In recent times, consumers have increasingly demanded more ethical and sustainable practices from businesses, and for businesses to be held accountable for these practices. Consumers are often willing to pay more for ethical and sustainable products and services. As a result, business reliance on environmental and sustainability claims has also grown.

Using truthful and accurate “green” claims can have great advertising and product differentiation benefits for businesses. However, when such claims are misleading and deceptive, then the business may be found to be engaging in “greenwashing”.

What constitutes greenwashing?

A key risk for business is that “green”, “environmental” and “sustainability” claims can often mislead consumers, as there is often not enough further information provided about these claims. The misleading nature of these broad terms is not always intentional and may arise for a variety of reasons including:

  • a business’ poor understanding of their supply chain;
  • a business’ lack of due diligence before making marketing statements; or
  • a business’ poor reporting practices.

However, there are some businesses that will deliberately make misleading or deceptive statements in respect of ethical and sustainable practices to persuade consumer expectations and influence purchasing decisions.

When businesses make statements about their environmental and sustainability practices there is a huge element of trust from the consumer. Oftentimes, the consumer cannot validate these statements by looking at the product or service, or even using it.

The ACCC’s investigation into “greenwashing” statements

The ACCC has announced that it will prioritise regulating “greenwashing” this year by targeting businesses that make false and misleading statements in respect of ethical and sustainable practices that mislead consumers and undermine consumer trust and confidence in the market.

The ACCC is considering an internet sweep of various environmental claims made by Australian businesses, much like the investigation previously undertaken in Europe and the UK.

Key guidance for businesses in making environmental claims

The key guidance businesses should consider when making a “green” statement are:

  • make clear what sustainability benefit the product / service offers;
  • consider the entire lifecycle of the product – if the claim only relates to one aspect of the product lifecycle, this should be made clear to consumers;
  • avoid using industry jargon, vague or overly-technical language;
  • substantiate your sustainability statement with facts, scientific reports, transparent supply chain information, reputable third-party certification, or other forms of evidence;
  • make only fair comparisons with competitive products (compare ‘apples with apples’);
  • be honest and specific about your sustainability efforts – be transparent about your environmental policies to allow consumers to make an informed choice; and
  • make sure that labels (including visuals) are useful to consumers and not misleading or confusing.

Implementing ethical and sustainable practices can sometimes be a long process for businesses, and the ACCC recognises that businesses should be able to promote the steps they are taking in this transition. However, businesses should be sure to not overstate the status of the transition.