News & Insights

Every year, the Australian Competition and Consumer Commission (ACCC) announces its key focuses for the upcoming year through its compliance and enforcement policy and priorities (enforcement priorities) and this year, they’ve released key guidelines to combat ‘greenwashing’. They have previously stated that their priorities reflect the issues impacting the Australian economy, consumers, and businesses in Australia.

“As consumers become more environmentally conscious, businesses need to be honest and transparent when making environmental or sustainability claims so consumers are not being misled. False or misleading claims can undermine consumer trust in all green claims, particularly when consumers are often paying higher prices based on these claims,” said ACCC Chair Gina Cass-Gottlieb.

As a result, some businesses rely on false or misleading claims to make product sales, and businesses that take genuine steps to embrace sustainable practices are at a competitive disadvantage because they are likely to incur higher costs. This demonstrates the need of lowering the risk of misleading consumers, as well as the importance of businesses providing sufficient transparent facts to support environmental claims.

In March 2023, the ACCC conducted an internet sweep and discovered that 57 percent of the 247 businesses evaluated were making potentially false environmental claims. Following that, they presented their long-awaited draft guidelines on environmental claims, stating eight fundamental principles for corporations to follow. The regulatory authority is encouraging submissions on their recommendations, which are open until September 15, 2023.

What is greenwashing?

‘Greenwashing’ occurs when a business misrepresents the extent to which its products, services or practices are environmentally friendly, sustainable or ethical. With the sharp evolution of sustainability (and climate change in particular) greenwashing claims have now become an immense source of legal risk for businesses and consumers alike. With increased investor and customer demands for corporate sustainability, as well as increased scrutiny from regulators and strategic litigants, the ability to navigate the risks associated with greenwashing claims has never been more critical.

Eight guidelines for making credible environmental and sustainability claims

The proposed guidance’s main goal is to strengthen the integrity of organisations’ environmental and sustainability statements and to safeguard consumers from greenwashing. The ACCC identifies eight practical principles to apply when making environmental and sustainability claims. It suggests that using these principles will mitigate risk and ensure businesses are less likely to mislead consumers and therefore less likely to be in contravention of the Australian Consumer Law.

They are:

1.       Make accurate & truthful claims.

2.       Have evidence to back up your claims.

3.       Don’t leave out or hide important information.

4.       Explain any conditions or qualifications on your claims.

5.       Avoid broad and unqualified claims.

6.       Use clear and easy-to understand language.

7.       Visual elements should not give the wrong impression.

8.       Be direct and open about your sustainability transition.

Key Takeaways

There has always been uncertainty around what contravenes the Competition and Consumer Act 2010 (Cth)) when it comes to greenwashing. While this is a draft advisory statement issued by the ACCC, these rarely change and therefore this is likely to reflect the ACCC’s position. As a result, it is a good opportunity to get a head start to assess claims in this light. This may mean modifying packing and marketing material to ensure you are compliant.

Macpherson Kelley recently attended a presentation by the ACCC chair, and it became very evident that being able to properly give evidence is critical when making sustainability claims. If you were thinking about making environmental or sustainability claims but weren’t sure how to do so legally, we can assist your company with in a number of ways:

• making the product/service’s sustainability benefit evident;
• being specific rather than ambiguous (i.e. not making recycled material statements if it is only made from 30% recycled material);
• substantiating sustainability statements with facts;
• making packaging and labelling beneficial for consumers rather than technical or deceptive.

Macpherson Kelley can help

A legal eye can provide clarity to a situation wheredefining greenwashing isn’t black and white. For further information and advice about your advertising obligations, or for a review of your marketing campaigns and collateral, please contact the experts at Macpherson Kelley.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.