ACCC publishes new greenwashing guidance, seeks submissions

Kirsten Webb, Emily Tranter, Claire Smith and Julian Rein
27 Jul 2023
Time to read: 5 minutes

The ACCC guidance will undoubtedly be welcomed by many businesses as they face increasing consumer and stakeholder pressures to disclose climate-related and other sustainability risks.

The ACCC has published its long-awaited draft guidance to assist businesses to avoid greenwashing when making their environmental and sustainability claims.

The ACCC is accepting feedback from stakeholders until 15 September 2023. Corporates are urged to make submissions on whether the draft guidance will provide the much requested guidance to improve business confidence when making claims.

Once finalised, we expect the ACCC will use the guidance as a foundation for its continued surveillance and enforcement actions against potentially misleading and deceptive conduct in a similar manner in which ASIC has used Information Sheet 271 to take corrective action, including commencing court proceedings. The ACCC plans to release sector-specific guidance after the finalisation of the economy-wide guidance.

How did we get here

The ACL applies to all forms of marketing, such as information on packaging, in advertisements, on store signs, social media, websites or told to consumers in writing or verbally, and more generally to representations in connection with the supply or possible supply of goods or services, or to conduct, in trade or commerce.

The draft guidance builds upon the 2011 Green Marketing and the ACL guidance by incorporating over a decade of new technologies, terminology, and a changing consumer knowledge base.

The 2023 draft guidance significantly expands and adds to these basic principles without undoing any of the established guidance, setting a set of goals and principles and detailed guidance on the application of those principles to specific aspects of environmental and sustainability claims, informed by the findings in the ACCC's March 2023 internet sweep on greenwashing.

The Principles at the core of the ACCC's greenwashing guidance

  1. Make accurate and truthful claims.
  2. Have evidence to back up your claims.
  3. Don't leave out or hide important information.
  4. Explain any conditions or qualifications on your claims.
  5. Avoid broad and unqualified claims.
  6. Use clear and easy-to-understand language.
  7. Visual elements should not give the wrong impression.
  8. Be direct and open about your sustainability transition.

While many of these principles apply to misleading or deceptive claims of all kinds, the draft guidance includes detail on how these principles apply to environmental and sustainability claims, with specific focus on misleadingly broad claims, use of unclear or overly specialised terminology, claims based on unsound scientific evidence, confusing use of certification trade marks, and misleading representations about progress towards sustainability goals, as outlined below.

The guidance identifies that businesses are increasingly falling foul of the ACL by having only a superficial understanding of their supply chains. Limited due diligence or underdeveloped reporting practices can set the groundwork for inadvertently making environmental claims that are at odds with the reality of a product's lifecycle, thereby misleading consumers. Comprehensive and well-communicated knowledge underpinning claims is the key to avoiding greenwashing enforcement action by the ACCC.

Clarity and validity of the scientific basis of claims

  • Do not overstate the level of scientific acceptance of studies that claims are based on. If the study relied upon only supports the claim under certain conditions, the conditions should be specified in the claim.
  • Avoid "overall environment positive" representations as almost all products and services have a negative impact on the environment.
  • Avoid claiming simple compliance with legally mandated obligations as special or particularly environmentally-conscious.

Third-party certifications and environmental imagery

  • Avoid vague use of certifications and logos.
  • Verify that the product matches the claim being certified and assess the independence and integrity of a certification logo or scheme.
  • Accurately use the certification logo and describe the scheme.
  • Ensure that the scheme is independent with no conflict of interest. Avoid using symbols akin to trust marks of third-party certification bodies and words such as "approved" where there is no independent certification or verification.
  • Assess the consumer perspective of how a third-party certification logo is likely to be interpreted
  • Use care with visual elements that can be interpreted as broad environmental claims such as the colours green or blue, images of plants, animals, or the earth.

Guidance on consumer understanding in 2023

  • Consider the total product lifecycle when making claims of sustainability in production: where a claim made is only true for specific parts of the life cycle and would not be true when considering the totality, it is better to be specific to avoid misleading consumers.
  • Ensure that claims are true when considering the normal use of the product or service in Australia: a business should ensure that any claim made is true when being normally used by a consumer in the market in which it is normally sold. For example, a product that is 100% recyclable in another jurisdiction may not be in Australia due to differences in infrastructure.
  • Specify any special steps the consumer must take to achieve the advertised outcome: specify if consumers must take steps beyond normal use to achieve the outcome claimed and outline those steps.
  • Updated meaning of key terms: The ACCC has expanded on the terms explored in the 2011 guidance and provided guidance on consumer understanding of common phrases used in environmental and sustainability claims like the overly broad terms "green", "environmentally friendly", "eco friendly" and "sustainable".
  • Refer to the guidance for advice on how to use the terms "recyclable", "recycled", "renewable energy" and "free".

Carbon Neutral, Climate Neutral, Net Zero

  • Specifically and transparently qualify the usage of these headline terms to avoid consumer confusion.
  • Undertake thorough baseline assessments, use established methodologies, communicate scope of emissions assessed clearly, account for all types of greenhouse gas emissions, avoid misrepresenting the proportional impact of an initiative, and avoid advertising carbon neutral products when the option is not the default or requires a premium.

Transitions to sustainability and representations of future goals

  • Have reasonable grounds for making representations about future goals and targets: businesses should have reasonable grounds for making representations about the future, such as greenhouse gas reduction targets, net-zero goals, transitions to low-waste.
  • Use formal and reliable methods for quantifying emissions and have concrete plans to implement commitments: The ACCC will assess the formality or reliability of the way businesses quantify their emissions, and whether there is a genuine commitment and concrete or actualised plan for implementation which underpins representations of goals, plans, and intentions.

The draft guidelines include a Good Practice Case study which gives good insight into ACCC expectations about goals, targets and commitments and use of offsets as follows:

  • A business making claims about its goals, targets or transition should:
    • Quantify emissions and process against an emissions reduction target:
      • calculate its own emissions;
      • account for direct and indirect (scope 1 and scope 2) emissions through independent life cycle analysis and measuring off a nominated baseline; and
      • clearly convey to consumers which emissions are included in its calculations.
    • Commit to clear steps and be in the process of implementing them through operational changes and purchasing high integrity offsets:
      • clearly explain and detail any operational changes: ensure it is making operational changes to reduce gross emissions; and
      • purchase high quality integrity offsets: where emissions are not immediately available, only purchase high integrity offsets.
    • Reliance on offsets
      • clearly explain the proportion of gross emissions reduced and separately identify reliance on offsets. In using offsets, the business ensures it is:
      • provide details of the programs from which offsets are sourced;
      • take reasonable steps to verify their integrity;
      • annually cancel/surrender the offsets consistent with its goal and ensuring that the cancellations are recorded in the relevant registry; and
      • providing regular updates on its progress including the number of purchased and surrendered offsets in each year.
    • Investment plans for further reducing emissions with clear and quantifiable targets include:
      • increasing use of renewable energy to 100% by 2028 (based on committed investment decisions);
      • reducing reliance on air freight and switching to ocean freight and rail by 2025 (based on committed supply contracts);
      • trialing options in supply chain emission reduction, reporting back on results in 2025; and
      • reducing reliance on virgin materials by upcycling and recycling as per a detailed plan to achieve 75% reduction by 2025.

Key takeaways

The ACCC guidance will undoubtedly be welcomed by many businesses as they face increasing consumer and stakeholder pressures to disclose climate-related and other sustainability risks.

However, given greenwashing remains a key enforcement priority for the ACCC and following the wave for regulatory action by ASIC, it is expected that the ACCC will proactively use the finalised guidance to:

  • assess the creditability and compliance of business statements against ACL obligations; and
  • take action against any statements perceived as potentially misleading and deceptive.

As in all misleading and deceptive conduct matters, the ACCC has the power to issue section 155 notices, substantiation notices, infringement notices, and take court action.

The maximum penalties are significant, being the greater of $50 million, three times the value of the "reasonably attributable" benefit obtained by the contravention, or 30% of turnover for the contravening period.

The ACCC is accepting feedback from stakeholders until 15 September 2023.

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 communication. Persons listed may not be admitted in all States and Territories.