REGULATORY: D.C Regulatory: The FTC’s Revised Green Guides Provide Direction for Renewable Energy Marketing Claims by Harold Shaw and Jeff Perry

by King & Spalding
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The Federal Trade Commission (“FTC”) recently adopted revised Guides for the Use of Environmental Marketing Claims (“Green Guides”).[1] The 2012 Green Guides, which modify a 1998 version, are not binding regulations but are intended as guidelines for companies making environmental marketing claims.

Energy and natural resources companies should take notice since the Green Guides feature new sections addressing types of environmental claims that were not in wide use when the FTC issued the prior 1998 version of the guidance.

Purpose of the Green Guides

The Green Guides address claims involving the environmental attributes of a product, package, or service, regardless of whether it is being marketed to individuals or, in a notable clarification, in a business-to-business context.

The guidelines are intended to “help marketers avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act.” The FTC notes that the revised Green Guides will help it evaluate environmental marketing claims and decide whether to use its statutory enforcement powers.

Over the years, the FTC has brought several actions involving deceptive environmental marketing claims, and the revised Green Guides likely indicate areas that the Commission will focus on in the future.

General Principles for Acceptable Marketing Claims

The Green Guides outline general principles that apply to any environmental marketing claims. They stress that all reasonable interpretations of environmental marketing claims must be truthful, must not be misleading, and must be supported by a reasonable basis. According to the FTC, “[i]n the context of environmental marketing claims, a reasonable basis often requires competent and reliable scientific evidence.”

The Commission asserts that the Green Guides will help companies through this process by explaining how reasonable consumers are likely to interpret claims, describing the basic elements considered necessary to substantiate claims, and presenting options for qualifying a claim in order to avoid perceptions of deception.

FTC’s Guidance for Specific Types of Claims

The 2012 Green Guides advise companies not to make broad, unqualified environmental claims, such as “green” or “eco-friendly.” The FTC cautions that general claims need to be qualified with clear and prominent statements identifying the specific environmental benefits that justify the claim.

In addition, the 2012 Green Guides emphasize the need to avoid unqualified claims about a product’s ability to degrade in the environment. A number of sections clarify the FTC’s previously published views on environmental claims such as a product’s compostability, effect on atmospheric or stratospheric ozone, recyclability, recycled content, and source reduction.

Overall, the 2012 Green Guides address environmental claims such as:

  • General Environmental Benefit Claims - e.g., “Eco-friendly”;
  • Carbon Offsets - e.g., “neutralize the carbon emissions from your flight”;
  • Certifications - e.g., “Certified Non-Toxic”;
  • Seals of Approval - e.g., “GreenLogo for Environmental Excellence”;
  • Compostable Claims - e.g., “Compostable Yard Trimmings”;
  • Degradable Claims - e.g., “biodegradable”;
  • Free-Of Claims - e.g., “chlorine-free bleaching process”;
  • Non-Toxic Claims - e.g., “essentially non-toxic”;
  • Ozone-Safe and Ozone-Friendly Claims - e.g., “ozone-friendly” products;
  • Recyclable Claims - e.g., “Recyclable through our dealership network”;
  • Recycled Content Claims - e.g., “package made from 30% recycled material” or “65% recycled”;
  • Refillable Claims - e.g., “handy refillable container”;
  • Renewable Energy Claims - e.g., “made with wind power” or “made with renewable energy”;
  • Renewable Materials Claims - e.g., “made with renewable materials”; and
  • Source Reduction Claims - e.g., “generates 10% less waste.”

Renewable Energy-Specific Marketing Claims

One important new addition to the 2012 Green Guides is a section addressing renewable energy marketing claims. It affects companies that market renewable energy business-to-business or directly to consumers or that advertise the use of renewable energy or renewable energy credits in their manufacturing processes.

The FTC’s guidance on the topic covers three major areas: (1) the meaning of “renewable energy”; (2) qualifying “made with renewable energy” claims; and (3) “hosting” guidance.

The Meaning of “Renewable Energy”

While the Commission declined to define “renewable energy,” it did offer guidance based on how consumers are likely to interpret such claims. Citing a study where respondents associated the phrase with non-fossil fuel sources, the Green Guides advise companies not to make unqualified “made with renewable energy” claims based on fossil fuels use.

It is important to note that a company may make such a claim if it purchases renewable energy certificates that match the company’s use of non-renewable energy. In this circumstance, the Commission reasons that the use of non-renewable energy balanced by renewable energy certificates likely meets consumer expectations created by the renewable energy claim.

Qualifying “Made with Renewable Energy” Claims

In order to avoid potentially deceptive statements when making “Made with Renewable Energy” claims, the Green Guides advise companies to specify the renewable energy source(s) used. In the case of companies that purchase renewable energy from a mix of sources, a company is advised either to: (1) disclose all renewable energy sources; or (2) furnish a disclaimer that a product is made from a mix of renewable energy sources and specify the renewable energy source that supplies the greatest percentage of energy used.

Companies are also advised not to make unqualified “Made with Renewable Energy” claims unless virtually all of the significant manufacturing processes involved in making a product or packaging are powered with renewable energy (or non-renewable energy offset by renewable energy certificates). If renewable energy powers less than virtually all of a company’s significant manufacturing processes, the company should qualify its claim in ways that state the percentage of manufacturing or specify the parts of a product or production process that are powered with renewable energy.

“Hosting” Claims

If a company hosts a renewable energy facility but has sold its rights to claim credit for the renewable energy it generates, then a claim that the company “hosts a renewable energy facility” is viewed by the FTC as likely to mislead consumers because many consumers interpret the term “hosting” to imply that a company uses renewable energy.

In an example provided by the FTC, a power provider that generates and sells renewable energy to its customers, but sells renewable energy certificates based on 100 percent of this renewable energy to a third-party, is advised to keep in mind that its customers may mistakenly believe that the electricity they purchase is renewable.

The Green Guides recommend that a company faced with a similar situation state that it “generates renewable energy, but sells all of it to others.” While this is not the only way a company can describe its role in generating renewable energy, such language effectively alerts consumers that the company has sold the renewable aspects of its generating capacity.

Immediate Effect

Since the Green Guides represent an administrative interpretation, not a rule, they take effect immediately. While the Green Guides are not legally binding, the FTC will be using them to assess whether particular environmental marketing claims run afoul of the legal duty to avoid deceptive advertising.
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[1] 77 Fed. Reg. 62121 (Oct. 11, 2012), available at http://www.gpo.gov/fdsys/pkg/FR-2012-10-11/pdf/2012-24713.pdf.


 Harold M. Shaw, III
 Washington, D.C.
 +1 202 626 5603
 hshaw@kslaw.com 

 View Profile »

    

 Jeffrey H. Perry
 Washington, D.C.
 +1 202 626 5603
 jperry@kslaw.com 

 View Profile »

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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