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It’s Not Easy Being Green: Companies Need to Be Careful Making Sustainability and Green Claims Without Substantiation

In an attempt to align with their clients’ values, a growing number of businesses are selling products that are “ethically” sourced or “sustainable.”

Both the US and the EU have started to monitor such claims and take action. Specifically, in an annual review of digital advertising, European consumer protection authorities concluded that 42 percent of “green” advertising claims were exaggerated, false, or deceptive and could potentially qualify as unfair commercial practices under European Union rules.

Background

To keep up with the rising trend of climate and environmental consciousness, businesses across industries have gone to great lengths to create and promote eco-friendly products that appeal to the environmentally-conscious consumer. However, the rise in eco-friendly offerings has brought with it heightened scrutiny by regulatory agencies across the globe.

Over the past few years, consumer protection authorities in the US and abroad have signaled their intent to crack down on advertising claims that exaggerate or overstate the environmental benefits of the advertised product or service, otherwise known as “greenwashing.”

The European Commission “Greenwashing” Sweep

Every year, the European Commission (“EC”) and national consumer protection authorities throughout the European Union conduct screenings, or “sweeps,” of the digital marketplace to identify potential breaches of EU consumer protection law. This year, for the first time ever, the sweep focused on greenwashing.

In its review, the EC identified 344 potential greenwashing cases, of which 37 percent included vague and general terms such as “conscious,” “eco-friendly,” and “sustainable.” According to the EC, these claims “convey the unsubstantiated impression to consumers that a product had no negative impact on the environment.” The EC also found that over half of the identified claims lacked sufficient information for consumers to judge their accuracy. Overall, the EC found that in 42 percent of cases, authorities had reason to believe the green claims were exaggerated, false, or deceptive and could potentially qualify as unfair commercial practices under EU rules.

The findings of the sweep will inform an ongoing EC initiative to develop a more detailed legislative framework to protect consumers from “greenwashing,” with a legislative proposal expected later this year. European national authorities have also announced their intent to contact the identified companies regarding their green claims and request information to demonstrate compliance with EU consumer protection rules.

What this Means for US Brands

While the sweeps were conducted by European regulators, “greenwashing” is disfavored on both sides of the Atlantic. These recent developments in the EU may presage additional enforcement action in the US under the Biden Administration. As in Europe, US state consumer protection agencies and federal regulatory bodies regularly monitor environmental claims in advertising and marketing materials, including “sustainable,” “eco-friendly,” and “recyclable” claims. Under US law, such claims would likely be classified as “general environmental benefit” claims. The US Federal Trade Commission has cautioned US advertisers that “they should not make unqualified general environmental benefit claims” because “it is highly unlikely that marketers can substantiate all reasonable interpretations of these claims.” As we’ve seen, unsubstantiated environmental claims can also lead to class actions with potentially hefty price tags. Before making any environmental claims, advertisers should ensure that the claims are properly qualified and adequately substantiated.

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