The ACCC has issued its final guidance for businesses making environmental claims, with its eight “principles for trustworthy environmental claims”.
In the accompanying media release, Acting ACCC Chair Catriona Lowe noted how the guidance aims to support businesses meet their obligations under the Australian Consumer in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (ACL):
By following the principles in our guidance, businesses can more confidently make meaningful claims that consumers can understand and trust. It is important for businesses to consider whether they are exaggerating the environmental benefits of their product or services and whether they have a reasonable basis to make the claims, otherwise they risk breaching the Australian Consumer Law.
The final guidance’s principles remain substantially similar to those in the ACCC’s draft guidance published in July (for details see our article ‘ACCC issues its draft greenwashing guidance for businesses’):
- Make accurate and truthful claims
- Have evidence to back up your claims
- Do not hide or omit important information
- Explain any conditions or qualifications on your clams
- Avoid broad and unqualified claims
- Use clear and easy to understand language
- Visual elements should not give the wrong impression
- Be direct and open about your environmental sustainability transition
The changes from the draft guidance are all in the detail, with new:
- minor amendments (eg. describing claims as “environmental” claims, not “sustainability”;
- explanations (eg. further explaining what may be a “reasonable step” to substantiate a claim);
- perhaps most interestingly, further examples (eg. a dry cleaner advertising an “environmentally responsible” service, with the image of the crossed out ingredient it removes, will be “contrary to the ACL” if it uses other ingredients that are known to have significant detrimental environmental impact, even if not as harmful as the removed one).
- The particularities of the ACCC’s amendments in its final guidance shows that, with this compliance and enforcement priority of misleading environmental and sustainability claim, the ACCC is highly focused on the detail of exactly how a claim was made.
- The ACCC has broadcasted that it has several active investigations underway in this space. The guidance notes the ACCC will consider what is a proportionate response to the conduct and resulting or potential harm. However, as seen in its action against yoghurt manufacturer MOO Premium Foods (detail below), even one descriptive word about the basis of their “ocean [bound] plastic” claim (despite the relevant packaging including multiple disclaimers) can lead to significant investigations, and court-enforceable undertakings requiring public corrective notices, compliance trainings and audits.
- Early next year the ACCC will release further guidance for businesses and consumers specifically on emission and offset claims, as well as the use of trust marks (here noting to be particularly careful with third-party certifications). The ACCC will also develop guidance to educate consumers and facilitate assessment of environmental claims. From a competition perspective, the ACCC is considering what guidance is needed for green collaborations and whether the current authorisation regime is an adequate mechanism. Plenty of guidance is needed, and plenty of guidance is coming…
ACCC’s Final Guidance
The below table summarises the ACCC’s Draft Guidance to assist businesses in making environmental claims, and what the Final Guidance has amended.
Draft ACCC Guidance
What has changed in the Final ACCC Guidance?
Principle 1: Make accurate and truthful claims
As governments increasingly prescribe minimum environmental standards for businesses to comply with, claims should be meaningful, they should not simply refer to an environmentally beneficial feature which is required by law.
The ACCC’s position largely reflects its Draft Guidance but has provided further information to assist businesses in deciding what steps are ‘reasonable’ in ensuring environmental claims are accurate.
What is reasonable will always depend on the circumstances, but the ACCC recognises that the size of a business is important. Larger businesses are expected to have access to greater resources and undertake wider verification steps.
With businesses often relying on third-party studies to support environmental claims, the ACCC has provided updated guidance on assessing these, including:
If businesses have gone above and beyond the legal requirement, it is good practice to be explicit about the additional benefits achieved.
Principle 2: Have evidence to back up your claims
Principle 2 is largely consistent with the Draft Guidance about selecting evidence to support claims. The ACCC’s guidance is that the amount and type of information needed to support a claim should be proportionate to the claim made, adding that businesses are not required to disclose any commercially sensitive information.
The ACCC has also provided more specific guidance about relying on internal data, industry standards and third-party certifications. For:
Claims should also clearly reflect what the business has been certified for, particularly where the certification relates to inputs.
Principle 3: Don’t hide important information
The ACCC has changed the name of this principle to “Do not hide or omit important information”, warning against burying important information in fine print or away from the headline claim.
Information relevant to understanding a claim should be available directly on the product or at point of sale. Additional information can be provided (eg. through a website or QR Code) but this should not contradict or qualify the impression created by the actual claim.
Principle 4: Explain any conditions or qualifications on your claims
The ACCC’s Final Guidance reflects its Draft – businesses should clearly explain any actions or resources needed for the environmental benefit to be realised. If this information cannot be incorporated as part of the claim, the ACCC suggests making it clear in the claim that conditions apply and using digital means to provide extra and up-to-date information, such as through QR Codes and smart labels.
Principle 5: Avoid broad and unqualified claims
The ACCC has largely maintained its guidance about broad and unqualified claims but added further information to assist businesses to avoid vague language.
For example, the ACCC has added ‘clean’ to the list of terms which hard to substantiate and do not help consumers understand a product’s environmental benefits.
The Guidance has also added helpful information about ‘recyclable’ claims:
Lastly, the ACCC has clarified that businesses in high polluting industries should be particularly careful about making environmental claims, stating “businesses in these industries should not feel discouraged from making any environmental claims if they have put genuine and meaningful measures in place to reduce their environmental impact”.
Principle 6: Use clear and easy-to-understand language
The ACCC has repeated its Draft Guidance about using clear language but added that this does not mean oversimplifying or using ambiguous terms.
While scientific language may be appropriate in some situations, businesses should provide explanatory material and define terms if they may cause confusion. Where a scientific term has a non-technical meaning, it is unlikely that using scientific language is the clearest way of presenting the claim.
Principle 7: Visual elements should not give the wrong impression
The ACCC has confirmed the importance of visual elements to consumers, adding that the most important question for businesses is the overall impression given by a claim and any visuals.
This means that not all images of plants, for example, will represent an environmental claim. They may relate to product composition or flavour. For example, the ACCC clarified that a business selling fruit juice may use the colour green or images of fruit trees in a way which does not convey an environmental claim.
Principle 8: Be direct and open about your sustainability transition
The ACCC has clarified this principle to refer to the business’s ‘environmental sustainability transition’. This may reflect that businesses are encouraged to be sustainable in several ways, including socially and economically, while the ACCC here only covers environmental issues, not broader ESG ones.
The Final Guidance also encourages businesses to clarify what environmental plans really mean and provide progress updates. The ACCC provides a best practice example of how to explain a new initiative to introduce electric vehicles. To avoid creating a misleading impression about the overall environmental impact of this measure, the ACCC recommends that the business explain the proportion of its emissions that will be reduced and that there are other areas of the business that still have a significant impact on climate change and are hard to abate.
What else is happening in the greenwashing space?
Since the ACCC’s draft guidance release in July, there have been numerous key developments relating to MOO Premium Foods (MOO) and Mercer Superannuation (Australia) Limited (Mercer) which give further context around how both the ACCC and ASIC have refined their approaches to greenwashing enforcement.
On 28 November 2023, the ACCC accepted a court-enforceable undertaking from yoghurt manufacturer, MOO, in respect of claims that its product packaging was made from “100% ocean plastic”. The ACCC was concerned that these claims gave the misleading impression that the product packaging was made from plastic waste collected directly from the ocean. The ACCC’s investigation uncovered that the plastic was collected onshore from coastal areas with inexistent or inefficient waste management (being ocean bound plastic). The ACCC did not consider that MOO’s “100% ocean bound plastic” disclaimers on the packaging were sufficient to displace the misleading impression.
In the court-enforceable undertaking, MOO:
- admitted to making representations likely to contravene the ACL;
- committed to update its packaging so that it specified “100% ocean bound plastic”;
- committed to publish corrective notices; and
- agreed to implement internal compliance programs and annual internal audits.
As reported by the AFR on 7 December 2023, and subject to final court approval, ASIC has agreed to a proposed $11.3 million penalty settlement with Mercer, in relation to statements on Mercer's website about its 'Sustainable Plus' investment options.
ASIC instituted landmark proceedings against Mercer in February 2023, alleging that Mercer misled prospective members of its ‘Sustainable Plus’ investment options by claiming on its website that it excluded investments in companies involved in carbon intensive fossil fuels such as thermal coal, and companies involved in alcohol production and gambling. Despite these representations, several of the stocks held by Sustainable Plus funds involved companies that were engaged in activities relating to carbon intensive fossil fuels and alcohol and gambling.
If approved, Mercer’s $11.3m fine will be the first court-ordered pecuniary penalty handed down in a greenwashing court action in Australia’s financial services industry.