[co-author: Jenna Yim]
IN BRIEF
The Australian Competition and Consumer Commission (ACCC) has just issued its long anticipated guidance on the making of environmental and sustainability claims. The ACCC has set out eight principles which, in its view, businesses should follow when making such claims to comply with the Australian Consumer Law (ACL).
The guidance follows the ACCC's 'Greenwashing by Businesses in Australia' Report in March 2023, where internet sweeps revealed that 57% of websites and businesses that were reviewed made 'concerning' claims about their environmental practices.
The principles set out by the ACCC are in essence a restatement of the ACCC's long-held views and therefore contain no 'surprises.' The focus of the principles is very much on ensuring:
- The accuracy and specificity of any claims, including:
- Avoiding broad or unqualified claims or terms or images giving an incorrect impression; and
- Setting out the conditions and qualifications relevant to the claims;
- IMPORTANTLY, that you have evidence to substantiate and support the claims that you are making, and that evidence is reflective of the accepted position, studies, or science relevant to the claim; and
- That claims about your energy and sustainability transition are clear and supported by management decisions and operational steps that you are actually taking.
What may amount to a 'surprise' are some of the positions taken by the ACCC in the examples that it provides to flesh out its eight principles - we refer to some of these below.
While these examples are the ACCC's views and may not necessarily reflect the position that a Court would take, they are very instructive of the approach that the ACCC would take in response to a complaint and as part of an investigation into any claims.
This is highly relevant given that environmental and sustainability claims are key 2023-2024 Compliance and Enforcement Priorities of the ACCC and the very significant monetary penalties that may be imposed for breaches of the ACL.
The ACCC's guidance is similar to the compliance and enforcement approach of ASIC in respect of similar claims, detailed below.
The ACCC's guidance is in 'draft' and it is accepting submissions on the guidance until 15 September 2023.
PRINCIPLES FOR MAKING ENVIRONMENTAL CLAIMS
Increasingly, consumer decisions are influenced by environmental and sustainability claims.
In its guidance, the ACCC sets out common sense meanings of terms as follows:
Environmental Claim
An environmental claim is any representation made by a business in relation to its environmental impact, including claims that give the impression that the business's products or services:
- Have a neutral or positive impact on the environment;
- Are less harmful for the environment than alternatives; and
- Have specific environmental benefits.
They can appear on product packaging or labelling, point-of-sale materials, and in a variety of marketing or advertising materials, including online and social media advertisements - and importantly, in corporate reporting materials.
The ACCC also highlights that products and services often have a range of environmental impacts at different stages of their lifecycle. The ACCC refers to the environmental impacts associated with:
- The sourcing of raw materials, manufacturing, transport, and logistics;
- The consumption or use of a product or service; and
- What occurs following the consumer using a product - its reuse or recyclability, or whether it will contribute to landfill waste and greenhouse gas emissions when it breaks down or is incinerated.
The ACCC also notes that some environmental claims are aspirational, for example, where a business sets future goals for improving their environmental performance or reducing their greenhouse gas emissions.
Greenwashing
Greenwashing describes environmental claims that are false or misleading. The ACCC considers that a business will be engaging in greenwashing where they use any claim that makes a product, service, or business seem better or less harmful for the environment than it really is.
Key Principles and Takeaways
The ACCC then provides additional detail about its eight key principles, highlighting certain tenets within each principle and providing certain examples, a number of which are likely to be of particular interest or relevance. These are set out below.
THE ACCC'S COMPLIANCE AND ENFORCEMENT FOCUS
The guidance reinforces earlier statements that environmental and sustainability claims are a compliance and enforcement focus of the ACCC. It reinforces the ACCC's investigative armoury, the scope of remedies, and in particular, the severe penalties that a court may impose in the event of greenwashing and claims breach of the ACL. In brief, they are as follows:
This Insight focuses on the ACCC's guidance. The ACCC's views are very similar to those in ASIC's guidance which relates to claims in the context of the supply of financial services, financial products and sustainability-related investments. By way of example, please see ASIC's statements here.