Citing a “virtual tsunami” of environmental marketing claims during the past few years, the Federal Trade Commission (FTC) recently announced several initiatives designed to ensure that such claims do not confuse or mislead consumers. These initiatives are particularly relevant to anyone promoting green developments, touting building materials as green, or otherwise attempting to obtain a green certification for a project.
The Role of the FTC
On June 9, 2009, James A. Kohm, Associate Director of the Enforcement Division in the FTC’s Bureau of Consumer Protection, testified before a subcommittee of the Committee on Energy and Commerce of the U.S. House of Representatives. Mr. Kohm’s testimony described the three roles the FTC plays with respect to companies that tout green attributes (such as the recycled material content) of their products and services:
- First, the agency promulgates rules and guides (the “Green Guides”) to make the “rules of the road” clear for businesses.
- Second, the FTC challenges fraudulent and deceptive advertisements through enforcement actions.
- Third, the FTC publishes materials to help consumers make informed purchasing decisions.
Mr. Kohm’s then described in detail the FTC’s work in each of these three areas.
Mr. Kohm explained that the FTC is currently reviewing its Green Guides to make sure they address new green marketing claims that were not in use when the Green Guides were first issued (in 1992) or later revised (in 1996 and 1998). The Green Guides, which apply to all forms of environmental marketing, consist of general principles, specific guidance, and examples on the use of environmental claims. The Green Guides are not enforceable regulations. If, however, a marketer makes claims that are inconsistent with the Green Guides, the FTC can take action under Section 5 of the FTC Act, which prohibits unfair or deceptive practices.
The FTC recently held a series of public workshops and sought public comments to explore three new green marketing issues: carbon offsets and renewable energy, green packaging claims, and claims for green building and textiles. Mr. Kohm explained that the FTC plans to conduct its own research on consumer perceptions of such terms as “green,” “renewable,” “eco-friendly,” “sustainable,” and “carbon neutral,” and expects to revise the Green Guides based on its research and input from the public workshops later this year.
Mr. Kohm also described recent enforcement actions challenging green marketing claims involving the construction industry. For instance, the FTC recently targeted marketers of home insulation claiming that the marketers overstated the insulating properties of their products. In addition, the FTC has gone after marketers claiming their products were biodegradable when the products do not “decompose into elements found in nature within a reasonably short period of time after customary disposal.” Similar enforcement cases can be expected involving other building materials. In such enforcement actions, the FTC typically seeks civil penalties and injunctive relief.
Finally, Mr. Kohm described several consumer education products relevant to the construction industry. For instance, the FTC has issued guidance entitled, “Sorting out Green Advertising Claims.” The agency’s interactive website, Saving Starts @ Home, also offers tips to help consumers conserve energy and save money when purchasing insulation, heaters, and similar building products.
These recent FTC initiatives with respect to green claims involving building products are not surprising. When the FTC announced the public workshops focusing on green claims involving building materials, it noted the increased demand for green construction and the fact that green marketing claims had become “prevalent for a wide range of building products including flooring, carpeting, paint, wallpaper, lighting, insulation, and windows.” The FTC also mentioned that such claims are often supported by third-party certification programs which have grown substantially since the last revision of the Green Guides. The FTC’s goal is to make sure that such claims and certifications are not misleading to customers.
Examples of green building certification programs include the Green Building Council’s Leadership in Energy and Environmental Design program (LEED); the National Association of Homebuilders’ Green Building Standard; and Green Globes’ Green Building Initiative. Builders also can obtain an “environmentally friendly” certification from the federal government through the Energy Star program, which certifies homes based on energy use.
The Danger of Greenwashing
Until the FTC provides additional guidance, the construction industry and marketers of building products need to make certain that any claims about the green attributes of their products or services are clear, truthful, and independently substantiated. If a company engages in “greenwashing,” the term being used to describe vague or misleading green marketing claims, it may face more consequences than simply potential FTC enforcement. Companies engaged in greenwashing could be subject to claims by consumers or competitors based on breach of contract, fraud, unfair competition, or detrimental reliance. They could find themselves restricted from selling their products through retailers who have announced plans to assess independently the green attributes of the products they sell. They could also experience consumer backlash and brand dilution if the green claims are perceived by the public as bogus. Consumer blogs are happy to identify and rate green marketing claims. See, for example, http://www.greenwashingindex.com/. So, while consumer demand will continue to require building product and construction companies to advertise the green attributes of their products and services, they need to be sure that any such green claims are legitimate.