No Need to Be Blue About Green Marketing

An Overview

For the most part, the Green Guides simply apply traditional consumer protection principles to environmental marketing claims. The FTC admonishes against making claims that would mislead a reasonable consumer where the claim is material to a reasonable consumer's (i.e., someone possessing general knowledge) decision. Companies must also ensure that any express and implied messages conveyed by an advertisement are truthful, not misleading, and supported. In addition, companies must posses “competent reasonable and scientific evidence” for any claims they make. What constitutes “competent and reliable scientific evidence” is a hotly debated (and litigated) topic, but the FTC standard is that it consists of “tests, analyses, research, or studies that ' are generally accepted in the profession to yield accurate and reliable results [and] should be ' based on standards generally accepted in the relevant scientific fields ' to substantiate that each of the marketing claims is true.”

The Guides also offer some additional general guidance that should be considered when making any environmental claim:

Overdoing It

An environmental marketing claim should not overstate any of the product's environmental attributes or benefits, whether directly or by implication. Claims with a broad, unqualified focus such as “green” or “eco-friendly” are particularly problematic. Specific environmental benefits should be clearly conveyed. Avoid altogether any claims that have a negligible benefit.

'

Trade-offs

Similarly, marketers should be careful about making general claims that identify a particular benefit. Before doing so, one should analyze trade-offs resulting from the touted benefit to determine if the claim, on the whole, can be substantiated. For example, the Guides note, just because a company comes out with 25% lighter packaging does not mean it can tout environmental benefits, such as reduced packaging. It may be that those bottles take 25% more energy to produce, which could make a generic claim of environmental improvement misleading. Therefore, any claim made for a product that may have a mixed impact on the environment must take the environmental impact over the course of the product's entire lifecycle into account. Unfortunately, the Green Guides do not provide the FTC's view on the appropriate methodology for engaging in such a life cycle analysis.

Make Qualifications Clear

In order to prevent certain claims from being deceptive, companies must qualify them appropriately in any advertising or packaging text. Qualifications should be written in plain language, in a reasonably large font, and clearly and prominently displayed in close proximity to the claim itself.

Is it the Product, Package, or Service?

Whenever you are making an environmental marketing claim, unless it is absolutely clear from the context, you should specify whether the environmental benefit being advertised refers to the product, the product's packaging, a service, or just to a portion of the product, package, or service.

Specific Claims and Admonitions

In addition to providing general advice, the Green Guides also set forth guidance with respect to a number of specific types of claims.

Carbon Offsets

Confusion regarding claims of this type was one of the principal reasons why the FTC revised the Green Guides. Four key issues should be kept in mind when making such claims: 1) Any offset should not be sold more than once; 2) Competent and reliable scientific evidence must support the claim and an appropriate accounting method must be used; 3) Be upfront and disclose if the offset purchase pays for emission reductions that will not occur for at least two years; and 4) Don't claim emission reductions through carbon offsets if the activity that caused those reductions was required by law.

Certifications or Seals of Approval

The Green Guides make clear that a certification or seal of approval can be considered an endorsement. Accordingly, in addition to specific issues related to environmental claims, you must also ensure that the certification/seal complies with the FTC's Endorsement Guides (http://ftc.gov/os/2009/10/091005revisedendorsementguides.pdf) prior to any such use. Endorsements must be accurate, truthful, not misleading, and from a genuine, qualified third party. Any connection between the endorser and the company must be disclosed. Also, keep in mind that notwithstanding any endorsements provided, scientific evidence is still required to support environmental impact claims.

Finally, beware of three common environmental marketing pitfalls: 1) Using an unqualified environmental certification or seal of approval. Such a certification/seal likely conveys that the product offers a general environmental benefit, which as discussed earlier, is not recommended. Rather, it is better practice to state the basis for the certification/seal in close proximity to it. 2) Seals/certifications provided by an industry trade association or group. Such certifications should be disclosed to avoid any issue of deception. 3) Promoting, on the packaging itself, that the manufacturer belongs to an environmental-friendly association. Unless that association analyzed (and approved) the environmental attributes of the product itself, touting the manufacturer's membership on the packaging could be deceptive.

'Compostable'

In order to tout that a product is compostable, all of the materials in the product or package should break down into usable compost safely, in about the same time as the materials with which it is composted. Any limitations ' such as whether or not a product can be composted at home ' must be noted.

'Degradable'

Claims that a product is degradable can only be made if the company can prove that the entire product or package will completely break down within one year. Moreover, the Green Guides state in no uncertain terms that biodegradable claims may not be made for products that are disposed of in landfills because they do not present conditions under which decomposition will occur within one year.

'Free-of'

In order to state that a product is “free of” something, three conditions must be met: 1) The product can only include an amount that would be considered a “trace contaminant”; 2) The amount present cannot cause the material harm that people typically associate with the substance; and 3) The substance cannot have been intentionally added. It is not entirely clear, but if the substance was used in the manufacturing process, the FTC may consider this to have been “intentionally added.”

Also, never use a “free-of” claim if the substance was never associated with that product type or if the product includes another substance that poses an environmental risk similar to the one caused by the substance itself. Otherwise, the ad will likely be considered deceptive.

'Non-Toxic'

While a product that includes a trace amount of a toxic substance cannot be labeled as “non-toxic,” a marketer can disclose that a product only has trace elements of a toxic substance provided that the trace amount is not harmful.

Ozone-Safe/Friendly

Do not represent, either directly or indirectly, that the product, package or service is safe for, or friendly to, the ozone or atmosphere. Period.

Recyclable

To make an unqualified recyclable claim, recycling facilities must be available to at least 60% of the consumers where the product is sold. Otherwise, a company must modify its claims. Be careful, however. Simply stating “Recyclable where facilities exist” or “Recyclable ' Check to see if recycling facilities exist in your area” will not work if product is marketed nationally and the company does not otherwise disclose the limited availability of recycling programs. Additionally, only make an unqualified recyclable claim if the entire product or package (excluding minor incidental components) is recyclable. If only a part of the product/package is recyclable, clearly qualify the claim to avoid any deception charges. On a related note, if any component significantly limits the recyclability of the product, or if the product is shaped in such a way that it would not be accepted in recycling programs, then it should not be marketed as recyclable.

Recycled Content

Do not claim that your product or package is made from recycled content ' which includes recycled raw material, as well as used, reconditioned, and re-manufactured components ' unless it is from materials that have been recovered or otherwise diverted from the waste stream, either during the manufacturing process or after consumer use. As with other environmental claims, if the entire product or package is not comprised of recycled content, any such claim must be clearly qualified. Additionally, if there are numerous sources of recycled content in a product, it is best to state the percentage of each source. Thus, “65% recycled content; including 40% from reconditioned parts” is better than merely stating “65% recycled” where the product contains 25% recycled raw materials and 40% reconditioned parts.

Renewable Energy

Unqualified renewable energy claims can only be made if: 1) the company retains or purchases renewable energy certificates (RECs) to match the use of energy that was derived by fossil fuels; and 2) all, or virtually all, the significant
manufacturing processes involved in making the product or package are powered with renewable energy or non-renewable energy that is matched by RECs. Otherwise, state the percentage, or specify the part of the manufacturing process or product to which the claim applies. Importantly, companies that generate renewable energy ' e.g., through solar panels installed on-site ' but sell all of that electricity and the associated RECs to the utility cannot claim they “use” renewable energy.

According to the FTC, “research suggests that reasonable consumers may interpret renewable energy claims differently than marketers may intend.” As such, the Green Guides recommend specifying the source of the renewable energy (e.g., wind or solar energy). That can be done by either disclosing all the sources, or stating that a mixed of sources was used and specify the source that makes up the greatest percentage, calculated on an annual basis.

Notably absent from the Green Guides is any discussion of two common environmental claims ' “sustainable” and “natural.” The FTC felt that these terms were susceptible to too many different meanings to offer meaningful guidance.

Conclusion

Companies intending to market products that contain environmental claims should consider general advertising and consumer protection principles, as well as consult the Green Guides. Consider qualifying the claim or making a more specific claim, if consumers might otherwise misinterpret the broader claim. Additionally, maintain accurate records regarding the substantiation of any claims.

Jay L. Levine is a partner in the Washington, DC, office of Bradley Arant Boult Cummings LLP. His practice focuses on complex litigation, particularly antitrust and consumer protection matters. He can be reached at [email protected] or 202-719-8215.

Today, more Americans than ever take into account the environmental impact of their purchasing decisions. This has not gone unnoticed by manufacturers, distributors, re-sellers and advertisers of all types. Accordingly, “green marketing” has surged in the past few years. Companies in many industries now regularly tout the environmentally friendly attributes of their products, services and packaging. But, as with any good marketing idea, in-house counsel must be vigilant in ensuring that the advertising and marketing claims that their company is making pass legal muster.

Failing to ensure legal compliance when making green claims in advertising can have serious consequences for a company ' not the least of which is scrutiny from the Federal Trade Commission (FTC). False or deceptive advertising violates the FTC Act, and can bring about civil penalties. An FTC investigation can consume enormous resources ' both money and time. It is also never good business to be on the FTC's radar and labeled as having deceived customers.

Green marketing claims have evolved over time. To address these new claims, as well as clarify previous guidance, the FTC revised its Guides for the Use of Environmental Marketing Claims (www.ftc.gov/os/fedreg/2012/10/greenguidesfrn.pdf). Colloquially referred to as the “Green Guides,” they represent the latest in FTC thinking regarding the appropriateness of making certain claims related to environmental benefits.

An Overview

For the most part, the Green Guides simply apply traditional consumer protection principles to environmental marketing claims. The FTC admonishes against making claims that would mislead a reasonable consumer where the claim is material to a reasonable consumer's (i.e., someone possessing general knowledge) decision. Companies must also ensure that any express and implied messages conveyed by an advertisement are truthful, not misleading, and supported. In addition, companies must posses “competent reasonable and scientific evidence” for any claims they make. What constitutes “competent and reliable scientific evidence” is a hotly debated (and litigated) topic, but the FTC standard is that it consists of “tests, analyses, research, or studies that ' are generally accepted in the profession to yield accurate and reliable results [and] should be ' based on standards generally accepted in the relevant scientific fields ' to substantiate that each of the marketing claims is true.”

The Guides also offer some additional general guidance that should be considered when making any environmental claim:

Overdoing It

An environmental marketing claim should not overstate any of the product's environmental attributes or benefits, whether directly or by implication. Claims with a broad, unqualified focus such as “green” or “eco-friendly” are particularly problematic. Specific environmental benefits should be clearly conveyed. Avoid altogether any claims that have a negligible benefit.

'

Trade-offs

Similarly, marketers should be careful about making general claims that identify a particular benefit. Before doing so, one should analyze trade-offs resulting from the touted benefit to determine if the claim, on the whole, can be substantiated. For example, the Guides note, just because a company comes out with 25% lighter packaging does not mean it can tout environmental benefits, such as reduced packaging. It may be that those bottles take 25% more energy to produce, which could make a generic claim of environmental improvement misleading. Therefore, any claim made for a product that may have a mixed impact on the environment must take the environmental impact over the course of the product's entire lifecycle into account. Unfortunately, the Green Guides do not provide the FTC's view on the appropriate methodology for engaging in such a life cycle analysis.

Make Qualifications Clear

In order to prevent certain claims from being deceptive, companies must qualify them appropriately in any advertising or packaging text. Qualifications should be written in plain language, in a reasonably large font, and clearly and prominently displayed in close proximity to the claim itself.

Is it the Product, Package, or Service?

Whenever you are making an environmental marketing claim, unless it is absolutely clear from the context, you should specify whether the environmental benefit being advertised refers to the product, the product's packaging, a service, or just to a portion of the product, package, or service.

Specific Claims and Admonitions

In addition to providing general advice, the Green Guides also set forth guidance with respect to a number of specific types of claims.

Carbon Offsets

Confusion regarding claims of this type was one of the principal reasons why the FTC revised the Green Guides. Four key issues should be kept in mind when making such claims: 1) Any offset should not be sold more than once; 2) Competent and reliable scientific evidence must support the claim and an appropriate accounting method must be used; 3) Be upfront and disclose if the offset purchase pays for emission reductions that will not occur for at least two years; and 4) Don't claim emission reductions through carbon offsets if the activity that caused those reductions was required by law.

Certifications or Seals of Approval

The Green Guides make clear that a certification or seal of approval can be considered an endorsement. Accordingly, in addition to specific issues related to environmental claims, you must also ensure that the certification/seal complies with the FTC's Endorsement Guides (http://ftc.gov/os/2009/10/091005revisedendorsementguides.pdf) prior to any such use. Endorsements must be accurate, truthful, not misleading, and from a genuine, qualified third party. Any connection between the endorser and the company must be disclosed. Also, keep in mind that notwithstanding any endorsements provided, scientific evidence is still required to support environmental impact claims.

Finally, beware of three common environmental marketing pitfalls: 1) Using an unqualified environmental certification or seal of approval. Such a certification/seal likely conveys that the product offers a general environmental benefit, which as discussed earlier, is not recommended. Rather, it is better practice to state the basis for the certification/seal in close proximity to it. 2) Seals/certifications provided by an industry trade association or group. Such certifications should be disclosed to avoid any issue of deception. 3) Promoting, on the packaging itself, that the manufacturer belongs to an environmental-friendly association. Unless that association analyzed (and approved) the environmental attributes of the product itself, touting the manufacturer's membership on the packaging could be deceptive.

'Compostable'

In order to tout that a product is compostable, all of the materials in the product or package should break down into usable compost safely, in about the same time as the materials with which it is composted. Any limitations ' such as whether or not a product can be composted at home ' must be noted.

'Degradable'

Claims that a product is degradable can only be made if the company can prove that the entire product or package will completely break down within one year. Moreover, the Green Guides state in no uncertain terms that biodegradable claims may not be made for products that are disposed of in landfills because they do not present conditions under which decomposition will occur within one year.

'Free-of'

In order to state that a product is “free of” something, three conditions must be met: 1) The product can only include an amount that would be considered a “trace contaminant”; 2) The amount present cannot cause the material harm that people typically associate with the substance; and 3) The substance cannot have been intentionally added. It is not entirely clear, but if the substance was used in the manufacturing process, the FTC may consider this to have been “intentionally added.”

Also, never use a “free-of” claim if the substance was never associated with that product type or if the product includes another substance that poses an environmental risk similar to the one caused by the substance itself. Otherwise, the ad will likely be considered deceptive.

'Non-Toxic'

While a product that includes a trace amount of a toxic substance cannot be labeled as “non-toxic,” a marketer can disclose that a product only has trace elements of a toxic substance provided that the trace amount is not harmful.

Ozone-Safe/Friendly

Do not represent, either directly or indirectly, that the product, package or service is safe for, or friendly to, the ozone or atmosphere. Period.

Recyclable

To make an unqualified recyclable claim, recycling facilities must be available to at least 60% of the consumers where the product is sold. Otherwise, a company must modify its claims. Be careful, however. Simply stating “Recyclable where facilities exist” or “Recyclable ' Check to see if recycling facilities exist in your area” will not work if product is marketed nationally and the company does not otherwise disclose the limited availability of recycling programs. Additionally, only make an unqualified recyclable claim if the entire product or package (excluding minor incidental components) is recyclable. If only a part of the product/package is recyclable, clearly qualify the claim to avoid any deception charges. On a related note, if any component significantly limits the recyclability of the product, or if the product is shaped in such a way that it would not be accepted in recycling programs, then it should not be marketed as recyclable.

Recycled Content

Do not claim that your product or package is made from recycled content ' which includes recycled raw material, as well as used, reconditioned, and re-manufactured components ' unless it is from materials that have been recovered or otherwise diverted from the waste stream, either during the manufacturing process or after consumer use. As with other environmental claims, if the entire product or package is not comprised of recycled content, any such claim must be clearly qualified. Additionally, if there are numerous sources of recycled content in a product, it is best to state the percentage of each source. Thus, “65% recycled content; including 40% from reconditioned parts” is better than merely stating “65% recycled” where the product contains 25% recycled raw materials and 40% reconditioned parts.

Renewable Energy

Unqualified renewable energy claims can only be made if: 1) the company retains or purchases renewable energy certificates (RECs) to match the use of energy that was derived by fossil fuels; and 2) all, or virtually all, the significant
manufacturing processes involved in making the product or package are powered with renewable energy or non-renewable energy that is matched by RECs. Otherwise, state the percentage, or specify the part of the manufacturing process or product to which the claim applies. Importantly, companies that generate renewable energy ' e.g., through solar panels installed on-site ' but sell all of that electricity and the associated RECs to the utility cannot claim they “use” renewable energy.

According to the FTC, “research suggests that reasonable consumers may interpret renewable energy claims differently than marketers may intend.” As such, the Green Guides recommend specifying the source of the renewable energy (e.g., wind or solar energy). That can be done by either disclosing all the sources, or stating that a mixed of sources was used and specify the source that makes up the greatest percentage, calculated on an annual basis.

Notably absent from the Green Guides is any discussion of two common environmental claims ' “sustainable” and “natural.” The FTC felt that these terms were susceptible to too many different meanings to offer meaningful guidance.

Conclusion

Companies intending to market products that contain environmental claims should consider general advertising and consumer protection principles, as well as consult the Green Guides. Consider qualifying the claim or making a more specific claim, if consumers might otherwise misinterpret the broader claim. Additionally, maintain accurate records regarding the substantiation of any claims.

Jay L. Levine is a partner in the Washington, DC, office of Bradley Arant Boult Cummings LLP. His practice focuses on complex litigation, particularly antitrust and consumer protection matters. He can be reached at [email protected] or 202-719-8215.