Sales & Marketing

11 Dec 2008

'Green' Claims: turning over a new leaf in 2009

Last Thursday the New Zealand Commerce Commission (Commission) released guidelines for 'Green Marketing'. 2008 has seen consumers worldwide experience an increase in claims that household products ranging from toilet paper to whiteware are 'environmentally friendly' or 'Green' or 'carbon neutral'. The list of items marketed as 'Green' has also extended to larger ticket items such as cars, computers and televisions. Such claims are often the main point of differentiation between competing products and are a powerful marketing tool. This article highlights key points contained in the guidelines and will help you avoid an investigation.

The Fair Trading Act 1986 (Act)

The Act prohibits conduct that is either misleading, deceptive or is likely to mislead or deceive and/or is a false or misleading representation. It does not matter that consumers were not actually misled, or for that matter that a business did not intend to mislead or deceive consumers. The Act also prohibits false or misleading representations that a product is of a certain standard, grade, composition, or have any sponsorship, approval, endorsement, performance characteristics or benefits that they do not have. If there is a real, or not remote, possibility that consumers may have been misled then, the Commission will take an active interest.

Guidelines for Green Marketing

The Commission has issued basic guidelines surrounding environmental claims to assist manufacturers and businesses to avoid breaching the Act. Part of the basis of these guidelines is the right of consumers to be able to rely on environmental claims. Any claims made about a product should be truthful and not misleading. Set out below is a summary of the key points contained in the Commission's guidelines together with some questions you might wish to consider.

Environmental claims should:

Be accurate -

• This is a question of fact. If you claim that your refrigerator uses 25% less power, then make sure it does and make sure you have scientific or test data to substantiate claims.
• Do not claim products are scientifically tested if they are not.
• Advertising test results is fine, provided the results are not distorted so as to mislead the consumer or make the results themselves appear more favourable than they really are. You must also be able to provide evidence of the accuracy or relevance of these results.
• Note that claiming products have been tested, but failing to notify consumers that the testing did not support the claim, will not suffice.
• Claims that a product is 'recyclable' must be accurate. It is no good making such a claim if the facilities to recycle the product are not readily available in New Zealand. Use of the term 'recyclable' or symbols may be misleading if there are very few or no facilities, facilities are not available to the public, or, they are simply pilot plants.
• Claims that a product has a certain benefit or advantage must be genuine. Stating something is 'XYZ Free' is not a benefit, and therefore not accurate, if it is irrelevant, insignificant, or simply obeying the law.
• If you claim that your packaging is made from 40% more recycled product, when it originally only had 0.5% recycled product, the Commission has suggested that this is likely to mislead consumers. You should avoid implying significant environmental benefits if they are simply not there.

Be specific -

• Is the entire product made from recycled product or just the packaging?
• Is it a specific environmental benefit that can be linked to manufacture, transportation, extraction or disposal?
• What is the consumer's overall impression going to be?
• Terms such as 'eco-friendly' and 'clean and green' are vague self-claim terms and are not independently verified eco-labels. That doesn't mean you shouldn't use them. It just makes it more important that you clearly define what you mean by the claim.
• We suggest you visit eco-label  to select the most appropriate label. The website provides information on each claim, who owns the label, its applicability, whether it meets specified standards, if it is independently audited and how frequently it is reviewed. The more reputable eco-labels are those that are audited at least annually by an independent third party and are based upon recognised (national and/or international) standards.

Comparative claims, such as being 'environmentally friendlier' should explain what the product or service is, it is being compared with.

• use language that the average member of the public can understand -
  • Scientific language may be helpful to scientists but will only confuse the average consumer.
  • Consider:  who can understand your technical jargon?
• consider the whole product life cycle -
  • Consumers should not be misled as to environmental claims surrounding a product. Specify the part of the life cycle that the claim relates to; whether that be its manufacture, use, recycling, treatment or disposal.
  • Whilst claiming a refrigerator is 'energy efficient' rather than 'green' may prevent misleading consumers  it should be quantified or compared to existing benchmarks or rating systems.
• not create a false picture -
  • A picture can tell a 1000 words - and environmental images are capable of making far reaching claims of environmental benefits. Some images may suggest certain advantages or benefits that are just not there, and should be used with caution.
  • use an endorsement or certification with caution -
  • When a product has a logo or symbol from a local or international environmental scheme consumers may make assumptions and may be misled. If you intend using a logo, attaching a qualification or further information may reduce the risk of customers being misled. Where appropriate, also ensure you have the correct authorisation and qualification to use them.

The penalties

Those found to have breached the Act can risk fines of up to $60,000 (for individuals) and $200,000 (for companies) per offence. There are also the associated legal costs in defending a claim under the Act. Of further concern is risking your good name and the consumer backlash that may follow. There is also potential to have your products recalled, corrective statements issued and of course the necessary costs associated with rebranding and remarketing of products.

Going forward

The Commission has stated that it also intends to produce a separate guide for carbon neutral marketing. For those wishing to get a sense of where the Commission might go on this we suggest you look at decisions of the Australian Competition and Consumer Commission (ACCC) (Australia's equivalent to the Commission) regarding carbon neutral claims.  We also refer you to our recent article 'Thinking of making a 'Grrrrrreen' claim – then think twice'. 

In short

Start 2009 on the right foot. The Commission has followed the lead of the ACCC and is likely to continue to do so. Don't become one of the active investigations the Commission undertakes in 2009 and avoid fines of up to $200,000, the risk of tarnishing your business' good name, potential legal costs, not to mention costs associated with product recalls, corrective statements and rebranding. And last but not least - pick up the phone and have your legal team run their eyes over your advertising material. If you follow these simple steps then you will avoid that unwanted visit from the Commission.

Authors

Peter Stubbs

Partner - Corporate & Commercial

DDI: +64 9 977 5010

Mobile: +64 21 955 230

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Craig Nelson

Senior Associate - Corporate & Commercial

DDI: +64 9 977 5185

Mobile: +64 21 918 309

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