Consumers generally take these sorts of claims at face value, and should be entitled to rely on them when making purchasing decisions. To ensure consumers are not misled in this regard, the Commerce Commission has released specific guidance to assist traders when making green and eco marketing decisions that comply with the Fair Trading Act 1986.
What are environmental claims?
An environmental claim is “a representation about the environmental impact of the production, distribution, use and disposal of a good or service."1 These claims, which can take many forms and which may be express or implied, give the impression to consumers that the good or service is favourable for the environment or that it has a lesser environmental impact than another good or service.
Common environmental claims include “life cycle claims" on the composition, production or disposal of a good or its packaging. For example, composition claims about recycled components of products or packaging, as well as organic or “free-of" claims. Production process claims might include that products are made with renewable energy, sustainable and durable products, or that products are carbon-neutral. Goods or packaging may also be marketed as biodegradable, compostable or recyclable.
Environmental claims can also take the form of comparative claims (e.g. “better for the environment", “20% less energy than other brands"), company or brand names which imply an environmental benefit (e.g. through green imagery or wording), or certification stamps used to show the environmental qualities of goods or services (e.g. organic produce).
The guidelines
The Environmental Claims Guidelines (which replace the 2008 Guidelines for Green marketing), include general principles and examples of cases where the Commerce Commission has previously taken action. The guidelines, which were designed in consultation with relevant industry bodies and government agencies, remind traders making environmental or “green" claims to:
- Be truthful and accurate: A claim must accurately reflect the information the trader has, and not overstretch what is known or proven. When considering the accuracy of a claim, traders should consider what a “reasonable consumer" would understand the claim to mean. Claims should be reviewed regularly ensure they remain accurate.
- Be specific: Vague claims may mislead consumers. For example, if a product is advertised as being “recyclable", “chemical-free" or “sustainably sourced", but this is only true for some components of the product, there will be a risk that consumers could be misled. If a claim relates to a particular part of the product or production process (for example the packaging or ingredients) then this should be specified.
- Substantiate claims: Traders must have reasonable grounds for their claims (e.g. having research or test results to demonstrate a factual basis for the claim). What will constitute adequate substantiation will depend on the claim being made, the context and the circumstances. A claim that refers to scientific proof, for example, needs to be supported by a high level of substantiation involving reliable and credible scientific evidence. The Commerce Commission recommends that traders consider making the evidence they hold to substantiate claims accessible to consumers.
- Use plain language: Claims should be clear and easy for consumers to understand.
- Not exaggerate: Claims should not overstate an environmental benefit to create an exaggerated impression of the product being good for the environment. Traders should avoid making a general claim across all products or services within their range, or imply that the range as a whole is eco-friendly or sustainable, if that claim is only true for some products.
- Take care when relying on tests or surveys: Test results need to be interpreted correctly, communicated accurately, and traders should make it clear whether testing is conducted internally or independently.
- Consider the overall impression created by the goods, services, packaging or marketing materials to determine whether it is misleading. Fine print cannot be used to correct a misleading impression. Caution needs to be exercised when brands make implied claims, for example using natural imagery or green motifs in a way that may lead consumers to think the product is eco-friendly.
Areas of particular risk
The Commerce Commission has emphasised several areas in which traders need to take special care.
Omitted ingredients
A claim that a product is “free-of" a particular ingredient or component could be misleading if:
- the product includes other ingredients or components that could result in similar harmful effects,
- the omitted ingredient is not commonly used in comparable goods or services (for example, it could be misleading to describe a product as being CFC-free when no New Zealand products of that type contain CFCs), or
- the product does not contain the omitted ingredient, but the packaging does, and this has not been made clear to consumers.
Organic products
Caution is required when making claims that goods are “organic" or “certified organic". In particular traders need to consider the source of the raw ingredients and the production process, and ensure that the product as a whole can be properly described as being organic. Traders who make organic claims should ensure they are aware of their obligations under the Organic Products Bill 2020, introduced to Parliament earlier this year.
Carbon claims
It is important that a business that makes a carbon offset claim clearly informs customers of the basis for that claim. The Ministry for the Environment has issued guidance notes advising that carbon offsets must be from tangible activities that have been implemented. Guaranteeing to plant trees cannot be counted as a carbon offset until those trees have removed carbon from the air.
Care also needs to be taken when using the claim “carbon neutral", as this has a wide range of meanings, which could include (for example) consumers being led to believe that a business's emissions have been completely eliminated through emissions reduction and offsets. It is very important that businesses are able to substantiate claims of this nature.
Disposal claims
If a product is advertised as being “compostable, “biodegradable" or “recyclable", this should be true in most circumstances considering the ways that consumers are likely to dispose of the goods, and what these words are commonly understood to mean.
It is likely to be misleading for example, to advertise a product as being compostable, if it is only compostable in commercial facilities to which most consumers will not have access. Claims that a product is compostable need to be backed up by firm evidence (for example, compliance with an international composting standard).
If products are marketed as being recyclable traders should consider where and how the products can be recycled. If a product is not accepted at kerbside recycling or Council drop-offs, the trader should make it clear where and how they can be recycled.
It should also be made clear if these types of disposal claims apply to the whole good or just part of it.
What's next?
These guidelines will be updated periodically to take account of evolving case law, legislation and business practices. Moving forward, traders should keep the guidelines in mind when making environmental claims to market their products or services, and should be careful to ensure that any such claims are truthful, well founded, and not misleading to consumers to avoid breaching the Fair Trading Act 1986. Failure to do so can carry significant penalties under the Act (with fines of up to $600,000 for body corporates).
Traders should take the release of these guidelines as a signal that the Commerce Commission is taking a particular interest in environmental claims, and should evaluate any claims they make to ensure that these are accurate, clear, and able to be substantiated.
If you have any questions about the matters raised in this article, please get in touch with the contacts listed, or your usual Bell Gully adviser.
1 Commerce Commission, “Environmental Claims Guidelines: a guide for traders” July 2020, at 2.
Disclaimer
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.