A New Playbook for Green Advertising

11/8/10

What does it mean for a product to be environmentally friendly? How about sustainable? Or even biodegradable? These words may appeal to a rapidly growing body of environmentally conscious customers, not to mention the major corporations and startups who appeal to them by touting their own “greenness”—but unless they convey a clear meaning and can be substantiated, green advertising may land companies in a lot of hot water.

More than 95 percent of green products are guilty of greenwashing—meaning they contain false or misleading environmental claims—according to a recent study conducted by environmental marketing company TerraChoice. To address this pervasive problem, the U.S. Federal Trade Commission (the FTC) recently released proposed revisions to its Environmental Marketing Guides. Once finalized (probably in early 2011) the FTC guidance will establish significant new rules of the road for companies that advertise the environmental attributes of their products, services, or business practices. It will address everything from general environmental claims to certifications and seals of approval to claims of recyclability and compostability to renewable energy use and carbon offset claims. Companies currently making any environmental marketing claims to consumers, whether through traditional advertising, websites, or social media, need to pay careful attention to the FTC’s existing and forthcoming guidance if they wish to avoid the prospect of enforcement action or related consumer litigation.

Informally known as the “Green Guides,” the FTC’s Environmental Marketing Guides provide guidance on how Section 5 of the FTC Act and similar state laws—all of which prohibit deceptive or misleading marketing acts or practices—are likely to be enforced with respect to environmental advertising claims. Noncompliance with the Green Guides has also been used as the basis of consumer class actions and claims initiated by competitors under the federal Lanham Act. Additionally, the National Advertising Division of the Better Business Bureau (the NAD), a self-regulatory organization that resolves disputes between competitors and has the authority to initiate its own challenges, operates an active enforcement program in the area of green advertising. Like the FTC and state regulators, the NAD looks to the Green Guides when evaluating green advertising claims.

The FTC first issued the Green Guides in 1992 and revised them in 1996 and 1998, but during the last 10 years the FTC has brought few enforcement actions. That pattern may be shifting. Since President Obama took office in 2008, the FTC has used the Green Guides in seven lawsuits to enforce laws against unfair and deceptive advertising with regards to environmental marketing claims. This reflects a significantly greater enforcement rate when compared to prior administrations. If the recent proposed Green Guide revisions become final, more vigilant enforcement is likely to continue.

The Green Guides are a major step in the right direction. Both businesses and consumers benefit from clear advertising rules that create market transparency. Customers should get what they pay for, especially when it comes at a cost premium, and should be empowered to send clear market signals about the types of products they want to buy. Equally important, companies that are true environmental leaders need a mechanism to communicate their efforts so they can distinguish themselves from competitors and reap rewards for their innovations. Hopefully the Green Guides will facilitate development of a clearer lexicon for communicating the ever-increasing methods that companies are using to “go green”…whatever that means.

Susan Mac Cormac is a partner in the Corporate Group of Morrison & Foerster’s San Francisco office. She serves as co-chair of the Firm’s 550 lawyer Business Department,and co-chair of the Cleantech Group. Follow @

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