The Australian Competition and Consumer Commission (ACCC) has taken steps towards tackling ‘greenwashing’ in the Australian market, warning businesses that are currently capitalising on environmental and sustainability claims to consider whether their claims are accurate and not misleading.
On 20 September 2022, ACCC Deputy Chair Delia Rickard delivered a speech at the Sydney Morning Herald Sustainability Summit to discuss the practice of greenwashing and announce the regulator’s pending ‘internet sweep’ of environmental and sustainability claims made by Australian businesses. The warning should come as no surprise, as greenwashing was announced as one of the ACCC’s annual consumer and fair trading priorities for 2022/23, as discussed in our previous article here.
In this article, we provide an overview on the practice of greenwashing, break down the key points from the ACCC’s recent speech and provide some tips and takeaways for businesses to consider.
What is greenwashing?
Greenwashing is generally said to occur where a business disseminates inaccurate information to present itself as environmentally responsible when there is little to no merit to its claims.
The act of greenwashing has a significant impact on the purchasing decisions of consumers, who are increasingly interested in supporting ethical and sustainable business practices, even if it costs them more to do so. In most cases, consumers lack the time and resources to verify the accuracy of environmental claims before purchasing, and as such place a great deal of trust in businesses that the sustainability claims they make are accurate and not misleading.
What are the risks of greenwashing?
The act of greenwashing may constitute a breach of the Australian Consumer Law (ACL), in particular section 18 (which prohibits engaging in misleading or deceptive conduct in trade or commerce) and section 29 (which prohibits a person from making false or misleading representations about goods or services).
Section 29 currently attracts a maximum pecuniary penalty of the greatest of:
- $10 million;
- If the court can determine the value of the benefit obtained – 3x the total value of that benefit; and
- If the court cannot determine the value of the benefit obtained – 10% of the body corporate’s annual turnover in the preceding 12 months of the offence.
However, on 28 September 2022, the Federal Government released a new bill proposing to significantly increase these penalties as part of its plan to strengthen Australia’s competition and consumer laws. We summarised details of these proposed changes in our recent article here.
Other consequences that businesses face for non-compliance include court injunctions,1 compensation orders, non-punitive orders (such as community service orders, disclosure orders, probation orders or corrective advertising orders),2 or making adverse publicity orders.3
What can businesses do to ensure they are not ‘greenwashing’?
Delia Rickard suggested a number of steps that businesses can take to improve their environmental claims. These tips for business can be summarised as follows:
- Use clear and specific language when making environmental claims to ensure that your claims are easy to understand and accurately identify the specific part of the product or process being referred to. Ambiguous or broad terms (eg ‘green’) should be avoided.
- Avoid using technical jargon where possible, given that most consumers will not have knowledge of scientific concepts and specific industry standards. Businesses should also avoid relying on ‘technicalities’ – being claims which are technically true, but only if certain conditions are met in practice.
- While standards can be a useful tool, businesses should be wary of which standards they rely on to substantiate environmental claims. Delia Rickard stated in her speech that “many standards have been developed by those who have a vested interest in ensuring that the standards they are required to comply with are not robust“, and that there are “many standards which are dated and require review“. Delia Rickard also noted the importance of having independent environmental experts be instrumental in such a review.4
- Consider the entire lifecycle of a product when making environmental and sustainability claims. If a claim only relates to a specific aspect of a product’s lifecycle, this should be made clear to consumers. Businesses should not attempt to downplay any negative impacts of the production process, eg if a product uses less water in the production process but produces higher emissions, the fact that the product produces higher emissions should not be ignored or reduced.
- Businesses should be transparent about their products and environmental policies so that consumers can make an informed choice. The ACCC encourages businesses to present information in a manner that is easy for consumers to digest (eg easy to follow infographics or QR codes on packaging could be used in place of large volumes of substantiating information that may be difficult for consumers to comprehend).
- Businesses should consider obtaining certification from reputable third-party certification bodies to demonstrate their sustainability efforts to consumers. This can assist in giving comfort to consumers of a business’ environmental practices, provided the certification status is not misrepresented in any way.
The overarching question for businesses to consider is what the ‘ordinary consumer’ would understand a claim to mean. According to Delia Rickard, “an ordinary consumer isn’t someone that has undertaken extensive scientific research into the composition of a product. They aren’t someone that has extensively reviewed all the extrinsic material used to back up a marketing claim. And they certainly aren’t someone that has detailed knowledge of the complex supply chains involved in the manufacturing of a product“,5 and that “while a claim may be technically true, this does not necessarily mean that it will not mislead consumers“.6
How does the ACCC plan to address greenwashing?
The ACCC has stated that it will soon begin an internet sweep of environmental claims made by Australian businesses online, and will use the results of this data to update guidance for businesses and information for consumers. As part of its review and consultation with relevant stakeholders, the ACCC may also consider introducing clearer standards and regulations with respect to environmental claims in order to increase consumer confidence in Australian businesses.
In parallel, the ACCC has made it clear that it “won’t hesitate”7 to take enforcement action against businesses where it becomes aware that consumers being misled or deceived by green claims. A noteworthy litigation matter in this regard is the ACCC’s action against Volkswagen for false representations on its emission ratings, which was previously discussed by our firm here.
How can we help?
We have a dedicated commercial and consumer law team that can assist you with review of marketing materials and provide related advice. Please contact us if you would like more information about the services we provide.
This article was written by Teresa Torcasio, Partner, Zoe Vise, Associate and Katie Lau, Solicitor.
1Competition and Consumer Act 2010 (Cth), Sch 2, s 232.
2Competition and Consumer Act 2010 (Cth), Sch 2, s 246.
3Competition and Consumer Act 2010 (Cth), Sch 2, s 247.
4Delia Rickard, ‘Speech to SMH Sustainability Summit’ (Speech, 20 September 2022)