independent; (3) advise marketers to qualify environmental certifications or seals that convey general environmental benefit claims because marketers are unlikely to be able to substantiate such general claims; and (4) direct marketers to clearly and prominently qualify seals and certifications that apply only to specific and limited benefits.
                 
    The final Green Guides also clarify two situations that were not clearly addressed in the 2010 proposal.  First, the Guides now advise marketers on how to qualify general environmental claims conveyed by a certification that is based upon broad-based multi-attribute standards that cannot practically and effectively be communicated to consumers in labels or marketing materials.  Second, the Guides clarify that marketers remain responsible for substantiating claims conveyed by any certification, including government certifications.   
  •  “Free-of” Claims.  According to the updated Green Guides, an otherwise truthful claim that a product is “free of” a specified substance may be deceptive if the product contains or uses other substances that pose the same or similar environmental risk or if the substance never has been associated with the given product category.  “Free-of” claims may be permissible, however, where a product contains a de minimis or trace amount of a substance if the claim passes a three-part test.  The test is that (1) the amount of the substance is no more than that which would be found as a background level; (2) the substance’s presence does not cause material harm that consumers typically associate with that substance; and (3) the substance has not been added intentionally to the product.  The FTC indicated that these changes were designed in part to more closely align the Guides with the International Organization for Standardization (ISO) standard 14021 (Environmental labels and declarations – Self-declared environmental claims).
  • “Non-toxic” Claims.  The final Green Guides provide that it is deceptive to misrepresent that a product is non-toxic.  The FTC noted that consumers are likely to interpret a non-toxic claim to mean that a product is non-toxic for both humans and the environment.  The Green Guides therefore advise marketers to qualify non-toxic claims as necessary to avoid deception.  In the final Green Guides, the FTC clarified that a claim that a product is “non-toxic” should not be made if there is trace toxicity.  In other words, unlike for “free-of” claims, the Green Guides do not make any allowance for trace or de minimis levels of toxicity in a product.  
  • Renewable Energy Claims.  Under the 2012 revision, it is deceptive to misrepresent that a product is made with renewable energy or that a service uses renewable energy.  The final revision provides guidance on several issues related to renewable energy.  First, the Guides advise marketers not to make unqualified “made with renewable energy” claims if the power used to manufacture the item was derived from fossil fuel, unless the marketer has purchased renewable energy certificates (RECs) to match their energy use.  Second, the Guides warn marketers to qualify renewable energy claims to minimize the risk of misinterpretation by consumers, for example, by disclosing the source of renewable energy.  Third, the Guides advise that marketers should not make unqualified claims that a product is “made with renewable energy” unless all or virtually all of the manufacturing processes used to make the product were powered by renewable energy or non-renewable energy matched with RECs.  Next, the Guides caution marketers that host a renewable energy facility that it is deceptive to make unqualified renewable energy claims if the marketer has sold all of the renewable attributes of the energy it produced or hosted.  The FTC declined to issue guidance on claims based upon legally-required renewable energy sources in the current revision, but noted its concern that such claims may deceive consumers and pledged to continue to monitor the issue.  
  • Renewable Materials Claims.  In the final Green Guides, the FTC also added a provision stating that it is deceptive to misrepresent that a product or package is made with renewable materials.  The Guides caution marketers to qualify any “made with renewable materials” claim as needed to avoid deception.  For example, marketers may minimize the risk of unintended implied claims by identifying the material used and explaining why it is renewable.
  • Carbon Offset Claims.  Some marketers assert that their product or service offsets its carbon emissions through emissions reductions elsewhere.  In its 2010 proposal and the final revised Green Guides, the FTC advised marketers to (1) use competent and reliable scientific and accounting methods to quantify emission reductions and ensure that a given reduction is sold only once; (2) avoid deceptive practices related to the timing of when an emissions reduction will occur by disclosing if an offset represents emission reductions that will not occur for two years or longer; and (3) avoid express or implied claims that a carbon offset represents an additional emission reduction if the reduction or activity that caused the reduction was required by law.  The FTC declined to offer more extensive guidance on carbon offset claims, noting limitations on the extent of its authority, low consumer awareness of carbon offset products, and ongoing policy debates about substantiation of offset claims. 

Revisions to Existing Sections of the Green Guides

The final Green Guides also revise previous guidance related to several aspects of environmental marketing claims.

  • General Environmental Benefit Claims.  Earlier versions of the Green Guides cautioned marketers against making general environmental benefit claims, such as “environmentally friendly,” because it is nearly impossible to substantiate all reasonable interpretations of such claims.  In the 2010 proposal, the FTC proposed additional guidance on how to qualify and substantiate general environmental benefit claims and sought comment on related issues.  Like the proposal, the final Guides advise marketers not to make broad, unqualified general environmental benefit claims that cannot be substantiated.  They advise, however, that marketers may be able to qualify such claims with clear and prominent language that focuses consumers on specific claims or limited environmental benefits that can be substantiated.  The final Guides also caution marketers against implying that any specific benefit is significant if it is, in fact, negligible.  Finally, where a claim implies a net environmental benefit, the final Guides direct marketers to analyze environmental trade-offs resulting from the change or product attribute to determine whether there is support for the purported net benefit. 
       
    The FTC also provided guidance on when a life cycle assessment might be needed to substantiate a general environmental claim.  It advised that a life cycle assessment might be appropriate in the context of general environmental claims that are coupled with a change in a product or process.  For example, if a marketer claims that its packaging is “greener” because it uses less plastic, the FTC would require the marketer to both substantiate the source reduction claim (“uses less plastic”) and the claim that the change in packaging results in a net environmental benefit (“is greener”).  If the new packaging changes other environmental attributes in a product’s life cycle (e.g., requires the use of more energy during manufacturing or the use of a different kind of plastic), evaluating the general environmental benefit claim likely would require the marketer to assess more comprehensively any trade-offs made to determine if the net benefit claim is supported. 
              
    The FTC indicated that it would evaluate whether a life cycle assessment is conducted in an objective manner by qualified individuals, whether the analysis is generally accepted in the profession to be accurate and reliable, and whether the assessment is sufficient to substantiate that each of the marketer’s claims is true.  Beyond this guidance, the FTC declined to issue additional guidance regarding when a life cycle assessment is required or which particular methods or standards marketers should utilize.
  • “Compostable” Claims.  The 1998 version of the Guides stated that a compostable claim should be substantiated by competent and reliable scientific evidence that the entire item will break down into, or otherwise become part of, usable compost in a safe and timely manner.  In 2010, the FTC proposed a revision to clarify the meaning of “timely manner” by adding that the product should break down in approximately the same time as the materials with which it is composted.  The FTC adopted this proposed change without revision in the final Guides.  
  • “Degradable” Claims.  According to the 1998 version of the Guides, a claim that items entering the solid waste stream are “degradable” must be qualified unless the entire item will break down within a “reasonably short period of time.”  The final revised Green Guides adopt the FTC’s 2010 proposal clarifying that “break down within a reasonably short period of time” means that the entire item will fully decompose within one year after customary disposal.  The updated Guides also clarify that unqualified degradable claims are inappropriate for items destined for landfills, incinerators, or recycling facilities in which the items will not degrade within a year.  
  • “Recyclable” Claims.  The 1998 Green Guides included a three-tiered approach to analyzing recyclability claims:  (1) unqualified claims were permitted if recycling facilities were available to a “substantial majority” of consumers or communities where the item was sold; (2) claims of recyclability were permissible where facilities were available to a “significant percentage” of communities or the population, but not a substantial majority, if the claim was also qualified by a statement such as “this product may not be recyclable in your area” or that identified the approximate availability of recycling programs (e.g., as a percentage of communities or the population); and (3) when recycling facilities were available to less than a “significant percentage” of communities or the population, marketers could either disclose that the product was recyclable only in the few communities with recycling facilities available for the particular product or state the number of communities, the percentage of communities, or the percentage of the population where programs were available to recycle the product. 

    The 2010 proposal retained the tiered structure but proposed to clarify that “substantial majority” means at least 60 percent.  The final Green Guides adopt the 60 percent threshold for defining what constitutes a “substantial majority,” but modify the recyclable claims analysis from a three-tiered to a two-tiered framework by eliminating the “significant percentage” threshold.  Under the final Green Guides, marketers may make unqualified claims for products that at least 60 percent of consumers or communities can recycle, or they may make qualified claims for products that do not meet the 60 percent threshold.  Statements qualifying the availability of recycling facilities for a product should be proportionate to the level of access actually available.  Where there is less access to appropriate facilities, the marketer should more strongly emphasize the limited availability of recycling for the product.

Claims Not Addressed in the Final Green Guides

Beyond the revisions and additions described above, the FTC declined to address a handful of categories of claims.  Specifically, it did not address the use of the terms “natural,” “organic,” or “sustainable” in the final Green Guides.  The FTC explained that it lacks a sufficient basis to provide meaningful guidance or wants to avoid proposing guidance that duplicates or contradicts rules or guidance of other agencies.  With respect to the term “sustainable,” the FTC noted that there is the potential for confusion and that it would continue to monitor the use of the term in marketing materials.  The FTC advised marketers using the term to test any claim to be sure the marketer can substantiate any express or implied environmental claim the marketer makes. 

Additional Guidance and Clarifications

Marketers may want to be aware of the additional clarifications that the FTC made in discussing the final Green Guides or in the Green Guides themselves.

  • Business-to-Business Claims.  The FTC added new language to the final Guides clarifying that they apply to business-to-business marketing claims.  In addition, the final Guides incorporate an example of a business-to-business claim that was newly proposed in the 2010 revisions.  The FTC noted that marketers must understand who their customers are and how their claims will be interpreted by those customers.  It further cautioned marketers to be aware that business-to-business claims may be passed on to individual customers and that marketers should be careful not to provide other businesses with the means and instrumentalities to engage in deceptive conduct.
  • Sophisticated Audiences.  In response to several comments recommending that the final Guides focus on more sophisticated “green consumers,” the FTC emphasized that the Green Guides are based on marketing to a general audience.  However, it noted that when a marketer targets a particular segment of consumers, such as those who are particularly knowledgeable about the environment, the FTC will examine how reasonable members of that group interpret the advertisement.  It cautioned, however, that more sophisticated consumers may not view claims differently than less sophisticated consumers. 
  • Auditors, Certifiers, Retailers, and Other Entities.  In response to a request from several commenters for clarification as to whether the Guides apply to entities other than manufacturers, the FTC noted that entities such as certifiers, auditors, and retailers may be liable under Section 5 of the FTC Act.  The FTC further noted that outside of the environmental context, courts have held advertising agencies, catalog marketers, retailers, infomercial producers, and home shopping companies liable for their roles in making or disseminating deceptive claims.
  • Website Disclosures.  Despite evidence that some consumers use smartphones and other devices to access product information at the point of sale, the FTC reiterated that websites cannot be used to qualify otherwise misleading claims that appear at the point of sale.  Of course, if the point of sale is online, the FTC confirmed that a marketer may make any necessary disclosure or qualification online, provided the disclosure is clear and conspicuous and in close proximity to the claim the marketer is qualifying.
  • State and Local Laws.  In the final Green Guides, the FTC made several adjustments to its 2010 proposed revisions in response to comments regarding overlap or conflict with state and local laws.  For example, the FTC revised an example in the section for “non-toxic” claims so that it refers to a cleaning product rather than a pesticide, since Environmental Protection Agency regulations prohibit non-toxic claims for pesticide products.  The FTC reminded marketers to follow the strictest law or regulation applicable to their products.  It further noted that the Green Guides, as administrative interpretations of Section 5, are not regulations and do not preempt other laws.  Thus, even if a claim is not deceptive under the Guides, a marketer should not make the claim if another law proscribes it.  

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Beveridge & Diamond actively counsels clients on environmental marketing.  For further information on this topic, please contact Mark Duvall (mduvall@bdlaw.com) or Lauren Hopkins (lhopkins@bdlaw.com).

For a PDF version of this client alert, please click here.

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