8 Key Principles for Understanding and Navigating Green Claims: ACCC’s Guidance for Businesses

In the ever-evolving landscape of corporate responsibility and consumer awareness, the significance of environmental, social, and governance (ESG) factors cannot be understated. These factors are increasingly shaping the decisions of both consumers and businesses alike. At the General Counsel Summit held on August 8, 2023, Ms. Catriona Lowe, Deputy Chair of the Australian Competition and Consumer Commission (ACCC), highlighted the importance of accurate and transparent green claims made by businesses in response to the growing demand for sustainable products and services.

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

Catriona Lowe, ACCC Deputy Chair

Engaging with the ACCC: The Power of Legal Practitioners

Ms. Lowe commenced her address by acknowledging the essential role that general counsels play in ensuring corporate accountability and legal compliance within organisations. As legal experts, general counsels possess the knowledge and experience required to identify potential issues of non-compliance or anti-competitive conduct. Ms. Lowe emphasised that the ACCC values the input of legal practitioners in identifying matters that require regulatory attention.

The Impact of Greenwashing

With environmental consciousness on the rise among consumers, businesses are adapting to meet this demand for sustainable products and services. However, this surge in environmentally friendly claims has also given rise to a concerning practice known as “greenwashing.” Greenwashing involves businesses making misleading or exaggerated claims regarding their environmental practices, ultimately eroding consumer trust, and undermining legitimate green initiatives.

ACCC’s Expectations and Guidance

The ACCC, as Australia’s competition and consumer protection authority, is concerned about the proliferation of potentially misleading environmental or sustainability claims. To address this, Ms. Lowe outlined the ACCC’s draft guidance for businesses making environmental claims. This guidance seeks to provide businesses with clear principles that ensure truthful, transparent, and accurate communication of environmental claims. These principles encompass various aspects of green claims, from accurate representation and evidence to avoiding vague or misleading terms and ensuring clarity in visual elements and certifications.

Key Principles for Meaningful Green Claims

Throughout her speech, Ms. Lowe highlighted eight key principles that businesses should adhere to when making green claims:

  • Accurate and Truthful Claims: Avoid exaggerating environmental benefits and ensure transparent and fair comparisons.
  • Evidence-based Claims: Have research, data, or evidence to substantiate environmental claims.
  • Full Disclosure: Do not hide important information and avoid misleading through disclaimers in small print.
  • Clear Conditions and Qualifications: Clearly explain any conditions or qualifications associated with the claim.
  • Avoid Broad and Unqualified Claims: Use specific and easily understandable language in claims.
  • Precision in Emissions-related Claims: Clearly explain complex emissions-related terms and provide evidence for such claims.
  • Use of Clear and Understandable Language: Avoid scientific or technical language that may confuse consumers.
  • Transparent Visual Elements and Trust Marks: Visuals and trust marks should accurately represent the claims and not be misleading.
  • Building Consumer Trust and Encouraging Genuine Sustainability

The ACCC’s draft guidance underscores the importance of maintaining consumer trust in the realm of green claims. Consumers rely on the accuracy of these claims to make informed purchasing decisions, and businesses have a responsibility to ensure that they convey truthful and accurate information. By following the principles outlined in the guidance, businesses can avoid misleading practices and contribute to building a trustworthy marketplace for sustainable products and services.

In conclusion, Ms. Lowe’s speech at the General Counsel Summit highlighted the ACCC’s commitment to promoting competition, fair trading, and consumer protection. The growing importance of ESG factors in consumer decisions demands a high level of integrity from businesses when making 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.”

It is incumbent upon legal and compliance practitioners to ensure that the staff in their organisations are trained in the principles of accurate, transparent, and evidence-based green claims. By doing so, businesses can not only foster consumer trust but also drive genuine market innovation towards a more sustainable future.

A transcript of the speech is available here.