“Make sure it’s right…” – Unpacking ACCC’s draft guidance to businesses on improving their environmental claims and avoiding greenwashing 

On 14 July 2023, the ACCC published a 39-page draft guidance (ACCC Guide)¹ to assist businesses with improving their environmental claims and avoid straying into the murky world of greenwashing.

The ACCC Guide follows the ACCC’s greenwashing report in March 2023,² which we discussed in a previous article.³ In that report the ACCC detailed the findings of their internet sweep of almost 250 diverse businesses, which revealed an alarming level of greenwashing conduct. With these concerns in mind, the aim of the ACCC Guide is to inform businesses on what it considers to be good practice when it comes to making environmental claims and to safeguard consumers, who “can find it difficult to verify whether environmental claims are true” and may be susceptible to greenwashing conduct.⁴

What does the ACCC Guide cover?

The ACCC Guide is intended to provide general guidance to businesses of their obligations under the   Australian Consumer Law (ACL)⁵ as they relate to environmental and sustainability claims. The ACCC Guide outlines:

1. what the ACCC considers to be good practice when it comes to businesses making environmental and sustainability claims about their products and services, having regard for their ACL obligations;
2. the eight principles that the ACCC encourages businesses to apply when making environmental and sustainability claims; and
3. the ACCC’s compliance and enforcement approach to breaches of the ACL caused by greenwashing conduct.

In this article we summarise some of the key points raised in the ACCC Guide.

What are the eight principles?

The ACCC Guide identifies eight key principles that, in the ACCC’s view, will assist businesses with compliance.

The eight principles recommended by the ACCC, which are supported by practical examples and case studies in the ACCC Guide, are summarised as follows:

PRINCIPLE 1: Make accurate and truthful claims

1. Under this principle, businesses should ensure that claims are not false or only partially true. This includes taking adequate measures to substantiate information from suppliers if the business involves selling products provided by third parties.
2. Regarding claims that are supported by scientific evidence or research, businesses must not present scientific evidence or research as being universally recognised if that evidence or research is inconclusive or contentious.
3. Businesses should not make claims that “exaggerate an environmental benefit or understate an environmental harm”.⁶ To steer clear of such conduct, businesses should specify precise environmental benefits of their products or services, quantify all benefits that are achieved (if applicable), keep away from general or “overall positive” statements that overlook environmentally harmful aspects of the business and avoid vague scientific opinions that are potentially irrelevant.
4. Businesses should only make meaningful claims that describe a genuine benefit associated with the product, service or business. A claim is not considered meaningful if all similar businesses, products or services share the same feature that is being claimed or if it promotes benefits that are “irrelevant, insignificant”,⁷ or presents a legal requirement as the business’ own green credentials.
5. If comparisons between products, services or businesses are made in a claim, they must be transparent, fair and true relating to the environmental impacts being compared. Details expanding on such comparisons should always be included so that consumers can easily understand what is being compared. In addition, any comparisons made by a business should use current or updated information, be like-for-like (i.e. made between products or services that can be substituted for each other), relate to verifiable and significant characteristics made against the same standards and not withhold relevant information required for consumers to make informed purchasing decisions.
6. Claims about the future should be made reasonably. Any predictions made by businesses in relation to environmental matters, should be based on reasonable grounds and the business must genuinely intend to achieve all future goals that it claims it plans to achieve. For example, a business ought to be able to show that it has appropriate business plans and investment approvals in place to make the changes necessary to meet the predicted goals. In this regard, any goal or initiative should be realistically achievable and should be revised if the business is not on track to meet that goal or initiative.

PRINCIPLE 2: Have evidence to back up your claims

1. The ACCC notes that all environmental claims made by a business should be reasonably backed up by evidence and that the evidence should ideally be publicly available. Evidence that is independent and backed by scientific studies is generally considered to be the most credible. This principle also requires businesses to make any supporting evidence “as easy to find and understand as possible”,⁸ businesses are encouraged to use accessible links or marketing tools like QR codes, brochures, dedicated webpages or charts and graphs. The ACCC Guide also includes some helpful guidelines on when to rely on scientific studies and laboratory test results to make environmental claims.⁹
2. Obtaining third-party certifications is a recognised way to make environmental and sustainability claims credible. However, businesses that use this method to substantiate their claims should ensure the certification’s scope applies directly to what is being claimed and is not mischaracterised or disproportionately emphasised in promotion materials. Businesses should also be mindful that certification is an ongoing process and continuous compliance is of the utmost importance (i.e. if a certified claim is no longer true, the certification must also be removed from the business’ marketing schemes). The ACCC Guide provides further tips on what to look for when choosing a certification scheme.¹⁰

PRINCIPLE 3: Don’t leave out or hide important information

1. Businesses must not omit information as it could mislead consumers. In the context of environmental and sustainability claims, the ACCC had found by way of its internet sweep in 2022 that contravening businesses bolstered their green credentials by hiding negative environmental impacts that could minimise the effect of their marketing materials.
2. In the case of information presented in small print (e.g. disclaimers, disclosures or clarifications), businesses are advised to only include details that support an overarching claim. Therefore, anything in small print must not be a claim in itself or contradict the message or impression that a claim intends to give.
3. A genuine claim must take into account the full lifecycle of a product or service. A product or service may impact the environment differently at various stages of its lifecycle. Businesses should therefore specify clearly what the positive environmental impacts are in their claims and identify the extent to which they apply. For example, some products may contain sustainable components, but the overall manufacturing process may damage the environment.  To ensure that consumers can make an informed decision about a product’s claimed sustainability, the ACCC Guide recommends that businesses provide the full picture of a product’s lifecycle when they advertise claims about that product’s impact on the environment.

PRINCIPLE 4: Explain any conditions or qualifications relating to your claims

A claim may be conditional if a marketed feature only becomes true under specific circumstances. In these cases, businesses must clearly set out the nature of the condition. If certain steps need to be actioned for environmental benefits to be realised, those steps must be described in detail to the consumer. In doing so, businesses need to consider the standard usage of products or services and the conditions they are normally in when sold, as well as any requirements to access infrastructure, technology and other resources in order for sustainable impacts to take effect.

PRINCIPLE 5: Avoid broad and unqualified claims

1. Broad and absolute language such as ‘green’, ‘environmentally friendly’ or ‘free’ cannot be qualified and will not suffice as a genuine claim. Vague terminology tends to be a blanket coverage of a variety of benefits and could be misleading if any of those benefits does not apply to businesses making the claim. Therefore, it is essential to make the claim as specific as possible and offer any further clarifications with supporting information when necessary.
2. The ACCC has expressed caution about making claims about greenhouse emissions associated with their products, services or business and their overall impact on climate change, given the complexities involved in quantifying these impacts. It should be assumed that consumers will not readily appreciate what “climate neutral” or “net-zero” refers to. Accordingly, the ACCC Guide outlines some practical steps that businesses should take when making claims relating to greenhouse emissions, such as undertaking thorough emissions baseline assessments using recognised methods, communicating all steps taken to reach the basis of the claim, providing verified and up-to-date information on the relevant scope 2 (or indirect) emissions and carbon offsets, as well as accounting for different types of greenhouse gas emissions.
3. In addition to the above, businesses in highly polluting industries must take extra care in ensuring all claims are accurate and takes into consideration the negative impacts of the industry.

PRINCIPLE 6: Use clear and easy-to-understand language

This principle echoes the underlying basis for many others – make clear representations so consumers can immediately understand the claims that are being made. In order to achieve this, the ACCC recommends that businesses avoid technical jargon that ordinary and reasonable consumers may not understand and, secondly, assume words will convey their common meaning. The ACCC Guide reinforces that businesses should not presume that consumers will correctly interpret the meanings of the words that they use in marketing materials. Where terms used in marketing materials may have multiple potential meanings, the ACCC warns businesses to be particularly clear on the intended meaning of the term.

PRINCIPLE 7: Visual elements should not give the wrong impression

1. Use of visual elements are common in marketing schemes but those used in environmental claims should be considered carefully.  Consumers could misinterpret the use of environmental images or colours as a broad claim of an environmental benefit that may not be true, or may only be partially true.
2. Businesses should not use widely recognised symbols (such as the mobius loop for recycling) in relation to a claim if they are unsure whether the claim meets the criteria for the symbol. If such a symbol is used, be sure to provide a clear explanation next to the symbol of how it applies to the claim and why it is relevant. In the case of recycling, the mobius loop can represent that the product is made of recycled materials or that the materials are recyclable, or both. Without explaining the context in which the symbol is used, consumers may be misled in thinking that the product has all these characteristics, which may not be true.
3. If a business uses third-party labels and certifications to indicate that its products have been certified by an independent third-party scheme, care must be taken about how such a symbol is used.  Businesses should only use third party symbols or certification logos if it is accompanied by a clear explanation of the relevant certification scheme and its applicable scope (e.g. whether it extends to only some parts of a product, service or business or covers their entirety).

PRINCIPLE 8: Be direct and open about your sustainability transition

1. The ACCC encourages businesses to be confident about discussing the steps they are taking to reduce their environmental impact but reminds businesses that in doing so, businesses must not mislead consumers about their progress in that transition. To avoid misleading consumers, businesses should not use vague or unclear statements to discuss their transition progress, or make statements that suggest that they have progressed further along the transition process than is the case. Businesses should also be mindful not to downplay any detrimental impacts that may be ongoing as they transition to a more sustainable model.
2. This principle also reiterates points made in Principle 1 regarding aspirational claims. All objectives or claims made by business in connection with their transition process must be realistic and based on what is actually required in order to achieve those goals. Business plans and investment authorisations connected with the goals, may be some of the ways that businesses can demonstrate that they have grounds for making aspirational claims.

What can the ACCC do if a business doesn’t comply?

Generally, the ACCC will pursue breaches of the ACL relating to environmental or sustainability claims in line with its Compliance and Enforcement Policy (found here).

The ACCC Guide refers to the following main powers under the Competition and Consumer Act 2010 (Cth) (CCA):

• Section 155 Notices – A notice issued under section 155 of the CCA allows the ACCC to gather information and/or require a person to attend an examination to give evidence as part of an investigation. Refusal or failure to comply with a section 155 notice, or providing false or misleading information, may lead to:
  • in relation to conduct on or after 1 January 2023:
    • fines of up to $137,500 for corporations and $27,500 for individuals; and/or
    • 2 years’ imprisonment for individuals,
  •  in relation to conduct before 1 January 2023:
    • fines of up to $111,000 for corporations and $22,200 for individuals; and/or
    • 2 years’ imprisonment for individuals.

For a more comprehensive guide on the ACCC’s use of its section 155 powers, click here.

• Substantiation Notices – Where a potentially contravening environmental claim has been made, the ACCC may issue a substantiation notice under section 219 of the ACL to require the business to give information and/or produce documents that could substantiate the claim. This notice is used as a “preliminary investigative tool”¹¹ that helps determine whether there is a need to further investigate the business and its claims. Refusal or failure to comply with a substantiation notice, or providing false or misleading information, could result in an infringement notice or court order for penalties (discussed below).

• Infringement Notices – If the ACCC believes, on reasonable grounds, that a person or business has contravened the ACL (i.e. engaged in greenwashing conduct), it may issue an infringement notice. Depending on the alleged contravention and the surrounding facts, the infringement penalties differ but are generally fixed at:
  • in relation to conduct on or after 1 January 2023, up to:
    • $16,500 for corporations;
    • $165,000 for listed corporations; and
    • $3,300 for individuals; or
  • in relation to conduct before 1 January 2023, up to:
    • $13,320 for corporations;
    • $133,200 for listed corporations; and
    • $2,664 for individuals.

The ACCC’s use of infringement notices is further detailed in its published guide that can be found here.

• Penalties – As discussed in previous articles, the (not so recent) super penalty regime has now taken effect. By way of court action, a court may penalise a corporation and individuals for each contravention of the relevant provision of the ACL. For corporations, the potential penalties that may be imposed by a court could reach $50 million or more. For individuals, the maximum penalty is $2.5 million. Businesses should also take note of potential criminal liability for offences under the ACL.

For more information about the current penalty regime, please refer to our article here.

What happens now?

As we have previously noted, “several active investigations [are now] underway” and the ACCC will “engage directly with businesses and industry associations to improve compliance with the Australian Consumer Law”.¹² The publication of the ACCC Guide suggests that the ACCC will continue to prioritise its crackdown on greenwashing in the coming months and beyond.

Consultation in relation to the ACCC Guide is now open and will remain open until 15 September 2023, for consumers, businesses and other stakeholders to provide feedback. In particular, the ACCC has indicated that they want to hear feedback from small business and consumer groups on whether the ACCC Guide addresses:

1. common difficulties businesses face when making environmental claims; and
2. common issues consumers face in understanding what environmental claims mean.

Specific consultation questions have been listed for business and industry associations, as well as consumers and consumer advocates in order to finalise the eight draft principles.

Submissions can be made on the ACCC Consultation Hub at https://consultation.accc.gov.au/accc/environmental-and-sustainability-guidance/.

While businesses attempt to navigate around all eight practical principles (and any newer versions released in the future), the key takeaway for now about making an environmental claim is to “make sure it’s right” (i.e. not false, misleading or deceptive), and in the case of any uncertainty, “…don’t make the claim”.¹³

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 and Katie Lau, Solicitor.

¹Australian Consumer and Competition Commission, Environmental and sustainability claims – Draft guidance for business (July 2023), <https://www.accc.gov.au/about-us/publications/environmental-and-sustainability-claims-draft-guidance-for-business>
²Australian Consumer and Competition Commission, Greenwashing by businesses in Australia – Findings of the ACCC’s internet sweep of environmental claims (March 2023), <https://www.accc.gov.au/media-release/accc-%E2%80%98greenwashing%E2%80%99-internet-sweep-unearths-widespread-concerning-claims>
³Ibid.
⁴Above n 1, page 7.
⁵Competition and Consumer Act 2010 (Cth), Sch 2
⁶Above n 1, page 13.
⁷Ibid.
⁸Above n 1, page 16.
⁹Ibid.
¹⁰Above n 1, page 18.
¹¹Above n 1, page 34.
¹²Australian Consumer and Competition Commission, ‘ACCC ‘greenwashing’ internet sweep unearths widespread concerning claims‘ (Web Page, February 2023), <https://www.accc.gov.au/media-release/accc-%E2%80%98greenwashing%E2%80%99-internet-sweep-unearths-widespread-concerning-claims>
¹³Australian Consumer and Competition Commission, ‘ACCC publishes draft guidance to improve businesses’ environmental claims’ (Web Page, July 2023), <https://www.accc.gov.au/media-release/accc-publishes-draft-guidance-to-improve-businesses-environmental-claims>