ACCC releases final guidance to curb greenwashing

Following its commitment to clamp down on ‘greenwashing’ practices among Australian businesses, the Australian Competition and Consumer Commission (ACCC) has now published its final guidance on environmental marketing claims. This fortifies the ACCC’s stance on ensuring that all environmental marketing and advertising claims are transparent and honest, with the goal of bolstering consumer trust and enabling fair business competition.

Background

In our previous article from July this year, we examined the ACCC’s draft guidance, which was aimed to help businesses steer clear of greenwashing. Greenwashing is the practice of making representations relating to the environmental or sustainable benefits of products or services that are not supported by evidence and, as such, may be false or misleading.

Since then, and after considering broad-based stakeholder feedback, the ACCC has finalised its position. The ACCC has also committed to releasing additional guidance on specific topics, such as emission and offset claims, in early 2024.

The final guidance

The essence of the final guidance mirrors the principles previously outlined in the ACCC’s draft. It delineates eight principles designed to aid businesses in aligning their marketing strategies with genuine environmental benefits, consequently avoiding misleading consumers – a practice that has become an ACCC enforcement and compliance priority.

The eight principles

Highlighting the need for accuracy, honest representation, and prominence of evidence, the ACCC’s final eight principles are as follows:

1. Make accurate and truthful claims: ensure all claims are true, accurate and represent the genuine environmental impact, and assess the reliability of outside scientific studies or research that is cited to bolster a claim.
2. Have evidence to back up your claims: substantiate claims with credible, scientific and independent evidence that is easily accessible to consumers.
3. Don’t hide or omit important information: provide all relevant and important information that enables consumers to make informed decisions. Businesses should be careful to avoid omitting relevant information from their representations to consumers, or otherwise ‘burying’ important details in fine print or small text.
4. Explain any conditions or qualifications on your claims: clearly explain any conditions or qualifications relating to claims, including where a claim is only accurate in certain circumstances.
5. Avoid broad and unqualified claims: avoid broad and unsubstantiated claims and ensure that any disclaimers are prominently displayed – the regulators’ attention will likely be focused on vague assurances.
6. Use clear and simple language: use clear and simple language that avoids technical terms. In some cases, stating a claim in scientific terms will be the most suitable and understandable course of action; however, if a phrase has a non-technical equivalent, it is doubtful that adopting a scientific term will be the clearest approach.
7. Visual elements should be accurate: visual elements, such as diagrams and images, should not give a wrong impression as to the environmental benefits of a product or service. The overall impression given to an ordinary and reasonable consumer is important.
8. Be direct and open about your sustainability transition: be transparent and direct about sustainability objectives, including by avoiding aspirational targets, and detail action plans for sustainability transitions.

Following the principles does not guarantee compliance with the Australian Consumer Law (ACL). Companies should take a proactive stance against greenwashing practices and make sure that their obligations to consumers are met.

The ACCC’s internet sweep and continuous oversight

Reaffirming its proactive approach and to inform the final guidance, the ACCC conducted an internet sweep in late 2022 to identify any misleading environmental and sustainability marketing claims. The ACCC has warned of ongoing investigations into greenwashing and cautions businesses against breaches of the ACL.

The ACCC has specified its focus on environmental claims that businesses make in key areas. It has underscored the importance of substantiating claims related to:

• resource use and waste management
• materials used and sourcing
• product durability and repairability
• options for disposal and end-of-life
• energy consumption and emissions
• water usage
• pollution and harmful substances
• deforestation and impacts on land, aquatic environments, and biodiversity.

Enforcement considerations

In its effort to enforce compliance with the ACL, the ACCC will pay special attention to conduct with significant public interest, substantial consumer detriment, or that involves large enterprises impacting national markets. Conduct representing new or critical market issues, or where ACCC action can enlighten or deter market participants, will also be under the microscope.

The ACCC has various regulatory powers (such as issuing section 155 notices under the Competition and Consumer Act 2010, substantiation notices, infringement notices, and seeking penalties) to investigate and address potential ACL contraventions. Businesses should anticipate continued use of these powers, especially when guidelines are not being followed.

Conclusion

The finalised guidance is a clear indicator of the ACCC’s resolve to address greenwashing and protect the integrity of environmental claims in the marketplace. Businesses are encouraged to closely review their advertising and operational practices to guarantee alignment with these principles. The final guidance can be found on the ACCC website,

If you would like to receive greenwashing compliance training or require assistance with reviewing your compliance with the Australian Consumer Law, including advice on whether your business systems will enable you to respond to a notice from the ACCC to support any claims you may have made in relation to your goods or services, contact a member of our corporate advisory team.