The Federal Trade Commission (FTC) unanimously voted last week to finalize revisions to its “Guides for the Use of Environmental Marketing Claims,” also known as the “Green Guides.” This culminates a five-year regulatory process by the FTC that has included consumer perception surveys, workshops and public comment. The Green Guides as revised are effective immediately.
The FTC first issued the Green Guides in 1992 in response to an explosion of “green” marketing and advertising claims. After revising the Green Guides in 1996 and 1998, the FTC scheduled another round of revisions for 2008. However, the proliferation of claims being made by companies wishing to tout the “environmental friendliness” of their products caused the FTC to commence its revision process a year earlier in 2007. The proposed changes were intended to revise and update various sections in the Green Guides, add several sections addressing new types of environmental benefit claims, and change the format of the Green Guides to make them more user-friendly.
In October 2010, the FTC announced proposed revisions to the Green Guides1 and solicited public comments on the proposed revisions. After considering 340 non-duplicative comments, the FTC further revised the Green Guides to clarify some aspects and issued them as final. Along with the revised Green Guides, the FTC issued a 302-page “Statement of Basis and Purpose,” which discusses the comments received and the FTC’s response to those comments.
Although published in the Code of Federal Regulations (16 C.F.R. Part 260), the Green Guides remain agency guidance and are not independently enforceable. Nonetheless, they reflect how the FTC will likely apply Section 5(a) of the FTC Act, which prohibits unfair or deceptive acts or practices, to environmental marketing claims. In the past several years, the FTC has noticeably increased the number of enforcement cases based on marketing claims that allegedly ran afoul of the Green Guides.
A summary of the revised Green Guides, as finalized by the FTC, is provided below.
The New Green Guides
The Green Guides as finalized by the FTC are substantially similar to the Green Guides proposed by the FTC in 2010. The types of environmental marketing claims specifically discussed in the Green Guides include:
- General Environmental Benefit
- Carbon Offsets
- Certifications/Seals of Approval
- Free-of and Non-Toxic
- Recycled Content
- Renewable Energy
- Renewable Materials
Overall Theme. The theme throughout the Green Guides is that marketers should not make blanket, general claims that a product is “green” or “environmentally friendly.” According to the FTC, marketers must be able to substantiate every express and implied material claim that a general assertion conveys to a “reasonable consumer.” Based on its consumer perception study, the FTC has concluded that very few products have all the attributes consumers apparently perceive from “environmentally friendly” or “eco-friendly” claims, making general claims (as perceived by the consumer) nearly impossible to substantiate. The FTC is now encouraging marketers to qualify general environmental benefit claims to clearly identify the benefits that are claimed.
Certifications and Seals of Approval. Certifications and seals of approval received increased attention in the updated Green Guides. While the previous Green Guides only addressed certifications and seals of approval in one example, the Green Guides now have a separate section addressing such claims. The FTC’s Endorsement Guides, revised in December 2009, generally cover certifications and seals of approval but the Green Guides now include eight examples illustrating how the Endorsement Guides apply to environmental claims. Consistent with the entirety of the Green Guides, the FTC cautions marketers against using unqualified certifications or seals of approval that convey a general environmental claim. The Green Guides also emphasize that marketers must disclose any material connections to the certifying entity and marketers must also ensure that certifications do not deceptively imply certification by an independent third party if the certification was not independent.
Other Sections. Based on comments submitted by members of the public, the FTC clarified some revisions proposed in October 2010. The Green Guides now contain separate sections that address “free-of” and “non-toxic” claims and further clarify the guidance regarding “free-of” claims with a three-part test. The FTC also revised the section regarding the use of the term “recycling,” moving the definition of “substantial majority” (recycling facilities are available to at least 60 percent of consumers or communities) to the body of the regulation instead of a footnote. New sections to the Green Guides addressing carbon offsets and terms such as “renewable energy” and “renewable materials” were also refined in an attempt to address concerns submitted in response to the proposed revisions.
Business-to-Business Claims. Significantly, the Green Guides now include language clarifying that they apply to “business-to-business transactions.” Companies selling to other businesses must be mindful that their marketing claims may be passed on to individual consumers and, according to the Green Guides, “should be careful not to provide other businesses with the means and instrumentalities to engage in deceptive conduct.”2 This is a very significant "clarification," as it has the potential to expand the application of the Green Guides well beyond consumer products.
Conflicts/Pre-emption. The Green Guides also discuss how they are intended to interact with international standards and federal, state and local laws. The FTC acknowledges that its efforts to harmonize the Green Guides with environmental marketing standards in ISO 140213 was not completely successful, because the goals and purposes of the two sets of standards are not fully aligned. As a result, companies marketing products in both the U.S. market and markets subject to ISO 14021 may need to modify marketing claims for each market to ensure compliance.
With respect to federal, state and local laws, it bears mention that the Green Guides are not enforceable, and therefore cannot directly conflict with or pre-empt other legal requirements. While the FTC states that it will apply prosecutorial discretion when determining when to pursue enforcement, it also states that compliance with other laws is not a defense to FTC enforcement and that the most prudent course is to comply with the most stringent requirements when faced with conflicting standards.
Sustainability. The FTC notably declined to address sustainability claims directly, despite the proliferation of that term. Marketers are nonetheless expected to test for consumer perception of sustainability claims (“and all attendant reasonably implied claims”),4 and to be able to substantiate consumers’ reasonable understanding of that term as used in the marketing claim. The Green Guides do not specifically discuss whether sustainability reports posted on corporate websites may be deemed to constitute marketing.
Life Cycle Assessments (LCAs). The FTC also declined to provide direct guidance on the use of LCA information in environmental benefit marketing claims, other than reiterating the general statement that marketers are responsible for substantiating consumers’ understanding of marketing claims. In some instances, where a general benefit claim is combined with a specific attribute claim (e.g., “This product is better for the environment because it requires less energy to make”), the Green Guides would require an analysis for the product’s environmental trade-offs, which could include a LCA depending on the nature of the claim. While the FTC declined to identify specific LCA methodologies for companies to follow in those situations, it expects marketers to apply the following substantiation analysis: (1) was the LCA conducted and evaluated in an objective manner by qualified persons and is generally accepted in the profession to yield accurate and reliable results, and (2) was the LCA sufficient in quality and quantity based on standards generally accepted in the relevant scientific fields, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that each of the marketer’s claims is true?5
The foregoing is not intended to address all of the issues presented by the revised Green Guides. Companies making marketing claims based on the environmental attributes of their products — whether or not sold to consumers — will need to review these Guides closely and carefully re-evaluate how their environmental marketing claims are being interpreted by consumers.
The FTC is not the only entity that will be scrutinizing environmental marketing claims based on the Green Guides. State attorneys general may bring actions under section 43(a) of the Federal Trade Commission Act to compel compliance with section 5(a) of the Federal Trade Commission Act, while private consumers may use the Green Guides to indicate false or misleading advertising under one or more state false advertising laws. Additionally, companies have, with increasing frequency, been bringing challenges regarding their competitors’ environmental marketing claims before the National Advertising Division of the Council of Better Business Bureaus.