Navigating Greenwashing: The ACCC’s definitive guide for businesses making sustainability claims

Greenwashing has been at the forefront of the Australian Competition and Consumer Commission (ACCC)’s enforcement priorities over previous years. In July 2023, the ACCC published its draft guidance to improve businesses’ environmental claims. The draft guidance was subject to public consultation in the second half of 2023, and on 12 December 2023, the ACCC released its final guidelines for businesses titled “Making environmental claims”.

The ACCC received feedback on the draft guidelines from over 150 stakeholders and incorporated some changes to the final guidelines – mostly in the form of minor clarifications, further explanations e.g. what is considered to be a “reasonable step” when substantiating claims, and further examples. However, the 8 principles espoused in the draft guidelines remain unchanged in the final version. These 8 principles are for businesses to:

1. Make accurate and truthful claims – Businesses are advised to only make claims that represent a genuine environmental impact and which do not exaggerate the benefits or level of scientific acceptance of the claim. If a business is considering making an environmental claim that features a comparison of two or more products or services, it must ensure that the comparisons are transparent and fair. This includes comparing “like-for-like” products or services and measuring compared features using the same methodology or against the same standard. An example of recent enforcement action includes the ACCC accepting court-enforceable undertakings from yoghurt manufacturer MOO Premium Foods Pty Ltd in November 2023 following an investigation that found claims of ‘100% ocean plastic’ made on packaging, website and social media to be misleading.
   
   
2. Have evidence to back up claims – The ACCC considers that any business that makes an environmental claim should have a reasonable evidentiary basis for making the claim. Where evidence is required to substantiate a claim, independent and scientific evidence is the most credible type of evidence. The ACCC has previously indicated that its preferred investigative tool for ‘green claims’ is a substantiation notice requiring a person to give information and/or produce documents that could be capable of substantiating or supporting a claim. Non-compliance with a substantiation notice or providing false or misleading information in response to one carries the risk of infringement notices being issues or court-ordered penalties being imposed.
   
   
3. Not hiding or omitting important information – Key information relating to a claim, such as disclaimers or conditions, must not be hidden from consumers such as in fine print. The ACCC encourages businesses to be transparent by providing consumers with all the relevant information relating to an environment claim to assist the consumer to assess the claim. Businesses should consider the full life cycle of a product or service.
   
   
4. Explaining any conditions or qualifications on claims – Where an environmental claim may only be true in certain circumstances or under certain conditions, a business must clearly explain these disclaimers and conditions to consumers.
   
   
5. Avoiding broad and unqualified claims – Businesses should avoid using overly broad and vague terms such as ‘Green’, ‘Clean’, ‘Environmentally friendly’, ‘Eco friendly’ and ‘Sustainable’ to describe their products and services without any additional qualifiers or explanations. These terms convey sweeping benefits and may be interpreted in various ways. The use of such broad terms increases the risk of potentially misleading consumers. Where businesses decide to use terms which convey an environmental benefit, they should explain how the product or service meets this attribute. For example, a claim that a product is recyclable would be understood by a consumer to mean that the product can be recycled via local council recycling bins. If a product is only recyclable through a third-party service, a business must clearly explain this requirement to the consumer.
   
   
6. Using clear and easy to understand language – Claims, or explanations associated with a claim, should be worded in a way that is clear and easy to understand for the ordinary and reasonable consumer. The ACCC recommends businesses to avoid using technical or scientific language when explaining any environmental claims.
   
   
7. Avoiding visual elements that give the wrong impression – A business should not incorporate symbols or images in their advertisements, product packaging or point of sale which would convey a misleading environmental meaning to a consumer. For example, images of plants, animals, the earth or certain endangered animals may convey to a consumer that the product has an environmental benefit. The ACCC has foreshadowed that it intends to release further guidance on the use of “trust marks” in early 2024. In this regard, the ACCC made submissions in June 2023 to the Senate Inquiry into Greenwashing stating that it is in the process of considering two certification trade marks: 
   
   
8. Being direct and open about the business’ environmental sustainability transition – The ACCC encourages businesses to be transparent with consumers about the steps they have taken to improve their environmental performance. However, it cautions against exaggerating a business’ progress in its sustainability transition as this may mislead consumers.

The ACCC has also defined the term greenwashing in the final guidelines as “environmental claims that are false or misleading. The ACCC considers that a business will be engaging in greenwashing where it makes a claim that represents a product, service or the business itself as better for or less harmful to the environment than it really is.”

Additionally, the ACCC clarifies in the final guidelines that environment claims are made about environmental attributes and is “any representation made by a business in relation to its environmental impact, including claims that give the impression that [the] business, products or services:

1. have a neutral or positive impact on the environment;
2. are less harmful to the environment than alternatives;
3. have specific environmental benefits.”

Although the final guidelines are non-binding, given that the ACCC has announced that greenwashing remains on their enforcement agenda for 2023/2024 (and is likely to remain an ongoing priority), businesses should familiarise themselves with the principles set out in the guidelines to ensure that they do not contravene the Australian Consumer Law (ACL). With the publication of these guidelines, we can expect greater scrutiny and enforcement action by the ACCC, including the issuing of information-gathering notices under section 155 of the Competition and Consumer Act 2010, substantiation notices, infringement notices and penalty proceedings. Risks from ACCC enforcement action are significant, with the maximum penalty for each contravention by a corporation being the greater of:

• $50 million;
• if the Court can determine the benefit obtained that is "reasonably attributable" to the contravention, 3 times the value of that benefit; or
• if the Court cannot determine the value of the benefit, 30% of the corporation's adjusted turnover during the relevant period.

Individuals responsible for contravening the ACL are at risk of paying a maximum penalty of $2.5 million per contravention.

Given that a Senate Inquiry is currently underway, the ACCC is anticipated to release further guidance or amend the guidelines if necessary, as a result. The Senate Inquiry Report into greenwashing is expected to be released on 28 June 2024.