What Happens When Green Marketing Goes Too Far – A Legal Perspective

1. sf-2745011 Greenwashing What Happens When Green Marketing Goes Too Far – A Legal Perspective Bren School of Environmental Science & Management November 3, 2011 Workshop Brooks M. Beard - Morrison & Foerster LLP

2. sf-2745011 Presentation Overview • What is “Greenwashing”? • Enforcement Tools in the United States • International Enforcement • What’s Coming Next? • Avoiding “Greenwashing” Allegations • Questions and Answers

3. Premium Paid for “Green” Products Recent Mintel report revealed that more than one-third of U.S. consumers would pay more for environmentally-friendly products Result increase in marketing campaigns using words such as “environmentally friendly,” “sustainable,” and “biodegradable” price premiums for such products Effect increased scrutiny increased risk of litigation or enforcement actions

4. zero-impact feedstock ECO-SMART environmentally safe feedstock content Bioenergy renewable sustainable cradle to cradle sustainability photodegradable cradle to grave CARBON OFFSETS CLEAN ENERGY greenhouse gases renewable resource eco-friendly life cycle alternative fuels energy intensity ozone-friendly recycled naturally derived environmentally friendly environmentally preferable non-toxic renewable energy credits compostable energy efficient environmental management systems (EMS) RENEWABLE green purchasing biodegradable degradable carbon neutral carbon footprint earth-friendly BIO-BASED recyclable NATURAL CONTENT environmentally safe

5. sf-2745011 Definition of Greenwashing • “Greenwashing” is generally viewed as the use of marketing claims or statements — whether words, names, seals, or other symbols — that deceive or mislead consumers as to the environmental benefits or attributes of a company’s product or service, or, more broadly, as to the company’s environmental practices as a whole.

6. sf-2745011 Examples of Greenwashing • Fluffy Language: Words or terms with no clear meaning • Ex. “sustainable” or “eco-friendly” • No Proof: It could be right, but where’s the evidence? • Suggestive Pictures: Images that indicate an unjustified green impact • Ex. Flowers blooming from smoke stacks • Green Products vs. Dirty Company: Such as efficient light bulbs made in a factory that pollutes rivers • Best in Class: Declaring you are greener than the rest, even if the rest are pretty terrible * The Greenwash Guide, Futerra Sustainability Communications

7. sf-2745011 U.S. Enforcement Tools • Federal Trade Commission Act • Lanham Act • State Consumer Protection Statutes • BBB’s National Advertising Division • FTC Enforcement Actions

8. sf-2745011 FTC Act • “[U]nfair or deceptive acts or practices in or affecting commerce are declared unlawful” (15 U.S.C. § 45(a)(1)) • Is the claim likely to mislead a reasonable consumer? • Viewed from the consumer’s perspective • FTC will not attempt to interpret the claim language • Prohibits ads that are likely to mislead a reasonable consumer • Was the claim material to the consumer’s decision to buy or use the product or service? • Substantiation – competent and reliable evidence

9. sf-2745011 FTC’s Green Guides • What are the Green Guides? • Provide examples of how using particular environmental claims could conform or run afoul of the FTC Act • Discourage use of broad unqualified statements such as environmentally friendly, eco-friendly, green, or sustainable • Must be able to substantiate claims with “competent and reliable evidence” • Guidance document • Substantial weight by courts

10. sf-2745011 Status of FTC’s Green Guides • In the process of revising Green Guides • draft guidelines have already issued • Key issues in draft: • general environmental benefit claims • certifications and seals • degradable and compostable claims • recyclable claims • renewable claims • carbon offsets • sustainability claims

11. sf-2745011 The Lanham Act • Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)) • Creates liability for misrepresenting in commercial advertising the “nature, characteristics, qualities or geographic origin” of goods or services • Only competitors permitted to bring suit under Section 43(a)

12. sf-2745011 State Consumer Protection Statutes • Many states have their own consumer protection statutes (“Little FTC Acts”) • California: • Unfair Competition Law (Bus. & Prof. Code § 17200 et seq.) • False Advertising Law (Bus. & Prof. Code § 17500) • Consumer Legal Remedies Act (Civil Code § 1750 et seq.) • May be enforced by both government and private citizens • Remedies can include damages, restitution, attorneys’ fees, injunctions, and civil penalties • Beware of class actions

13. NAD Proceedings National Advertising Division of the Better Business Bureau Alternative to litigation NAD routinely refers cases to FTC Self-regulation by advertising industry

14. NAD Proceedings — Continued Can be used only for review of national advertisements Compliance with ruling is voluntary (there is no formal enforcement mechanism) 95% compliance rate

15. Seventh Generation Household Cleaning Products Advertiser’s Seventh Generation claims that its products were “as gentle on the planet as they are on people” was puffery NAD noted the efficacy and benefit of the advertiser’s product NAD recommended advertiser discontinue claims linking household bleach to environmental risks; and posing potential environmental or health hazards

16. Church & Dwight (Arm & Hammer Essentials) “Harnessing the Power of Nature” More Sensible for the Environment 100% Naturally Derived Surfactants NAD found “natural” claims unsupported

17. Clorox “Green Works” Clorox claimed its “Green Works” product “cleans with the power of Clorox” NAD recommended discontinuing this claim to avoid conveying message that product has disinfectant capability

18. Mythic Paint

19. Mythic Paint - Continued Involves claims that product is non-toxic, free of carcinogens and volatile compounds (VOCs), and slogan “Safe for People, Safe for Pets and Safe for Earth” NAD determined that manufacturer had substantiation for claim that contains no VOCs, toxins, or known carcinogens and for its slogan NAD concerned about claims that traditional paints are dangerous and recommended manufacturer discontinue comparative safety claim; and modify advertising to avoid message of exaggerated risks of competitive paint products

20. Elanco Animal Health Division Elanco Animal Health Division > award does not support general claim that product is environmentally friendly

21. Dispoz-O “Enviroware” “Enviroware” tableware products “Enviroware cutlery, straws, hinged containers, plates, bowls and trays are 100% biodegradable and come with a certificate of biodegradability.” biodegradability claim unsupported

22. sf-2745011 Your Examples Of Green Marketing • Discuss examples of green marketing you brought • Do they seem overbroad? • Do they constitute greenwashing? • Or are they sufficiently focused?

23. sf-2745011 International Enforcement • United Kingdom • France • Scandinavian Countries • Canada • Australia

24. sf-2745011 United Kingdom • Advertising Standards Authority • Independent body used by the advertising industry to resolve private disputes • The number of complaints to the ASA about green claims was four times higher in 2007 than 2006

25. sf-2745011 United Kingdom —Continued • Advertising Standards Authority (cont.) • ASA’s 2007 Annual Report found: • “[C]onsumers were most confused about ads for carbon emission claims and green tariffs as well as green terms like sustainable and food miles” • “Consumers said they typically did not read the fine print or explanatory text in ads”

26. sf-2745011 United Kingdom — Continued Claim that Shell “use[s its] waste CO2 to grow flowers” and its “waste sulphur to make super-strong concrete” MISLEADING because only small amount of waste CO2 used to grow flowers and only small amount of sulphur used to make concrete.

27. sf-2745011 United Kingdom — Continued

28. sf-2745011 United Kingdom — Continued • ASA found that there was not yet an accepted definition for “sustainable” and disagreement exists regarding what constitutes “sustainable” • ASA evaluated data relating to cotton production in the US • ASA concluded that: • “the meaning of the term ‘sustainable’ in the CCI ad was likely to be ambiguous and unclear to consumers[;]” and • “CCI had not justified the claim”

29. sf-2745011 France • Charter of Commitment and Objectives for Eco-Responsible Advertising • led by advertising professionals • can impose fines and call for the withdrawal of offending material

30. sf-2745011 France — Continued • Advertisers should not make claims that are unsubstantiated, use exaggerated language, overstate the environmental benefit, or give the impression that the product has qualities other than is actually the case.

31. sf-2745011 Scandinavian Countries • Joint guidelines for ethical and environmental marketing claims • Claims must be clear, indicate whether they apply to the product or the packaging, verifiable, and substantiated by scientific data

32. sf-2745011 Scandinavian Countries — Continued • Claims must also be accurate and balanced, and may not exaggerate a product’s positive impact on the environment • Enforced against car manufacturers to prohibit claims that cars are “green,” “clean,” or “environmentally friendly”

33. sf-2745011 Scandinavian Countries—Continued • Norwegian senior government official has stated: • “If someone says their car is more ‘green’ or ‘environmentally friendly’ than others then they would have to be able to document it in every aspect from production, to emissions, to energy use, to recycling.” --Alister Doyle, “Norway Says Cars Neither Green Nor Clean” (Sept. 6, 2007), available at www.reuters.com/article/email/idUSL0671323420070906

34. sf-2745011 Canada • Recent guidelines issued jointly by the Canadian Competition Bureau and Canadian Standards Authority

35. sf-2745011 Canada — Continued • The core principle of the Guide is that businesses should only make claims that are substantiated and verified. • Substantiation means the existence and availability of supporting information for environmental claims • Verification means the accuracy or reliability of such information

36. sf-2745011 Canada — Continued • Terms such as “green”, “environmentally friendly”, “all natural”, “environmentally safe” and “eco” are discouraged because they do not convey a precise or specific meaning to consumers and are difficult to effectively substantiate.

37. sf-2745011 Canada — Continued • No claim of “sustainability” should be made because the concepts involved in sustainability are complex and under study.

38. sf-2745011 Canada — Continued • Substance “free” claims need to be literally true and cannot convey a general impression that is false or misleading (e.g., a product claiming that it is free of a certain chemical and is safe for the environment but fails to disclose that it contains a different harmful chemical could be considered false or misleading).

39. sf-2745011 Canada — Continued • Claims should take into consideration all relevant aspects of the product life cycle.

40. sf-2745011 Australia • Australian Competition and Consumer Commission recently released: “Green Marketing and the Trade Practices Act” • Guidelines for compliance with Trade Practices Act • Penalties under the Act: • Fines up to $1.1 million for companies and $220,000 for individuals • Injunctive relief

41. sf-2745011 Australia — Continued • Claims must be specific and qualified (e.g., “safe for the environment” is not specific) • Claims must only be made for a real benefit (e.g., “CFC free” has no real benefit because use of CFCs is prohibited in almost all aerosols)

42. sf-2745011 Australia — Continued • Claims must not overstate a benefit (e.g., “now 50% more recycled content” is overstated if previously contained only 1% recycled content) • Claims should consider whole product • Claims should make clear whether claimed benefit refers to packaging or content

43. sf-2745011 European Union’s Eco-Label • Voluntary labeling program • The label is awarded to goods and services that are “genuinely a better choice for the environment,” based on criteria established by the EU

44. sf-2745011 Group Exercise • Select a product or service for which you want to tout environmental attributes through advertising • existing product or service • fictional product or service • Consider what environmental attributes you can tout • Create ad or label copy that includes the environmental claim • 20 minutes, then we will discuss

45. sf-2745011 WHAT’S COMING NEXT? • ... more enforcement!

46. sf-2745011 FTC Enforcement History • The FTC brought 37 enforcement actions involving environmental marketing claims between 1990 and 2000 • Most of the environmental claims were challenged on the basis that the company did not have sufficient substantiation for the claim it made • No enforcement actions from 2000 until 2009 • In June 2008, FTC Commissioner Rosch stated there have been no recent enforcement actions because: • The industry has been abiding by the Green Guides; and • Private enforcement under the Lanham Act and self-regulation have developed into effective alternative enforcement mechanisms

47. Recent FTC Enforcement Actions Under the Federal Trade Commission Act, “unfair or deceptive acts or practices in or affecting commerce are declared unlawful” (15 U.S.C. § 45(a)(1)) 2009 saw first series of FTC enforcement actions for green claims in a decade biodegradability claims bamboo fiber claims

48. Biodegradability Actions FTC viewed biodegradability claims as false or misleading because products did not biodegrade under normal disposal circumstances Can only make such claims if: supported by competent and reliable scientific evidence tested under normal disposal circumstances for product

49. Bamboo Fiber Actions Labels and advertisements claimed products were made of bamboo fibers, but they were really made of rayon FTC also took issue with claims that products were manufactured using an environmentally friendly process contained the natural antimicrobial properties of bamboo biodegradable

50. sf-2745011 Increased Enforcement Action at State Level • State Attorneys General • District Attorneys • Regulatory Agencies • New Legislation • Consumer Class Actions