The ACCC's expectations for corporations making green claims at the General Counsel Summit

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Introduction

Thank you.

I would like to begin by acknowledging the Gadigal People of the Eora Nation, the Traditional Custodians of the land we are meeting on today, and to acknowledge their descendants and their continued connection to this country. I’d like to pay my respects to their elders past, present and emerging. I acknowledge their connection to the land, sea and community. I would also like to acknowledge and pay my respects to First Nations people who are attending today’s event.

Good morning, it is a pleasure to be here today and to have the opportunity to speak directly with so many general counsels.

As general counsel, you play an essential role in ensuring your organisation meets its legal obligations.

Your input on corporate accountability and decision making is critical to the overall perception and performance of your organisation.

I’m sure that whatever the nature of your organisation or your proposed response to climate change, environmental and sustainable initiatives are common words in your boardroom meetings.

Many businesses are required to set ESG targets and others are choosing to do so. Where these efforts are marketed to seek to appeal to consumers increased environmental consciousness, the advice you provide to ensure these claims are true and do not mislead consumers is incredibly valuable.

Given this, I’d like to take this opportunity today to outline the ACCC’s expectations for businesses making green claims.

I hope my presentation can help you feel more confident in providing counsel on your organisation’s obligations under the Australian Consumer Law.

Engaging with the ACCC

The ACCC’s core objective is to promote competition, facilitate fair trading and protect consumers for the benefit of all Australians.

That is, consumers, businesses and the wider community.

While the ACCC cannot pursue all matters that come to our attention, we are an evidence-based agency and will exercise discretion to direct resources to matters that provide the greatest overall benefit for consumers and competition.

As legal practitioners, your knowledge and on the ground experience is of significant value to the ACCC.

You know how markets are working, where there may be misconduct that should be addressed and what’s coming up next over the horizon.

Many of our cases over the years were a direct result of legal practitioners, like yourselves, raising matters with us.

A good example of this is the case of Maxgaming, a gaming and e-sports company. The case resulted in the business providing a court enforceable undertaking to amend potentially unfair contract terms.

I would encourage you all to actively be involved in the process of alerting the ACCC to matters of non-compliance or potential anti-competitive conduct.

I cannot overstate how valuable this can be to help the ACCC prioritise our resources and identify issues of significant detriment in order to effectively promote competition and fair trading, and protect consumers.

Additionally, this helps us in setting our yearly consumer and compliance priorities, allowing us to refocus our work on the issues most impacting Australian consumers and businesses.

What’s the issue?

Earlier this year, the ACCC reinforced our focus on environmental claims and sustainability as an enforcement and compliance priority, broadening it to also include our work in competition and product safety.

The ACCC isn’t the ESG regulator, however, in setting our priorities, we focus on how our competition and consumer protection tools can assist in helping to address the big, long-term challenges facing Australia.

Today’s consumers are concerned about the environment and sustainability, and these concerns are increasingly being reflected in their purchasing decisions.

In fact, research conducted by the Consumer Policy Research Centre in 2022 suggests that 45 per cent of Australians always or often consider sustainability as part of their decision-making process when making a purchase.[1]

Businesses are responding to this consumer demand for sustainable products, leading to a significant shift in how products are produced, marketed, and delivered to consumers.

The concept of greenwashing refers to conduct where businesses make misleading claims or representations to appear more environmentally conscious.

This includes the use of false, overstated, vague, or unclear representations, as well as a business omitting key information that would impact a consumer’s decision-making process.

False or misleading environmental or sustainability claims causes significant harm for both consumers and businesses.

Consumers are often willing to pay more for a product or service due to the environmental or sustainability benefit they are being promised.

False or misleading claims can undermine consumer trust in all green claims, particularly when they’re paying higher prices based on these claims.

We need these claims to be genuine.

This is not solely about protecting consumers, it’s also about ensuring a level playing field for business, and helping governments reach their targets of net zero by 2050.

Businesses that are taking genuine steps to adopt sustainable practices are put at a competitive disadvantage by businesses that engage in ‘greenwashing’ without incurring the same costs.

This can disincentivise businesses to continue investing in more sustainable products.

And if we are to reach our net zero targets, we need both businesses and consumers to drive market innovation by investing in and choosing products with the lowest environmental impact.

But for consumers to drive markets, they need to be able to trust that the products they are buying genuinely are sustainable.

And once a consumer has had their trust broken by a misleading green claim, this, understandably, has a significant impact on their likelihood to trust these claims again.

The ACCC understands that increasingly more consumers are walking away from relying on environmental claims because this trust has been broken.

A picture of the market

To get a better picture of the scale at which greenwashing is taking place in Australia, late last year, the ACCC conducted an internet sweep reviewing environmental and sustainability claims made by businesses in Australia.

We reviewed 247 businesses across a range of targeted sectors and from this, found that 57 per cent of businesses made potentially misleading environmental or sustainability claims.

This is a concerning figure.

The sweep identified a range of industries or businesses which commonly use environmental and sustainability claims and assessed whether these claims were potentially misleading or deceptive.

As consumers demand more ethical and sustainable practices from businesses, we are seeing claims like “environmentally friendly”, “sustainable production” and “compostable” becoming more prominent on our supermarket shelves.

Whilst some might regard such terms as ‘mere puffery’, they do carry meaning for consumers.

The misuse of these terms could reasonably mislead consumers and cause harm to those businesses that are doing the right thing when it comes to sustainability.

Our sweep found that the cosmetic, clothing and footwear, and food and drink sectors had the highest proportion of concerning claims among the industries targeted in the sweep.

These three industries were well above the average for concerning claims.

In particular, for businesses reviewed in the cosmetics industry, 73 per cent made concerning claims.

For clothing and footwear, we were concerned about 66 per cent of businesses reviewed. And for the food and drink sector, this number was 64 per cent.

In competitive markets like the food and drink sector, the ACCC has seen environmental claims, particularly those relating to recyclability, being used by businesses to influence a consumers decision making process on what brand or product to choose.

Another industry worth noting, is the energy industry. Of the 25 energy businesses that we reviewed, 64 per cent were making claims that raised concerns.

Many consumers are conscious of the environmental impact of energy services. The provision of energy involves a complex supply chain and there is a need for businesses to be transparent and make information clearly available to assist consumers in making informed decisions.

Improving green claims through the ACCC’s draft guidance

The ACCC already has a number of ‘greenwashing’ investigations underway.

To complement our enforcement work, we are conducting a range of education activities with businesses, including updating economy-wide guidance material, in addition to targeted guidance for specific sectors.

We recently released draft guidance for businesses to refer to when making environmental and sustainability claims. This guidance is currently open for consultation.

The draft guidance sets out what the ACCC considers reflects compliance with the law when businesses make environmental claims about their products and services. It also includes the ACCC’s views on good practice when making these claims.

It will assist businesses in complying with their obligations under the Australian Consumer Law.

As this audience is well aware, the Australian Consumer Law contains a broad prohibition against engaging in misleading or deceptive conduct.

It also prohibits businesses making a range of false or misleading representations about specific aspects of products or services.

Our intention with this guidance is to encourage businesses to make truthful and accurate claims about the environmental benefits of their product or service.

Our guidance helps to demonstrate how businesses can make clear, evidence-based claims that consumers can understand and trust.

Our key message to businesses when making green claims is to not overreach.

Only make a claim that’s truthful, don’t exaggerate the environmental benefits, and if you’re unsure then qualify the claim or change it to one that you can be confident making.

For most businesses today, the use of environmental or sustainability claims is a conscious choice, not a legal requirement.

Those claims are intended to convey a particular message to consumers in order to evoke a particular response. So, the message needs to be a truthful one – nothing less, and nothing more.

Ultimately, consumer trust is on the line here.

Most consumers do not have specialist knowledge of environmental or sustainable practices, and nor should they be expected to have this knowledge.

The responsibility is on businesses to make and be able to substantiate their claims in a way that consumers can understand what the environmental benefit is and if there are any restrictions that can limit this benefit.

We have also heard that some businesses may be nervous about making green claims due to growing public scrutiny or regulatory action being taken in relation to such claims. 

This is commonly referred to as greenhushing, where a business withholds environmental information that would be of use to consumers – perhaps due to the nervousness I have just referred to.

The ACCC’s draft guidance identifies eight practical principles which we encourage businesses to apply when making environmental claims.

By following these principles, businesses are less likely to mislead consumers and contravene the Australian Consumer Law.

To make it easier for businesses to make meaningful and truthful green claims, we’ve illustrated each principle with examples of what could be deemed as a misleading green claim.

I’d like to take this opportunity today to step you through these eight principles and empower you to assist your organisation, in your capacity as general counsel, to make truthful green claims.

The first principle in our draft guidance is making accurate and truthful claims.

In other words, don’t exaggerate the environmental benefits of your product or service and make sure that any comparisons made are transparent and fair.

This includes when you are making comparisons between the environmental impact of your own products or services, and those provided by competitors.

Unfair comparisons, or comparisons that aren’t transparent about precisely what is being compared, can mislead consumers into thinking they are making a better choice for the environment than is actually the case.

You should explain how the comparison has been made and ensure the comparisons are easy for consumers to understand.

Our second principle is that businesses should have evidence to back up their claims. That is with research, data or other evidence.

When making an environmental claim, you must have a reasonable basis for making the claim.

If you don’t have the evidence to back up your claims, then what is the basis for making your claim?

With no evidence, you are likely to mislead consumers and contravene the Australian Consumer Law.

Many environmental claims are difficult for consumers to verify.

By making any supporting evidence publicly available, you will help consumers to easily verify and trust your claims.

It is good practice to make this information as easy to find and understand as possible.

This leads me to our next principle, which is businesses must not hide important information.

For example, if you only highlight the positive aspects of your product or service while omitting information about the negative aspects, you can give consumers the impression that your business, product, or service has a lower environmental impact than it really does.

It is important to note that you cannot rely on disclaimers, disclosures or clarifications buried in small print, or otherwise not displayed prominently enough compared to your headline claim, as an excuse for making misleading environmental claims.

Any information that you provide in small print or qualifications should not conflict with the overall message of your claims.

For example, let’s take a cosmetics company that prominently advertises on their pump shampoo bottles that they are ‘plastic free’.

On the back of the bottle though, in small text, its stated that this claim only applies to the external bottle and does not apply to the cap, pump or internal tube that sits within the bottle.

Consumers are likely to assume that the ‘plastic free’ claim displayed prominently on the front of the bottle applies to the entire bottle.

In fact, I’m sure most of us in this room can think of a product we have recently seen or perhaps even bought that includes this claim with the assumption that the entire bottle is plastic free.

The small print on the back of the bottle does not assist consumers in their purchasing decision as it directly contradicts the headline claim ‘plastic free’ on the front of the bottle and is not sufficiently prominent or near the headline claim.

Given this, the claim ‘plastic free’ that draws in the consumers, is likely to mislead consumers in contravention of the Australian Consumer Law.

If you do need to make a disclaimer or qualification, you can reduce the risk of giving an overall impression that is misleading by prominently displaying this near the headline statement.

The next principle in our draft guidance is that businesses must explain any conditions or qualifications on your claims.

If the environmental claim is only true under certain conditions, then you must clearly explain this to consumers.

These claims can be misleading if the conditions or required steps are not clearly stated or are unlikely to be realised.

For example, many businesses make claims that a product is “recyclable”.

In some cases, these claims are based on consumers abiding by strict requirements which do not reflect normal consumer use, such as having to take the products to an industrial recycling facility.

In these circumstances, these claims risk misleading consumers if the business does not make the recycling conditions sufficiently clear.

To reduce the risk of misleading consumers, you should ensure that you provide consumers with enough information about what is required for your claims to be true.

Our next principle is that business should avoid broad and unqualified claims, such as ‘sustainable’; ‘environmentally friendly’; or ‘eco-friendly’.

These sweeping terms can mean different things to different consumers. Without further qualification or clarification, consumers can easily be misled.

Similarly, you should be mindful, that while a term may be common and familiar to consumers, it is unlikely to be meaningful without more information.

If you only provide partial information or make an inappropriately absolute assertion about what the claim applies to, you could be at risk of misleading consumers.

Some examples of this include the terms ‘recyclable’ and ‘recycled’, or where a product is claimed to be ‘free from’ a particular material.

While most consumers are familiar with these terms, it’s important that your business provides sufficient qualifications to explain how these terms apply to your product, service or business in a way that consumers can readily understand.

Many businesses are increasingly making emissions related claims and representations to consumers about the greenhouse emissions associated with their products, services or business.

Consumers are unlikely to readily understand what is meant by broad headline claims like

“Carbon Neutral”, “Climate Neutral” or “Net-zero”.

We know that many companies are looking to adopt emissions reductions strategies in line with global government commitments.

And while these claims may be familiar to consumers, they are technical terms that the majority of consumers do not understand the true meaning of.

Given this, businesses need to take very careful consideration in how they use the terms to advertise their business, product or service to consumers beyond just a flashy, headline statement.

Avoid using headline claims which create a misleading impression. For example, this can occur if a significant category of emissions has been excluded from your calculations when a consumer would understand the claim relates to your overall business.

If you choose to make emissions related claims, it’s good practice to:

• Undertake a thorough emissions baseline assessment.
• Clearly and transparently communicate the actions you have taken which underpin the claim being made, for example you should ensure that consumers can understand whether your claims are based on decarbonisation efforts or rely on the use of offsets.
• Account for all types of greenhouse gas emissions. Singling out one particular type of emission, for example carbon dioxide, and excluding others puts your business at risk of creating a misleading overall impression.
• Ensure that consumers can understand from the information you provide what emissions have been accounted for.

When making claims about future goals and ambitions, you must have reasonable grounds to make the claims, for example, before promoting your climate ambitions or goals, you should have appropriate business plans and investment approvals in place to make the changes necessary to actually meet the goals.

You may have noticed some recurring themes throughout our guidance, often relating to our next principle which is the use of clear and easy to understand language.

When you make environmental claims, it is good practice to avoid using scientific or

technical language – unless it is easily understood by ordinary and reasonable consumers.

It is important to remember that an ordinary consumer generally does not have specialist knowledge, instead they understand words to have their ordinary meaning.

Many businesses use visuals to convey their green claim to consumers, which is why we’ve included our next principle – visual elements should not give the wrong impression.

Businesses should use images and visual elements with care.

The use of environmental images may be capable of making a sweeping claim of an environmental benefit that may be misleading.

The visual elements of your marketing, products and packaging also convey certain things to consumers.

This includes the use of certain colours such as green, images like trees, and symbols including the mobius loop for recycling.

Trust marks also fall in this category.

Increasingly, businesses are turning to trust marks to convey their environmental credentials, with a variety of different certification schemes often existing for the same type of product.

While a robust scheme can enhance consumer trust and confidence, with so many schemes in use and some businesses creating their own schemes, it is becoming difficult for consumers to understand what every trust mark means and how robust the scheme actually is.

When selecting a certification scheme, businesses should do their due diligence about the scheme’s standing with industry, experts and, if applicable, regulators, to ensure that the scheme is considered capable of delivering on its stated aims.

If your business is using a trust mark it is important to meet the criteria of the certification, to only use, apply and promote the mark for products and or processes for which your operations comply with the criteria. For example, your business should not claim it is ‘certified’ by a scheme when only your products were certified, and not the entire business.

Businesses should also clearly explain the relevance of the certification program, and not overstate its benefits or implications.

Our final principle is to be direct and open about your sustainability transition.

If you can transition to more sustainable business operations and want to tell consumers about it, be honest.

The ACCC encourages businesses to take genuine steps to improve their environmental performance and share their progress with consumers.

Where genuine environmental benefits exist, businesses should also feel confident to advertise the environmental benefits of their products and services, and the steps they are taking to reduce their environmental impact.

However, transitioning to a more sustainable business model takes time and is often not linear.

During this transition, your products and operations will inevitably continue to have detrimental environmental impacts.

You can mislead consumers if claims about your business’ environmental improvements give the impression that you are further along in your sustainability transition than you actually are.

While these principles will help guide businesses when making green claims, there are limitations in what can be achieved though the prohibitions in the Australian Consumer Law on misleading claims.

We recognise that the absence of a single consistent approach to environmental claims, such as a common understanding of carbon emission or circular economy terms, creates uncertainty for businesses and consumers, and makes it more likely that businesses will inadvertently engage in misleading or deceptive conduct.

The Senate has established an inquiry into greenwashing, including legislative options to protect consumers.

Business concerns and challenges

There are many businesses that are genuinely changing their business practices and operations in response to climate change and as such can legitimately market their environmental credentials.

Our intention with this guidance is to make it easier for businesses to understand their obligations and feel more confident in making genuine claims.

We aren’t here to discourage businesses from adopting more sustainable practices and letting consumers know about this.

We also don’t want to dissuade businesses from advertising the environmental benefits of their products or services, or from sharing legitimate sustainability goals. On the contrary, we know consumers want this information.

Businesses should not fear regulatory action from making legitimate and truthful environmental and sustainability claims.

However, there remains too many businesses that are looking to take advantage of consumers and gain a competitive advantage by engaging in greenwashing.

There are challenges at both the product and business level in developing green claims and untangling the environmental impact of a product, particularly for businesses with long supply chains, which can lead to inaccurate green claims.

To meet these obligations, businesses are mapping their supply chains or checking the integrity of claims made by their suppliers to validate the sustainability of their product.

If your organisation is supplying products provided to you by a third party, you should still ensure any environmental claims you make are accurate and truthful.

This may include undertaking reasonable steps to verify supporting information provided to you by your suppliers.

For example, if a supplier claims their packaging is 100 per cent recycled but it’s the same price as standard, non-recycled packaging, this should raise alarm bells for you.

Don’t take a suppliers claim at face value, as this could lead to your business making a misleading claim that could lead to penalties.

It is also good practice to regularly review any claims you make to ensure that they are correct and up to date.

Enforcement of the guidelines

In determining whether to take enforcement action in respect of environmental claims, the ACCC will consider whether genuine efforts and appropriate steps were taken by the business to verify the accuracy of any information that they relied on.

The scope and extent of due diligence undertaken will vary depending on the size of the business.

The ACCC recognises that small businesses generally will not have access to the same resources as larger businesses, and this will be taken into account when assessing the steps taken to verify environmental claims.

The ACCC is selective in the matters we investigate and the sectors in which we engage in education and market analysis.

We cannot take on every matter that is brought to our attention.

Instead, we take what is known as a ‘harm-based approach’ when enforcing the law.

That is, we direct our resources to matters that may result in widespread harm to consumers, competition, or small businesses.

I want to emphasise that the guidelines I’ve discussed today are still in their draft stage.

We are currently engaging and consulting with businesses on if the eight principles that we’ve identified provide clarity for businesses and improve their confidence for making legitimate environmental and sustainability claims.

I would encourage you treat these guidelines as guard rails for your business’ green claims.

If you follow the eight principles, you can safely assume you’re on solid ground for making a genuine green claim.

As I mentioned earlier, as general counsel, your organisations turn to your expertise to ensure they comply with the law.

You help create a culture of compliance within your organisations.

Conclusion

Greenwashing causes significant harms for consumers and businesses.

This is why it cannot be taken lightly.

Consumers are often choosing to spend more money to buy sustainable, and businesses doing the right thing are being put at a competitive disadvantage.

This is why we need all businesses to do the right thing.

The ACCC’s guidance, which I’ve stepped you through today, will help with this. It provides you with a solid basis for making truthful claims that won’t mislead consumers.

We expect all businesses to familiarise themselves with this guidance and implement the eight principles into the environmental claims they are making.

Ultimately, it comes down to businesses wanting confidence in making environmental claims and consumers wanting to be able to trust these environmental claims. 

What we are looking for is accuracy in the impression that an environmental claim creates for consumers.

By helping your companies make claims that are clear, that you can back up and that don’t overreach, we can make this market work. It’s in all of our interests.

Thank you.