Product Risk Insights

22 July 2008

ACCC comes down hard on "greenwashers"

By Peter Briggs.

Key Points:
Businesses need to be careful when making a carbon claim.

As more consumers purchase carbon neutral products and more businesses seek to promote their green credentials, the burgeoning carbon offset market has come under fire for "vague, misleading and unsubstantiated" carbon claims by its less ethical traders.

The Australian Competition and Consumer Commission has released a guide on "Carbon Claims and the Trade Practices Act" to seek to address this problem and promote a more credible and transparent carbon offset market.

Conduct in breach of the Trade Practices Act

Section 52 of the Trade Practices Act 1974 prohibits conduct, in trade or commerce, which is misleading and deceptive or is likely to mislead or deceive. A breach of section 52 centres on whether the representations were:

  • misleading or deceptive;
  • made in the course of trade or commerce; and
  • relied upon by the consumer.

Accordingly, a business selling carbon offsets may be in breach of section 52 of the Act for inaccurate carbon claims that were made carelessly or negligently, regardless of whether they intended to mislead consumers. Consumers who purchase carbon credits in reliance on misleading information are then at risk of breaching the Act for making inaccurate carbon offset claims about their business, products or services. A breach of section 52 of the Act gives rise to a claim for damages.

The Act also prohibits false representations (in connection with the supply of goods or services) in relation to the sponsorship, approval, performance, characteristics accessories, use or benefits of products or services. A business in breach of these provisions of the Act may face a civil claim for damages brought by a person who suffers loss or damage as result of the conduct, and criminal proceedings, including a fine of up to $1.1 million.

The ACCC Carbon Guide

Since December last year, the ACCC has placed particular focus on environmental claims and the industry, releasing "Your consumer rights: environmental claims and Green Marketing and the TPA". Following this theme, the ACCC has stated that the Carbon Guide is "intended to educate businesses about their obligations under the Act and to alert them to potentially problematic areas." The ACCC Carbon Guide sets out concise and useful advice on making legitimate "carbon offset", "carbon neutral" and "low carbon" claims using simple examples intended to avoid "misleading and deceptive" claims.

What do I do when making carbon claims?

The ACCC Carbon Guide highlights the following things to remember when making carbon claims:

  • Think about the message that will be taken away by your target audience when producing your advertising. Even if you have the best of intentions, if your claims are misleading you could still be at risk of breaching the Act.
  • Provide accurate and complete information to consumers on which to base their purchasing decisions. Misleading conduct can include silence. It is essential that your consumers have the full picture.
  • Clarify your carbon claims. There are many varied standards of measurement, accounting and accreditation, so when making claims based on these, be sure to explain to consumers what you refer to and where to find further information.
  • When making claims of carbon neutrality, spell out exactly what is included in your claim to avoid misleading consumers. Be aware that there is no universal definition of carbon neutrality and that consumer understanding of the term may vary.
  • If you are making statements as to the future, ensure you have a reasonable basis for making them. Think about how you would answer a query about your future statement and on what basis you made it.

When buying carbon products or services

The ACCC Carbon Guide highlights a number of risks for prospective purchasers:

  • when making claims about your organisation's carbon neutrality, or about products and services you have offset, if you have purchased inappropriate or poor quality offsets you are at risk of having unsubstantiated carbon offset claims and therefore at risk of breaching the Act;
  • simply purchasing a carbon offset but not retiring it does not offset your specific emission. To ensure that your emissions are offset and your carbon offset claims are substantiated, you must make sure the offsets you purchase are retired at the point of sale; and
  • an emissions reduction project may not be entirely secure or may involve a range of risks. Obtaining some sort of guarantee or factoring some risk into the credit calculation may help to alleviate the potential for misleading conduct based on poor risk management.

Going forward

The ACCC Carbon Guide is a shot across the bows for those unscrupulous traders who have sought in the past to greenwash their advertising and exploit consumers but it also demonstrates how careful businesses need to be in making any sort of carbon claim. The ACCC has stated that it will vigorously pursue any claims which breach the Act. Businesses should re-evaluate their marketing and advertising material and consider appropriate risk management procedures as part of their procurement of carbon products or services to ensure that, in making a carbon claim, they do not breach the Act.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states or territories.
Peter Briggs
Peter Briggs