Speaking at The Sydney Morning Herald Sustainability Summit, Australian Competition and Consumer Commission Deputy Chair Delia Rickard said the ACCC will be actively targeting greenwashing, warning that businesses that make false or misleading claims undermine consumer trust and confidence in the market.

With increased demand from consumers for more ethical and sustainable practices by Australian retailers, it is no surprise that the ACCC have announced that consumer and fair-trading issues relating to environmental claims and sustainability are being treated as a priority.

What is greenwashing?

‘Greenwashing’ generally involves making unsubstantiated or misleading representations about the environmental impact of the production, distribution, use and/or disposal of a good or service, or the overall operation of a business. This is not a new term for the ACCC and has previously been referred to as ‘green marketing’.

Under the Australian Consumer Law (ACL), it's illegal for businesses to engage in conduct that misleads consumers, including through greenwashing, but there are currently no clear guidelines on how greenwashing is regulated.

Many businesses have raised concerns with the lack of a common definition or standard in Australia for terms such as ‘biodegradable’, ‘recyclable’ and ‘compostable’, as there is no benchmark against which a product’s performance should be measured. This was acknowledged in Rickard’s speech. The ACCC is not only actively monitoring green claims within the market but aiming to provide more guidance on how businesses can authentically ‘go green’.

Key takeaways

We have highlighted a few key takeaways for retailers that emerge from Rickard’s speech.

  • Making sustainability work for business and consumers requires a multi-pronged approach. The ACCC plays a part in this by ensuring that businesses tell the truth, but there will also be roles for standards bodies, certification schemes, industry and governments via policy reform.
  • The ACCC has received growing concerns that some businesses are falsely promoting environmental or green credentials to capitalise on changing consumer preferences. Sometimes, despite best intentions, businesses may inadvertently mislead consumers for a variety of reasons, such as a poor understanding of their supply chain, a lack of due diligence before making marketing claims, or poor reporting practices. But there is also an element of the market that will deliberately ‘fudge or bend the truth’ and will create a misleading impression to meet consumer expectations.
  • It recognises that businesses should be able to promote the steps they are taking in this transition. But claims made in this area can be tricky. While businesses may look to use short and snappy slogans and claims, rather than lengthy explanations of measures underway, it is important to convey accurate information to consumers. Businesses in these positions need to be careful to not overstate the status of their transition through the claims they make.
  • We are also seeing more businesses engage in corporate rebranding to appear ‘greener’. However, broad statements about corporate sustainability may not always fully align with the products or services being provided.
  • 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.
  • There are a number of trade marks that businesses may use in advertising and on packaging to help ‘sell’ their green credentials, but these are to be used with caution.
  • Businesses should be wary of making any general claims if they do not know the environmental practices and impacts of each of the businesses involved in their supply chains.
  • The ACCC will soon be commencing an internet sweep of various environmental claims made by Australian businesses and it will release more information on this soon. The ACCC will be using data from the internet sweep to update guidance for business and information for consumers on environmental claims.
  • The ACCC is working closely with other regulators, including the Australian Securities and Investments Commission and the Clean Energy Regulator in taking a coordinated approach to addressing the broad range of issues relating to sustainability.
  • The ACCC won’t hesitate to take enforcement action where it sees that consumers are being misled or deceived by green claims – just as it did against Volkswagen for false representations about compliance with Australian diesel emissions standards. In that matter, the Court ordered Volkswagen to pay A$125 million in penalties.

How does it impact the retail sector?

The reputation of a retail brand can be tarnished if the ACCC determines that it has made misrepresentations about its sustainability practices. As well as reputational damage, the ACCC has emphasised it will take enforcement action where necessary.

Just last week, Mosaic Brands were issued with two infringement notices relating to an alleged false or misleading representation promoting a face mask that as approved by the Food and Drug Administration (US) and Conformitè Europëenne (EU), when in fact it was not. It was fined A$266,400 in penalties.

It is important that retailers can support the claims they are making about sustainability, whether through reliable scientific reports, transparent supply chain information, reputable third-party certification, or other forms of evidence.

What can retailers do to prepare?

As the ACCC is conducting an internet sweep, retailers should review their marketing campaigns, websites and consumer-related material to ensure that their claims are clear and specific and avoid using vague language to describe their products or services.

Before incorporating the terms ‘green’ or ‘sustainable’ into promotion of a product, consider the entire lifecycle of a product and whether these terms can be applied to all aspects of a supply chain.

While standards and trademarks can be a useful tool to guide retailers, they should be wary which standards are being relied upon to substantiate environmental claims. It is therefore important that certifications and trademarks are not misused and there are appropriate verification processes in place. Businesses should consider collaborating with reputable third-party certification bodies. This will not only help consumers make decisions but provide guidance to businesses on how to improve their practices.

As the ACCC recommends, retailers should also be transparent about their products and environmental policies, to allow consumers to make an informed choice. Retailers can think creatively about how this information can be presented, particularly for products sold in brick-and-mortar stores. Some ideas include the use of QR codes on product packaging, which lead consumers to further information.

The overall takeaway is that any claims about being sustainable should be supported by extensive research and evidence that is available to consumers to allow them to make an informed decision before purchasing a certain product. If retailers are unable to support certain claims of sustainability, they should not be made.