III. Advertising and greenwashing
Misuse of terms such as “clean and green” and “net zero” or misinformation about the life-cycle impact of products misinforms consumers and potentially weakens support for green and climate mitigation policies. By contrast, if consumers can confidently choose products that are better for the environment, manufacturers and sellers of those products or services are likely to be rewarded for being green, which in turn will drive competition and ultimately the entire market to become more sustainable.
Regulating greenwashing is seen as a tool to support the transition towards a circular economy. Acknowledging the harm caused by greenwashing, legislators and regulators worldwide are increasingly focussing on implementing and enforcing regulations to combat misleading claims. Regulators include in particular authorities in the advertising, competition, and financial markets spaces. The most far-reaching tool is banning advertising outright.
In a number of countries, fossil fuel advertisements are being banned by local government agencies. In some countries, campaigns have started to ban fossil fuel advertisements by law (with France being the first country to do so).
As part of its policies to combat climate change, the city of Amersfoort is the latest city in the Netherlands that, by resolution of December 2022, has restricted content for the advertising spaces sold by the city. The city’s contracts with advertisers going forward will contain the condition that no advertisements will be shown in public places either by the fossil industry or for its products or services. “Fossil fuel advertisements" will include advertising for or by the fossil fuel industry (any companies or interest groups in the coal, oil and gas sector), the aviation industry, and other fossil products and services (such as air holidays and travel by air, airplane tickets, grey energy, gas contracts, cruise-holidays, cars, motorbikes, and scooters with fossil fuel or hybrid engines). The City Council of Haarlem similarly adopted the policy (which has yet to be implemented) to disallow advertisements in public spaces for fossil fuel products (including “products from the bio-industry”) when contracting with advertisers in the city.
Closer to home, in August 2022, Sydney resolved to restrict fossil fuel advertisements and sponsorships, because of the health and climate effects of burning coal, oil and gas.
There are no comparable advertising bans in New Zealand.
The Advertising Standards Code (ASC) sets advertising standards in New Zealand. Principle 1 (of 2) of the ASC is entitled: “Social Responsibility; advertisements must be prepared and placed with a due sense of social responsibility to consumers and to society”. The last Rule under this Principle, Rule 1(i) ASC, concerns the environment and provides: “Protecting the environment; Advertising must not depict or encourage environmental damage or degradation”. The accompanying guideline specifies that “care must be taken when areas of significant conservation value are featured in an advertisement. These include, but are not limited to, beaches, dunes, riverbeds, wetlands, tussock lands, lake margins or estuaries”. The Advertising Complaints Board ruled, in its decision Lawyers for Climate Action and others v Firstgas Group, (2021) that the intent of this rule was to ensure imagery and language in advertising did not depict or support environmental damage. Whilst the claim was successful on other grounds, the Board held that the Rule 1(i) did not apply to advertising of products and services that may have an impact on the environment or climate change. Similarly, in Kai Point Coal (2022) the complainant objected to the advertising of coal on the grounds that it was an environmentally damaging product. The Advertising Standards Authority (NZASA) said this issue was not within the NZASA’s jurisdiction and no rules had been breached.
Whilst specific advertising codes exist for alcohol, gambling, finance and health, which are seen as areas that require additional care from a health-related perspective, no specific advertising code exists in respect of the environment.
This website lists many initiatives worldwide regarding eco-restrictions on advertising.
Claims about the sustainability of products have become a strong marketing tool as consumers are increasingly concerned about climate and the environment. Greenwashing is behaviour that seeks to persuade people that a company, or a product or service, is better for the environment or the climate (or indeed, in respect of any of the Sustainable Development Goals) than it actually is. This site lists some interesting recent greenwashing cases.
In the UK, in January 2023 the Competition and Markets Authority (CMA) published an overview of current investigations into misleading environmental claims, including in respect of fast moving consumer goods. Typically, as is stated on the CMA’s website, problematic claims include the use of vague and broad eco-statements, for example packaging or marketing a product as “sustainable” or “better for the environment” with no evidence; misleading claims about the use of recycled or natural materials in a product and how recyclable it is; and entire ranges being incorrectly branded as “sustainable” without any evidential basis.
Recent advertising cases in the UK include Unilever/Persil and Tier
In August 2022, Unilever’s Persil advert was banned by the UK Advertising Standards Authority (UKASA) for breach of articles 3.1 (Misleading advertising), 3.9 (Substantiation), 9.2, 9.4, and 9.5 (Environmental claims) of the UK Code of Broadcast Advertising (BCAP Code) because the advertisers were unable to provide evidence to support claims that the full-life cycle of the product had a lesser environmental impact compared to a previous formulation. The TV advertisement stated Persil was “kinder to our planet”, and featured children picking up litter on a beach. The ASA said the advertisement’s claim was unsubstantiated. Additionally, in the absence of evidence demonstrating that the full life cycle of the product had a lesser environmental impact compared to a previous formulation, the conclusion was that the advertisement was likely to mislead.
In April 2022, Tier was held to have breached rules 3.1 and 3.7 (Misleading advertising), 11.1, 11.3 and 11.4 (Environmental claims) of the Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code). An advertisement by Tier, an electric scooter hire company, featured an image of a scooter with text which said “Be environmentally … friendly. Take a TIER”. The UKASA held that these words would be interpreted as an absolute claim (i.e. “no environmental damage”). Because it had not seen evidence based on the lifecycle of the product (the scooters were manufactured in and shipped from China to the UK) to support the absolute claim as it would be understood by consumers, it concluded the advertisement was misleading and breached the Code.
In Europe, in March 2022, the European Commission published its proposal for a Directive aimed at “empowering consumers for the green transition through better protection against unfair practices and better information”. The proposal includes amendments to the Unfair Commercial Practices Directive and the Consumer Rights Directive (Directives 2005/29/EC and 2011/83/EU). It adds items to the list of commercial practices which are considered to be "unfair". Background information is provided in this Briefing.
If the proposal is adopted, it will prohibit companies from making generic or vague claims about environmental performance that cannot be backed up by evidence. Examples of such generic environmental claims are “environmentally friendly”, “eco-friendly”, “eco”, “green”, “nature’s friend”, “ecological”, “environmentally correct”, “climate friendly”, “gentle on the environment”, “carbon friendly”, “carbon neutral”, “carbon positive”, “climate neutral”, “energy efficient”, “biodegradable”, “biobased” or similar statements, as well as broader statements such as “conscious” or “responsible” that suggest or create the impression of excellent environmental performance.
The proposal will also prohibit sustainability labels that are not based on third-party verification or established by public authorities. Any certification scheme should fulfil minimum transparency and credibility conditions. Other specific rules include the prohibition on making an environmental claim about an entire product when the claim only concerns certain components of the product; claiming a benefit for consumers that is considered as a common practice in the market; and making false claims about the reparability or durability of the product.
The proposal only looks at greenwashing of environmental claims. It does not extend to false claims about meeting other Sustainable Development Goals, such as human rights and living wages.
In Australia, the Australian Competition and Consumer Commission (ACCC) has conducted research into the use of environmental claims online. As outlined in the report of its findings published in March 2023, ACCC has identified several high-level concerns across the range of industries targeted, (similar to findings in other countries, such as those mentioned above) which will require further action.
In the context of financial markets, Australia’s Securities & Investments Commission (ASIC) reported in February 2023 that it had issued its first proceeding (against Mercer Superannuation (Australia) Limited) alleging greenwashing. Action against greenwashing is one of ASIC’s 2023 Enforcement Priorities.
In New Zealand, a number of regulatory bodies are responsible for preventing misleading statements and conduct, including greenwashing. This includes the NZASA, the Commerce Commission which has jurisdiction in respect of breaches of the Fair Trading Act 1986 (FTA) and the Financial Markets Authority (FMA) which regulates the financial markets.
The NZASA has developed the ASC (mentioned above) for the purpose of ensuring that every advertisement is a responsible advertisement. The Second Principle in the ASC provides that advertisements must be truthful, balanced and not misleading. Rule 2(h) concerns “Environmental Claims”. It specifies that “Environmental claims must be accurate and able to be substantiated by evidence that reflects scientific and technological developments”. Related guidelines provide further details of the requirements.
Complaints about advertising can be made to the NZASA Standards Complaints Board. Complainants must waive their rights to pursue claims in another forum. The ASA can request that advertisements be amended or removed (however, without any formal enforcement powers). Decisions of the NZASA can be found here. Examples include, in 2019, in Kai Point Coal, the (ironic) statement “Coal is pretty green” was held to be in breach of the ASC. Also in 2019, Treasures Care nappies showed a range of toddlers wearing nappies in outdoor settings, with the comment “Treasures has grown up in New Zealand alongside little Kiwis and their families, discovering our beautiful country. Like you we care for our home, so we’re taking our first steps with a nappy that’s gentler on our planet”. The complainant argued that the nappy advertisement associated a disposable single use item with the image of a clean green New Zealand. The ASA held that there were no environmental claims made which would breach Principle 2 or Rule 2(h) of the ASC.
In 2020, complaints were made against The Warehouse in relation to advertising claims that it is “sustainable and affordable”. The NZASA Complaints Board found that this statement was not misleading given that The Warehouse also referred to its sustainability policy. The ASCB said the policy’s sustainability initiatives were aspirational and while The Warehouse had reported progress towards these goals, it acknowledged there was still more work to be done.
Secondly, the Commerce Commission is responsible for providing information to consumers and traders that promotes compliance with the FTA. It also enforces compliance, either on its own initiative or pursuant to a consumer complaint. Sections 9 to 12 FTA prohibit persons in trade from engaging in misleading or deceptive conduct or conduct that is likely or liable to mislead and a person must not make unsubstantiated representations. Whether a claim (environmental or otherwise) is false or misleading is a question of fact, considered from an objective perspective. This means that a Court will consider what a “reasonable consumer” in the consumer’s situation, would understand the claim to mean. A breach of the FTA carries serious penalties, up to $600,000 for companies and $200,000 for individuals.
In July 2020, the Commerce Commission published Environmental Claims Guidelines to help traders understand their obligations when making green claims. Surprisingly few greenwashing complaints have been made to the Commerce Commission – only about 200 in the five years to 2022. The same concerns with green claims as identified in the UK and Australia (see above) arise in New Zealand and remain to be addressed.
There appears to be little case law in respect of false green claims under the FTA. However, the Commerce Commission has issued a number of warnings. For example, in 2021 and 2022 two companies received a warning for claiming that their cups/containers were recyclable when in fact they were not accepted for recycling. In 2021, Consumer NZ took the initiative of investigating green claims in the fashion industry, which it reports resulted in four brands removing their claims when they were unable to back them up.
Finally, the FMA enforces claims under the Financial Markets Conduct Act 2013 (FMCA) applicable to financial products and services. Investors increasingly care about ethical investing (which is not limited to environmental claims but encompasses other Sustainable Development Goals as well). Part 2 of the FMCA, “Fair Dealing”, prohibits conduct that is misleading or deceptive or likely to mislead or deceive, as well as the making of unsubstantiated representations. On its website, the FMA reminds providers offering any form of integrated financial product to clearly explain and substantiate the non-financial features and that green-washing is illegal. The FMA has issued a guidance note in respect of disclosure requirements for issuers of financial products that incorporate non-financial facts (for example, green claims). Various enforcement options are available to the FMA, including stop orders (when information is likely to confuse investors) and court action for breach of the FMCA, with civil liability orders and penalties (pursuant to section 38 FMCA, not exceeding the greatest of the consideration for the relevant transaction, 3 times the amount of the gain made or the loss avoided, and $1 million in the case of an individual or $5 million in any other case).