Still Seeing Green

The long-awaited revisions to the Federal Trade Commission's (FTC) Green Guides were issued on Oct. 6, 2010 and are expected to be approved and finalized soon. The proposed revisions (“Revised Guides”) (available at 16 C.F.R. 260 et. seq.) build off the Green Guides first issued in 1992, and thereafter revised in 1996 and 1998. The Revised Guides, however, represent a significant extension of earlier guidelines, as the revisions address subjects not previously considered and offer greater detail on topics discussed in prior versions. This expansion in the scope and level of detail stems from the substantial growth in the marketplace for green products since the last effort at revising the Green Guides more than a decade ago.

Development of the Revised Guides

The Revised Guides are the result of a substantial undertaking by FTC staff to investigate the marketplace for green products, to determine the state of green marketing and to measure consumer understanding of various representations concerning the environmental benefits of products. Four components made up the FTC's inquiry. First, a series of three workshops was hosted by the FTC. Second, the FTC hired a private firm to conduct extensive consumer research. Third, the FTC solicited comments from the public, as well as industry, consumer and environmental groups. Fourth, FTC staff conducted its own research in order to gain an understanding of the green marketplace. The result is an extensive document setting forth the FTC's information gathering and providing detailed analysis of the proposed revisions.

Content of the Revised Guides

A review of the Revised Guides reveals that the FTC attempted to adopt a consumer expectation test in determining the propriety of environmental marketing claims. While the Revised Guides seek to prevent misleading claims of a product's environmental benefits, this determination is based on what consumers understand certain terms to mean, rather than the strict scientific or technical meanings of those terms. Further, the Revised Guides do not articulate a single definition of what constitutes a green product. Instead, they require manufacturers to use specific language in making representations about a product's environmental benefits, and require that those representations be capable of corroboration.

As with the prior versions of the Green Guides, the Revised Guides are not themselves enforceable regulations. However, a violation of the Green Guides continues to give rise to an enforcement action under Section 5 of the Federal Trade Commission Act. Also, while the Revised Guides seem to have been drafted to address consumer expectations for the green products they purchase, they apply with equal force to business-to-business transactions. Finally, although the Revised Guides will certainly impact the market for green goods, it is the stated policy of the FTC not to set environmental policy, but rather to prevent unsupportable claims of environmental benefits, or so-called “greenwashing.”

Preventing 'Greenwashing'

Certain claims, such as “eco-friendly” or “environmentally friendly,” are highly suspect in the eyes of the FTC and are almost certain to attract the agency's attention. In a press release announcing the Revised Guides, the FTC addressed broad claims of environmental benefit, stating that “very few products, if any, have all the attributes consumers seem to perceive from such claims, making these claims nearly impossible to substantiate.” This statement reflects the FTC's concern that while a product may have substantial environmental benefits, consumers are likely to attribute qualities to a product that it does not possess when broad claims of environmental benefit are employed. The Revised Guides aim to eliminate such broad claims, which the FTC's research shows may be misleading. Instead, the Revised Guides illustrate how manufacturers should make specific, quantifiable claims of a product's environmental benefits.

Earlier versions of the Green Guides addressed permissible claims of a specific environmental benefit, including representations that a product was compostable, biodegradable, or recyclable. The Revised Guides provide additional guidance on each of these claims. For example, the Revised Guides offer new, specific details about when a manufacturer may advertise a product as degradable or biodegradable. Prior versions simply required that a product must decompose within a reasonably “short period of time.” This vague standard has been replaced. Under the Revised Guides, a product must completely decompose in no more than one year in a typical trash repository in order to be advertised as degradable.

The Revised Guides also address environmental marketing claims that were not considered in the last revisions in 1998. Claims that a product is made with renewable materials or was manufactured using renewable energy are addressed, as are advertising claims boasting of the use of carbon offsets in the manufacturing process. In addition, the Revised Guides contain an extensive discussion of the use of certifications and seals of approval. The Revised Guides note that permissible uses of certifications and seals of approval are covered by the FTC's Endorsement Guides and must satisfy these provisions. The Revised Guides are clear that if there is any connection between a manufacturer and the organization issuing the certification or seal, such as membership in a trade association, that connection should be stated clearly on the product.

Finally, the FTC adopted the rule that all information necessary to convey the environmental benefits of a product, and any limitation on those benefits, must be clearly stated on the product. Reference to a Web site is not sufficient, as the FTC has determined that information about a product is meaningless if not available to a consumer at the time of the purchase. For instance, if a certain type of processing facility is required in order to recycle a product, this information must be noted on the product, not simply available on a Web site.

Recyclable Claims

While the Revised Guides provide new direction on a wide variety of different claims of environmental benefit, the section addressing recyclable claims is addressed at length herein by way of example. Proposed Section 260.11 provides that “a product or package should not be marketed as recyclable unless it can be collected, separated, or otherwise recovered from the solid waste stream through an established recycling program for reuse or use in manufacturing or assembling another item.” The Revised Guides also dictate that when making a recyclable claim, a manufacturer must qualify such a claim in order to account for the availability of recycling facilities and collection sites available to consumers. As a result, an unqualified recyclable claim can only be made when recycling facilities are available to a minimum 60% of consumers (which the FTC determined is a substantial majority). If a substantial majority of consumers do not have access to facilities capable of recycling a particular product, the Revised Guides direct that the recyclable claim should be qualified and offer suggested language to be used by a manufacturer or distributor. The FTC has also determined that when facilities needed to recycle a particular product are not available to a significant percentage of consumers, the manufacturer must disclose this fact (if the product is marketed as recyclable).

The Revised Guides suggest a manufacturer qualify its claim by stating “this product is recyclable only in the few communities that have recycling programs.” This language is a suggestion, and is not the exclusive terminology that will satisfy the FTC. It is clear from this language, however, that manufacturers and distributors are charged with clearly conveying any limitation of a product's claimed environmental benefit. A manufacturer must also distinguish between a recyclable product and recyclable packaging. As can be seen from this section of the Revised Guides, a manufacturer is charged not only with being knowledgeable about its own product, but also about the availability of recycling facilities nationwide or in a particular market. Other claims of environmental benefits should be similarly qualified, and the Revised Guides offer suggested language that a manufacturer can employ.

Other Regulations and Standards

While the Revised Guides are comprehensive, they are not the only basis for a greenwashing claim. To the extent possible, the FTC worked to mirror existing federal law, but this does not mean that compliance with the Revised Guides will immunize a manufacturer against legal liability. Specifically, state and local laws and ordinances may impose requirements or recommendations over and above what is called for in the Revised Guides. State consumer protection laws often impose specific requirements for certain types of marketing claims or promotional material. A product or material may meet the requirements of the Revised Guides, but may not meet a local building code's requirements for “sustainable” construction materials. Furthermore, the FTC is not the “green police,” so other government agencies and non-government organizations may get involved in efforts to ensure compliance with federal, state and local environmental laws, regulations, codes and ordinances.

Impact of the Revised Guides

The changes in the Revised Guides will impact green marketing. For example, under the prior version of the Green Guides, a manufacturer may have been acting in accord with the Green Guides by marketing a product as “Eco-friendly” because the product included some post-consumer recycled content. Under the Revised Guides, a label should now read “Recyclable: made with fifty percent post-consumer recycled content; may be recyclable at facilities in your area.” The product itself may not have changed, but the packaging or label certainly will have to be altered to comply with the Revised Guides. A net result is that portions of packaging that convey environmental benefits of a product may start to look less like flashy marketing and more like unattractive product warnings.

Still to be answered are two key questions. First, will the Revised Guides come to be viewed widely as the appropriate standard against which green claims should be measured? The long-standing 1998 revisions of the Green Guides did not gain such popular acceptance, likely because the Green Guides failed to keep up with a rapidly expanding green economy. The more detailed Revised Guides may result in the Green Guides being seen more widely as a standard to formally adopt, or rely upon, when state and local governments issue new regulations and when non-government organizations publish new guidelines and standards.

Second, will the more detailed nature of the Revised Guides result in their wider use of as a litigation tool? The reported “greenwashing” litigation involving the 1998 version of the Green Guides consists of enforcement actions, rather than litigation of consumer claims. But, since the Revised Guides contain more extensive content and address a wider set of scenarios, the Green Guides role in litigation (both in prosecuting a lawsuit and in defending a claim) may grow.

Conclusion

Green products continue to be a major emerging market, with consumers and businesses demanding products that have a reduced environmental impact and can decrease their own energy costs. The Revised Guides have great potential to combine ample consumer protections with a roadmap for manufacturers and distributors of green products to follow in order to avoid running afoul of the FTC, or incurring other greenwashing liability. Moreover, the revisions make a real effort to address a wide variety of potential green marketing claims. However, certain sections of the Green Guides may hamper good-faith efforts by manufacturers to develop green, or greener, alternatives to existing products and bring them to market. Manufacturers may be concerned that marketing a product's environmental benefits may violate some of the more technical requirements of the Revised Guides, or that limitations on marketing green products may make a particular product unprofitable. In an effort to protect consumers from greenwashing claims, the FTC may have added more “green tape” for manufacturers and distributors to cut through as they work to bring their products to market.

Specificity and quantification are the keys to complying with the Revised Guides. A manufacturer or distributor may advertise the environmental benefits of a product, but must quantify the claim by setting forth any limitations on the product's environmental benefits. This is not necessarily a new requirement, but the Revised Guides provide greater clarity as to when a claim of environmental benefit must be limited or in some way qualified. An independent, third-party certification will add to the value of any such claim, but is not required by the Revised Guides. Manufacturers and distributors should familiarize themselves with the latest revisions to the Green Guides, both to steer clear of an FTC enforcement action and to ensure their compliance with the latest standards governing the green marketplace.

Stephen J. Finley, Jr. is an associate in the Product Liability Department of Gibbons P.C. in Philadelphia. He practices in the areas of product liability litigation and business and commercial litigation in the state and federal courts of Pennsylvania and New Jersey. Mr. Finley's practice is primarily dedicated to the defense of manufacturers and distributors of petrochemicals, pharmaceuticals, medical devices, industrial equipment and consumer products.

The long-awaited revisions to the Federal Trade Commission's (FTC) Green Guides were issued on Oct. 6, 2010 and are expected to be approved and finalized soon. The proposed revisions (“Revised Guides”) (available at 16 C.F.R. 260 et. seq.) build off the Green Guides first issued in 1992, and thereafter revised in 1996 and 1998. The Revised Guides, however, represent a significant extension of earlier guidelines, as the revisions address subjects not previously considered and offer greater detail on topics discussed in prior versions. This expansion in the scope and level of detail stems from the substantial growth in the marketplace for green products since the last effort at revising the Green Guides more than a decade ago.

Development of the Revised Guides

The Revised Guides are the result of a substantial undertaking by FTC staff to investigate the marketplace for green products, to determine the state of green marketing and to measure consumer understanding of various representations concerning the environmental benefits of products. Four components made up the FTC's inquiry. First, a series of three workshops was hosted by the FTC. Second, the FTC hired a private firm to conduct extensive consumer research. Third, the FTC solicited comments from the public, as well as industry, consumer and environmental groups. Fourth, FTC staff conducted its own research in order to gain an understanding of the green marketplace. The result is an extensive document setting forth the FTC's information gathering and providing detailed analysis of the proposed revisions.

Content of the Revised Guides

A review of the Revised Guides reveals that the FTC attempted to adopt a consumer expectation test in determining the propriety of environmental marketing claims. While the Revised Guides seek to prevent misleading claims of a product's environmental benefits, this determination is based on what consumers understand certain terms to mean, rather than the strict scientific or technical meanings of those terms. Further, the Revised Guides do not articulate a single definition of what constitutes a green product. Instead, they require manufacturers to use specific language in making representations about a product's environmental benefits, and require that those representations be capable of corroboration.

As with the prior versions of the Green Guides, the Revised Guides are not themselves enforceable regulations. However, a violation of the Green Guides continues to give rise to an enforcement action under Section 5 of the Federal Trade Commission Act. Also, while the Revised Guides seem to have been drafted to address consumer expectations for the green products they purchase, they apply with equal force to business-to-business transactions. Finally, although the Revised Guides will certainly impact the market for green goods, it is the stated policy of the FTC not to set environmental policy, but rather to prevent unsupportable claims of environmental benefits, or so-called “greenwashing.”

Preventing 'Greenwashing'

Certain claims, such as “eco-friendly” or “environmentally friendly,” are highly suspect in the eyes of the FTC and are almost certain to attract the agency's attention. In a press release announcing the Revised Guides, the FTC addressed broad claims of environmental benefit, stating that “very few products, if any, have all the attributes consumers seem to perceive from such claims, making these claims nearly impossible to substantiate.” This statement reflects the FTC's concern that while a product may have substantial environmental benefits, consumers are likely to attribute qualities to a product that it does not possess when broad claims of environmental benefit are employed. The Revised Guides aim to eliminate such broad claims, which the FTC's research shows may be misleading. Instead, the Revised Guides illustrate how manufacturers should make specific, quantifiable claims of a product's environmental benefits.

Earlier versions of the Green Guides addressed permissible claims of a specific environmental benefit, including representations that a product was compostable, biodegradable, or recyclable. The Revised Guides provide additional guidance on each of these claims. For example, the Revised Guides offer new, specific details about when a manufacturer may advertise a product as degradable or biodegradable. Prior versions simply required that a product must decompose within a reasonably “short period of time.” This vague standard has been replaced. Under the Revised Guides, a product must completely decompose in no more than one year in a typical trash repository in order to be advertised as degradable.

The Revised Guides also address environmental marketing claims that were not considered in the last revisions in 1998. Claims that a product is made with renewable materials or was manufactured using renewable energy are addressed, as are advertising claims boasting of the use of carbon offsets in the manufacturing process. In addition, the Revised Guides contain an extensive discussion of the use of certifications and seals of approval. The Revised Guides note that permissible uses of certifications and seals of approval are covered by the FTC's Endorsement Guides and must satisfy these provisions. The Revised Guides are clear that if there is any connection between a manufacturer and the organization issuing the certification or seal, such as membership in a trade association, that connection should be stated clearly on the product.

Finally, the FTC adopted the rule that all information necessary to convey the environmental benefits of a product, and any limitation on those benefits, must be clearly stated on the product. Reference to a Web site is not sufficient, as the FTC has determined that information about a product is meaningless if not available to a consumer at the time of the purchase. For instance, if a certain type of processing facility is required in order to recycle a product, this information must be noted on the product, not simply available on a Web site.

Recyclable Claims

While the Revised Guides provide new direction on a wide variety of different claims of environmental benefit, the section addressing recyclable claims is addressed at length herein by way of example. Proposed Section 260.11 provides that “a product or package should not be marketed as recyclable unless it can be collected, separated, or otherwise recovered from the solid waste stream through an established recycling program for reuse or use in manufacturing or assembling another item.” The Revised Guides also dictate that when making a recyclable claim, a manufacturer must qualify such a claim in order to account for the availability of recycling facilities and collection sites available to consumers. As a result, an unqualified recyclable claim can only be made when recycling facilities are available to a minimum 60% of consumers (which the FTC determined is a substantial majority). If a substantial majority of consumers do not have access to facilities capable of recycling a particular product, the Revised Guides direct that the recyclable claim should be qualified and offer suggested language to be used by a manufacturer or distributor. The FTC has also determined that when facilities needed to recycle a particular product are not available to a significant percentage of consumers, the manufacturer must disclose this fact (if the product is marketed as recyclable).

The Revised Guides suggest a manufacturer qualify its claim by stating “this product is recyclable only in the few communities that have recycling programs.” This language is a suggestion, and is not the exclusive terminology that will satisfy the FTC. It is clear from this language, however, that manufacturers and distributors are charged with clearly conveying any limitation of a product's claimed environmental benefit. A manufacturer must also distinguish between a recyclable product and recyclable packaging. As can be seen from this section of the Revised Guides, a manufacturer is charged not only with being knowledgeable about its own product, but also about the availability of recycling facilities nationwide or in a particular market. Other claims of environmental benefits should be similarly qualified, and the Revised Guides offer suggested language that a manufacturer can employ.

Other Regulations and Standards

While the Revised Guides are comprehensive, they are not the only basis for a greenwashing claim. To the extent possible, the FTC worked to mirror existing federal law, but this does not mean that compliance with the Revised Guides will immunize a manufacturer against legal liability. Specifically, state and local laws and ordinances may impose requirements or recommendations over and above what is called for in the Revised Guides. State consumer protection laws often impose specific requirements for certain types of marketing claims or promotional material. A product or material may meet the requirements of the Revised Guides, but may not meet a local building code's requirements for “sustainable” construction materials. Furthermore, the FTC is not the “green police,” so other government agencies and non-government organizations may get involved in efforts to ensure compliance with federal, state and local environmental laws, regulations, codes and ordinances.

Impact of the Revised Guides

The changes in the Revised Guides will impact green marketing. For example, under the prior version of the Green Guides, a manufacturer may have been acting in accord with the Green Guides by marketing a product as “Eco-friendly” because the product included some post-consumer recycled content. Under the Revised Guides, a label should now read “Recyclable: made with fifty percent post-consumer recycled content; may be recyclable at facilities in your area.” The product itself may not have changed, but the packaging or label certainly will have to be altered to comply with the Revised Guides. A net result is that portions of packaging that convey environmental benefits of a product may start to look less like flashy marketing and more like unattractive product warnings.

Still to be answered are two key questions. First, will the Revised Guides come to be viewed widely as the appropriate standard against which green claims should be measured? The long-standing 1998 revisions of the Green Guides did not gain such popular acceptance, likely because the Green Guides failed to keep up with a rapidly expanding green economy. The more detailed Revised Guides may result in the Green Guides being seen more widely as a standard to formally adopt, or rely upon, when state and local governments issue new regulations and when non-government organizations publish new guidelines and standards.

Second, will the more detailed nature of the Revised Guides result in their wider use of as a litigation tool? The reported “greenwashing” litigation involving the 1998 version of the Green Guides consists of enforcement actions, rather than litigation of consumer claims. But, since the Revised Guides contain more extensive content and address a wider set of scenarios, the Green Guides role in litigation (both in prosecuting a lawsuit and in defending a claim) may grow.

Conclusion

Green products continue to be a major emerging market, with consumers and businesses demanding products that have a reduced environmental impact and can decrease their own energy costs. The Revised Guides have great potential to combine ample consumer protections with a roadmap for manufacturers and distributors of green products to follow in order to avoid running afoul of the FTC, or incurring other greenwashing liability. Moreover, the revisions make a real effort to address a wide variety of potential green marketing claims. However, certain sections of the Green Guides may hamper good-faith efforts by manufacturers to develop green, or greener, alternatives to existing products and bring them to market. Manufacturers may be concerned that marketing a product's environmental benefits may violate some of the more technical requirements of the Revised Guides, or that limitations on marketing green products may make a particular product unprofitable. In an effort to protect consumers from greenwashing claims, the FTC may have added more “green tape” for manufacturers and distributors to cut through as they work to bring their products to market.

Specificity and quantification are the keys to complying with the Revised Guides. A manufacturer or distributor may advertise the environmental benefits of a product, but must quantify the claim by setting forth any limitations on the product's environmental benefits. This is not necessarily a new requirement, but the Revised Guides provide greater clarity as to when a claim of environmental benefit must be limited or in some way qualified. An independent, third-party certification will add to the value of any such claim, but is not required by the Revised Guides. Manufacturers and distributors should familiarize themselves with the latest revisions to the Green Guides, both to steer clear of an FTC enforcement action and to ensure their compliance with the latest standards governing the green marketplace.

Stephen J. Finley, Jr. is an associate in the Product Liability Department of Gibbons P.C. in Philadelphia. He practices in the areas of product liability litigation and business and commercial litigation in the state and federal courts of Pennsylvania and New Jersey. Mr. Finley's practice is primarily dedicated to the defense of manufacturers and distributors of petrochemicals, pharmaceuticals, medical devices, industrial equipment and consumer products.