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Taking Greenwashers to Task: FTC Enforcement Puts Manufacturers on Alert

Since the Federal Trade Commission filed three complaints against retailers in early June, manufacturers have certainly taken notice and are re-evaluating the way they introduce environmental claims.

Over the last month, I have traveled extensively visiting manufacturers across a wide spectrum of industries. During these discussions, there has been a recurring theme: Manufacturers have become more aware of the potential liabilities involved in making green claims.

Since the Federal Trade Commission (FTC) filed three complaints against retailers in early June, manufacturers have certainly taken notice and are re-evaluating the way they introduce environmental claims.

Created in 1914, the FTC aims to prevent unfair methods of competition in the marketplace. In the "green space," the commission generally serves three purposes:

1.    Create rules for businesses to follow (Green Guides)
2.    Enforce the rules against misleading and fraudulent advertising
3.    Help consumers make informed purchasing decisions (Appliance Energy Guide)

In 1992, the FTC released the first Green Guides to show how consumers understand environmental marketing claims. Whether or not the guides have had a profound impact over the past 17 years is debatable. In the early and mid 1990s, the FTC filed dozens of enforcement actions against manufacturers and even restaurants. However, since that time enforcement actions have been limited.

With the new enforcement actions the FTC undertook last month, manufacturer mindset has begun to change. Companies that have prided themselves by making products with reduced environmental impacts have suddenly realized that strong substantiation of claims is not just a competitive advantage, but a way to mitigate business risk.

In a recent webinar, I presented on green building products and eco labeling (one day before the recent FTC complaints), I polled the audience to find out just how many participants were familiar with the FTC Green Guides. To my surprise, less than 30 percent had even heard of the FTC Green Guides. Because many marketers are still unfamiliar with the Green Guides and due to the increasing interest in protecting their companies from the liability of making deceptive claims, here is a brief primer on some of the essentials included in the guides.

- The guides apply to any and all environmental marketing claims. This includes labeling, promotional materials and other types of marketing. Claims extend beyond words and slogans. An environmental marketing claim can include symbols, logos, brand names, pictures or any other means.

- Environmental claims need to be clear in the type of language used, in the way a message is portrayed and in understanding what the message applies to. When necessary, qualifying statements should be used to ensure clarity of message.

Overstatement and Relevance
- Claims should not overstate an environmental benefit or attribute of a product. Furthermore, one of the more complex concepts is relevance. The claim should be relevant to the product type, i.e., should not say the product does not contain a harmful substance when in fact no products of its type contain the harmful substance and should not exaggerate a benefit that may in fact be negligible.

- Claims should also not make general or vague statements, and these are often the easiest to spot on store shelves. Products claiming to be "earth smart," "eco-friendly" and other related phrases are implying a general environmental benefit that can be confusing to consumers.

- Perhaps the most important guidance provided is the requirement for substantiation. Anyone making an environmental marketing claim must have underlying proof. The guides go on to define the reasonable basis for substantiation to include:
"… competent and reliable scientific evidence, defined as tests, analyses, research, studies or other evidence based on the expertise of professionals in the relevant area, conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results."
Time will tell if the FTC takes action against others. If the FTC does continue to enforce the Green Guides, you will see an increasing number of manufacturers taking seriously the responsibility of making environmental claims. It will also lead to more scientific-based decision making and marketing, as more manufacturers look to ensure their substantiation is rock solid to mitigate risk of legal enforcement and negative publicity.

Joshua Saunders is the Global Service line manager for UL Environment Inc. (ULEI), a wholly owned subsidiary of Underwriters Laboratories Inc. As part of his role, Joshua is the program owner overseeing environmental verification and certification services.

Original image by LCBO.

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