BUSINESS:

FTC proposes crackdown on 'greenwashing'

Under a set of environmental marketing guidelines that were proposed by the Federal Trade Commission today, businesses would soon have to tread more carefully when calling their products "green" or "eco-friendly."

FTC's draft guidelines tell companies not to make "unqualified general environmental benefit claims" -- such as calling their products "green." Under current rules, those broader claims are fine as long as the businesses can provide evidence that the product is better for the environment in specific ways.

The proposed change is part of a long-pending revision to FTC's Green Guides, which would also set out the first federal ground rules for the marketing of carbon offsets and renewable energy credits.

FTC Chairman Jon Leibowitz said in a conference call today that consumers need to be protected from the deceptive and misleading claims that have proliferated since the agency's guidelines were last revised in 1998.

"For many products, confusion abounds," Leibowitz said. "We don't always get what we think we're getting."

FTC chose to advise against general environmental marketing because a consumer marketing study showed that consumers have scant understanding of what these claims actually mean, the proposed rule says.

When presented with claims about a supposedly "green" product, most people thought it was recyclable, biodegradable, made from recycled materials or made with renewable materials. Nearly half thought the marketing meant the product was nontoxic, compostable or made with renewable energy, the study found.

"Very few products, if any, have all of the attributes consumers appear to perceive from general environmental benefit claims," the proposal says. "In addition, given that all products have some environmental impact, it is doubtful that a marketer could substantiate that a product has no or negligible negative environmental impact. The commission, therefore, proposes revising the Guides to more directly caution marketers not to make unqualified general environmental benefit claims."

Thomas Lyon, director of the Erb Institute for Global Sustainable Enterprise at the University of Michigan, said the commission seems adamant about this point, but it will be a hard sell until there are better ways of measuring the environmental performance of products.

The commission considered taking a position on life cycle analysis, which is intended to assess the overall environmental impact of using one product over another. One commenter suggested that the commission take an environmental performance approach similar to the Food and Drug Administration's nutrition-facts labeling program.

Ultimately, the commission decided that the "complexity and variability" of claims made it too difficult to provide general guidelines for assessing environmental benefits, the draft rule says.

"It's going to reduce greenwashing, but I also think it's going to have a relatively limited impact," Lyon said after examining the proposal. "What we need is a system that will allow companies to credibly make these types of broad claims. That's really hard, and I think it's still a number of years off."

The guides, which have been under review since 2007, are not enforceable on their own. They don't impose any environmental standards for products, and companies aren't required to follow any of the suggestions.

But FTC's enforcement division, which is charged with preventing false and deceptive advertising, has sought to show businesses that the guides are being treated as if they are rules. The commission has stepped up enforcement under the Obama administration, filing a series of complaints about supposedly biodegradable products and the environmental benefits of bamboo-based clothing.

The new guides should provide more businesses with more clarity, meaning fewer enforcement actions, Leibowitz said. Most of them want to comply with fair rules, he said.

But if companies continue to push the line, Leibowitz said, "we're going to go after them, and we'll put them under order."

Advice for businesses

According to a summary that accompanies today's proposal, the guidelines could soon include several pieces of specific advice for businesses.

Some trade groups have questioned the scope of the guides, suggesting that stricter restrictions on 'green' marketing could have the opposite of the intended effect. By making it harder for businesses to tout the environmental benefits of their products, they say, the guides could dissuade them from making environmental gains -- and make it harder for eco-minded consumers to make choices.

Today's guidelines tell companies not to call their products "biodegradable" if it will take more than one year for them to break down. So, too, if the products are destined for landfills, incinerators or recycling facilities, because they wouldn't break down in those situations.

Under the proposal, companies would be advised against selling carbon offsets if the underlying emissions reductions were already required by the government. That is one of the proposal's few forays into the contentious topic of "additionality" -- the question of whether real emissions reductions are actually taking place when offsets are sold.

"Although many commenters urged the commission to provide detailed advice or extensive regulatory requirements, such an approach is not appropriate at this time given the extent of the commission's authority, the available consumer perception evidence, and the ongoing policy debates among experts in the field concerning the appropriate tests to substantiate offset claims," today's proposal says.

The proposed guidelines also explicitly add "ecolabels" -- seals of environmental approval -- to the existing rules for environmental endorsements. For example, products are not allowed to carry labels from a certification group that has not endorsed the product.

Labels too confusing?

Today's proposed guides are the closest the federal government has come to regulating ecolabels.

They have multiplied in recent years. There are now at least 349 ecolabels in 212 countries, spanning 37 different industries, according to Big Room Inc., a Vancouver, British Columbia-based company that maintains a database of the labels.

The labels include better-known tags such as the Green Seal and the U.S. Green Building Council's Leadership in Energy and Environmental Design label; the Forest Stewardship Council rating; Germany's Blue Angel and the Nordic Swan; and lesser known tags such as the Oregon-based Salmon-Safe label and the Composting Association Certified label.

In the lead-up to the revision of the Green Guides, experts have grappled with the question of what to do with the labels, which some say are more trusted by the public than self-declarations of eco-friendliness. Some have suggested creating a broad government system like the E.U. ecolabel or the U.S. Energy Star label, or creating a few widely used labels run by industry or independent organizations.

Others suggested modeling standards off of the International Organization for Standardization's environmental marketing guide, a voluntary set of standards that some countries are working to adopt into national law.

A new section in FTC's proposed Green Guides encourages businesses to use specific labels rather than those that make broad-based environmental claims. They caution businesses not to use labeling systems that don't specify criteria backed up by reliable scientific evidence. At the same time, they do not require certifiers to make their criteria public.

The onus, it appears, is to be on the marketer of the product, not on the labeling system: In short, if a product displays a seal, the marketer of the product should be able to substantiate its claim.

The guides do not go as far as requiring producers to get third-party certification for their environmental claims. Nor do they establish a central labeling system or lay out criteria for labeling systems.

If companies are dissuaded from making broad "green" claims, they may rush to certifications, Lyon said. That could pose new challenges.

"There are getting to be so many ecolabels that a lot of people are concerned that consumers may just become too confused and not bother to pay any attention to labels at all," he said.

Click here to read the proposed rule.

Click here to read a summary of the proposed guidelines.

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