By Ryan J. Carra, Associate, Beveridge & Diamond, P.C.*
As consumers become increasingly aware of the environmental impacts of their lifestyles, more companies are creatively touting the environmental attributes of their products. Recognizing that this situation could lead some companies to overreach, the U.S. Federal Trade Commission (FTC) refreshed its enforcement guidance for environmental claims (known as the Green Guides) last October. Since then, the FTC has announced three sets of enforcement initiatives based on its refreshed guidance, resulting in significant negative attention for the regulated parties in both traditional and social media. Additionally, lawsuits against companies related to their environmental marketing claims have brought unfavorable consumer attention.
In a world where social media allows a brand image to undergo significant harm in a few hours, companies must be especially careful to avoid the perception of greenwashing. In this article, we present the Top Ten ways to safely leverage the environmental attributes of your consumer products.
1. Prepare an internal environmental marketing guidance document.
Your plain-language internal guidance document should help non-attorney drafters and reviewers of marketing materials evaluate environmental marketing claims. The guidance should explain the principles behind the Green Guides, then it should apply those principles to the types of claims your company typically makes. For instance, if your company touts the recyclability of certain products, you should explain in detail the substantiation the FTC would expect to see to support such claims. The more your clients understand the risks and how to avoid them, the more invested they will be in ensuring compliance with the Green Guides.
The internal guidance should contain examples and suggested language for common types of claims. For instance, you could encourage marketers to replace claims like "energy efficient" with more concrete (and therefore easier to substantiate) claims such as "uses 25% less energy than our previous model." You could even prepare a database containing specific marketing claims that have been pre-approved by the legal department for each product or service (e.g., "Legal has approved a 'mercury-free' claim for the following products..."). Finally, you could accompany the roll-out of the internal guidance with a training presentation where you introduce your clients to environmental marketing principles and work through examples.
2. Multinational companies should consult enforcement guidance in other countries.
Multinational companies should recognize that the legal standards for environmental marketing claims vary by jurisdiction. Many countries have developed bodies of guidance and enforcement case law for evaluating such claims. Different types of claims may be evaluated differently. For instance, countries have varying standards for when a product may be marketed as "degradable." A best practice would be to ensure that claims made in accord with your internal guidance document would be compliant with enforcement guidance worldwide. This would allow the internal guidance to be a "one-stop shop" for clients throughout the company.
3. Conduct legal reviews of marketing campaigns early and often.
The quickest way for a legal department to be viewed as a roadblock within a company is to demand major, last-minute changes to a business plan. Avoid this by being involved in the development of a marketing campaign as early as possible. This will allow you to quickly identify red flags and work with your clients to develop creative ideas for avoiding problematic claims.
4. Beware of "free-of" claims - your "BPA-Free" claim could be misleading even if your product contains no BPA!
Last October, FTC released complex new guidance for substantiating "free-of" claims. The agency stated that a "free-of" claim is deceptive if the product does not contain one substance, but contains another substance that poses a similar environmental risk. Thus, a claim that a product is "free of Chemical X" is deceptive if the product contains Chemical Y, which has similar environmental effects to Chemical X. The agency also stated that it may be deceptive to claim that a product is "free-of" a substance if the substance has never been associated with that product category. Under these standards, FTC could bring an enforcement action against a "free-of" claim that is true on its face.
FTC also clarified that "free-of" claims are permissible even if a product does contain some of a substance, as long as: 1) the substance isn't present in greater than trace or background levels; 2) the substance isn't present at levels that cause the harm consumers typically associate with the substance; and 3) the substance wasn't intentionally added.
So, one "free-of" claim could be deceptive if the product contains none of the substance, and another "free-of" claim could be acceptable even though the product does contain the substance. Moral of the story: give "free-of" claims a very close review.
5. "Up to" claims are an FTC hot topic - make them carefully.
The FTC's guidance for substantiating "up to" claims - announced for the first time in June – is surprisingly stringent. The agency expects such claims (e.g., "up to 25%" savings in energy costs) to be substantiated with evidence that consumers are likely to achieve the maximum results promised under normal circumstances. This is likely a reaction to FTC's perception that marketers were cherry-picking favorable data in order to imply that consumers would achieve better results than they actually would under normal use. When developing this standard, FTC relied on a study suggesting that consumers pay little attention to the "up to" qualifier and expect to achieve the maximum savings.
This FTC guidance appears to be the first of its kind worldwide. We expect that foreign consumer protection agencies may follow suit - and back up their new standards with enforcement actions.
6. Be specific - your product is not "green."
One sure route to an enforcement action is to make an unqualified general environmental claim such as "green" or "eco-friendly." Some - but not all - countries allow marketers to qualify general environmental claims by providing an up-front explanation of the basis for the claim (e.g., "Our eco-friendly car gets 50 miles per gallon."). Your internal guidance should challenge your clients to develop more specific claims. Instead of claiming that a product has a "low environmental impact," for example, explain that the product is recyclable and made with recycled material. In addition to being far less likely to trigger an enforcement action, more specific claims sound more credible to potential customers.
7. Be aware that social and traditional media can damage your brand.
NGOs are very attuned to environmental marketing and do not hesitate to blow the whistle on perceived greenwashing. Many skillfully utilize social media (Twitter, Facebook, blogs, etc.) in attempts to publically shame companies, especially those who have become the subject of FTC enforcement actions or private suits involving environmental marketing. Traditional media are also eager to report on these topics. The best way to avoid this type of negative brand exposure is to understand the Green Guides and prepare carefully worded marketing materials containing fully substantiated claims.
8. Consumers care about environmental marketing - but it's a double-edged sword.
Now more than ever, consumers are more likely to favor a product that they perceive to have a minimal environmental impact. Companies are aware of this, and as a result, studies have shown that environmental marketing claims have increased tenfold in the last two decades. On the other hand, consumers that perceive that a company is greenwashing will go out of their way to avoid that company's products. Thus, the key to successfully leveraging the environmental attributes of your products is to market them aggressively - but only as far as the Green Guides allow.
9. Earn awards and certifications - don't invent them.
According to the Green Guides, the presence of an environmental certification or seal of approval implies to consumers that an independent certifier has applied an objective standard. Thus, if a material connection exists between the marketer and the certifying body, this may need to be disclosed in the marketing materials. Furthermore, if a logo or the name of the seal or certification implies a general environmental benefit (e.g., logo incorporates natural imagery and states "Certified Eco-Friendly"), the marketer should prominently disclose the basis for the seal or certification (e.g., "awarded for energy efficiency"). If the seal or certification is based on attributes too numerous to list, the marketer should disclose this by stating: "Awarded based on several environmental attributes. For details, visit [website]."
10. Guard against class action suits based on environmental marketing claims.
Earlier this year, a major manufacturer of diapers and baby wipes was sued on the theory that its "Natural" line of baby-care products was deceptively marketed in violation of state law – the products allegedly contained synthetic materials, including several chemicals whose use is restricted in fragrances and cosmetics in other countries. Media coverage of the class action suit focused on the incongruity between the "Natural" claims and the allegation that the products contained potentially harmful chemicals.
Several other class action suits have been filed in recent years against companies making allegedly deceptive environmental marketing claims. A typical strategy for plaintiff's attorneys is to identify a vulnerable claim, find plaintiffs willing to serve as class representatives, survive a motion to dismiss, obtain class certification, and seek settlement. For example, in 2010, the manufacturer of a cleaning product was sued under state law for including an allegedly deceptive seal of approval on its product packaging. Koh v. S.C. Johnson & Son, Inc., 2010 U.S. Dist. LEXIS 654 (N.D. Cal. 2010). The U.S. District Court for the Northern District of California denied the manufacturer's motion to dismiss, and the case ultimately settled with an agreement to stop using the seal of approval and the payment of an undisclosed sum.
Environmental marketing is all but a necessity in today's market. We hope these tips help you minimize your company's risks while fully leveraging the environmental attributes of your products.
*Beveridge & Diamond advises clients worldwide on environmental marketing compliance and other product-related issues. If you have any questions about how these issues impact your company, please contact Laura Metz Duncan (Principal) at (415) 262-4003, lduncan@bdlaw.com; or Ryan Carra at (202) 789-6059, rcarra@bdlaw.com.
