Consumers are increasingly considering the environment when making purchasing decisions with many prepared to pay a premium. It is no wonder that environmental claims are a priority focus area of the Commerce Commission.

Since 1 July 2017, the Commerce Commission has received 94 complaints about environmental claims that relate to the Fair Trading Act 1986 (FTA) mostly alleging that claims could not be substantiated and/or that the performance characteristics are false or misleading.

On 7 July 2020, the Commission released guidelines to help businesses understand their obligations when making environmental claims. These guidelines replace the Guidelines for Green Marketing published in 2008.

What is an ‘environmental claim’?

An environmental claim is a representation about the environmental impact of a good or service. Phrases such as “biodegradable”, “organic” and “recyclable” are environmental claims, and give consumers the impression that the good or service is beneficial for the environment. Environmental claims can be express or implied. Implied claims are made by inference from the overall impression, such as by use of imagery (eg, pictures of nature) and/or words (eg, “green” or “eco”).

The Commerce Commission’s guidelines

Businesses should keep the following principles in mind when making environmental claims:

• Consider what a “reasonable consumer” would understand the claim to mean. Information should also be kept up to date. This means regularly reviewing claims made on a continuing basis (such as on websites and packaging) to ensure accuracy.
• Be specific: avoid making claims that are vague or that have multiple meanings. If a claim only relates to a specific part of a product or the production process, make this clear to avoid the impression that the claim applies to the whole product or its lifecycle. The intention behind the claim is irrelevant.
• Substantiate claims: must have reasonable grounds for making a claim. This means having evidence, research, test results or similar credible information to demonstrate a solid foundation for the claim. Keep records of information gathered during a product production process. When claims refer to scientific proof, a high level of substantiation involving reliable scientific evidence is required. This information must be held at the time the claim is made – obtaining information afterwards to substantiate the claim is not sufficient.
• Use plain language: avoid scientific or technical language, and ensure claims are clear and easy for consumers to understand.
• Exercise caution when relying on tests or surveys: take care to interpret test results correctly and seek expert help if required. Do not portray test results in a way that makes them look more positive or credible than they are, such as by omitting key information that limits the claim.
• Consider the overall impression: do not rely on fine print to correct a misleading impression. Show any important qualifying information in a bold and clear way. If the claim requires significant qualifications in fine print which alter the overall impression, reconsider the headline claim.

Our view

Although not legally binding, the Guidelines indicate how the Commission will interpret its powers under the FTA.

Since the release of the Guidelines, there has been one prosecution in relation to Green Marketing (found here). While fines can be hefty (up to $600,000 for companies and $200,000 for individuals per breach), the true harm lies in reputational damage.

We suggest businesses review their marketing materials against the Guidelines to avoid inadvertently breaching the FTA. While the Guidelines are directly applicable to marketing, companies with publicly available corporate documents about a company’s environmental impact should also review these claims to ensure that they align with the Guidelines.

If you would like assistance in reviewing your environmental claims, please contact one of our experts.