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Behind the Green Screen: Everything Your Business Needs To Know About Greenwashing.

  • 23 April 2024
  • Studio Legal

Written by Lucy Diggle and Principal, Jennifer Tutty.

As the realities of climate change unfold, consumers are thinking more critically about the products and services that they choose to consume and support.

Whether that be looking for clothing labels that use recycled materials, opting for cleaning products with organic ingredients or investing in businesses with strong commitments to embracing renewable energies, there is a clear demand for businesses to cater to these emerging standards and expectations.

Unsurprisingly, many businesses have come to take advantage of the premium placed on environmentally conscious products and services. This is where greenwashing comes in.

In this week’s blog, we explain what ‘greenwashing’ means and the legal implications for Australian businesses engaging in greenwashing.

What is ‘greenwashing’?

Greenwashing is a practice where businesses make false or exaggerated claims about the environmental sustainability of their products, services, or credentials.

Greenwashing is often prevalent on product packaging, promotional materials, company reports and media reports.

Common examples of products or services that may be using greenwashing techniques include…

– A product label containing the words “organic”, “eco-friendly”, “sustainable” or “clean”.

– Green, brown or beige product packaging, intended to evoke the idea of organic and recycled materials.

– Visual branding and product symbols involving aspects of the natural environment. For example, images of leaves, trees or the earth.

– Claims using vague language about a business’ environmental credentials. For example, “100% sustainably produced”.

– Representations about a future goal with no reasonable grounds for making the representations. For example, a business claiming a “2025 zero emissions target” with no goals or strategies in place to achieve this.

Greenwashing is a dishonest mean of selling a product or service. Additionally over time, greenwashing can make it difficult for consumers to spot sincere business claims from their false, greenwashed counterparts. This can erode consumer confidence in the market for genuinely sustainable and ethical products and services.

Shifting accountability standards

In the last 2 decades, environmental organisations have made significant efforts to scrutinise and draw attention to greenwashing.

This issue has become an enforcement priority for regulatory and consumer bodies (such as the ACCC and ASIC) in recent years.

Currently, a Senate Inquiry into Greenwashing is underway. It’s mission statement involves uncovering the live issues at play, from advertising standards to consumer protections to environmental considerations.

It’s expected that following the report, policy objectives and legislative solutions will be actioned and implemented.

While we await the findings of this inquiry – set to be published next June 2024, it’s important to consider the current legal risks of greenwashing and how greenwashing claims are managed under existing legal frameworks.

Greenwashing: what does the law say?

In Australia, there is no legal definition of the term ‘greenwashing’. There is also no blanket prohibition on the practice itself. However, making green claims can fall under certain prohibitions in Australia’s commonwealth legislation.

The Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth)

Sections 1041E, 1041G and 1041H of the Corporations Act 2001 (Cth) (the Corporations Act) and s12DA and 12DB of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) prohibit misleading and deceptive conduct and statements in relation to financial products and services.

Greenwashing in relation to these services often involves claims that a financial product or investment strategy is environmentally friendly.

Example

A hypothetical example is a bank that regularly invests in fossil fuels, and then uses the marketing slogan: “Invest with us, invest in a clean future”.

Schedule 2 of the Competition and Consumer Act 2010 (Cth) – The Australian Consumer Law (ACL)

Section 18 of the ACL prohibits engaging in misleading or deceptive conduct in trade or commerce.

Additionally, section 29 of the ACL prohibits the making of false or misleading representations about the nature, quality, suitability or characteristics of goods or services.

Example

A hypothetical example of a product that may breach these sections of the ACL is a laundry detergent (containing a number of non-eco friendly chemicals) using the term “eco-friendly” on the packaging and the silhouette of a tree on its packaging.

Trade Marks Act 1995 (Cth)

Section 42 of the Trade Marks Act 1995 (Cth) (the Trade Marks Act) provides that trade mark applications must be rejected if use of the trade mark would be contrary to law.

When examining a trade mark application and deciding whether it is ‘contrary to law’, IP Australia (Australia’s Intellectual Property agency) must consider the following:

– whether the trade mark contains or consists of a sign the use of which is precluded under a particular piece of legislation e.g. Telstra Corporation Act 1991, Olympic Insignia Protection Act 1987, Wine Australia Act 2013; and

– court decisions which have has been issued on the particular trade mark which establishes the illegality of its use.

Despite the above, IP Australia is not necessarily required at the examination stage to consider whether use of a trade mark would amount to greenwashing and therefore be ‘contrary to law’. However, if the trade mark is accepted by an examiner and a member of the public is then concerned that the use of the trade mark would be amount to greenwashing, that person could formally oppose the registration of the trade mark on the basis that it is ‘contrary to law’. If IP Australia receives sufficient evidence that use of the trade mark would be be ‘contrary to law’, it must reject the trade mark under clause 42.

Additionally, section 43 of the Trade Marks Act allows particular marks to be rejected from registration if a connotation or sign within the mark is ‘likely to deceive or cause confusion’.

Like with section 43 of the Trade Marks Act, IP Australia will not necessarily raise that a trade mark is ‘likely to deceive or cause confusion’ at examination, but if the trade mark is accepted, members of the public will have the opportunity to oppose the application, and if IP Australia receives sufficient evidence that use of the trade mark would be be ‘deceive or cause confusion’, it must reject the trade mark under clause 43.

Business wanting to register their brand assets (brand names, logos and slogans) as trade marks should always consider whether those brand assets incorporate any aspects that may be considered greenwashing. If they do, these brand assets may be rejected or opposed for the reasons outlined above.

Example

Some hypothetical examples of trade marks that may be refused by IP Australia under the Trade Marks Act, if an applicant’s environmental credentials or practices don’t with the trade mark they are applying for, may include:

– A logo incorporating a graphic of a green leaf or tree.

– A brand name or slogan that includes words like “eco”, “natural” or “sustainable”.

Key ways for businesses to avoid greenwashing:

TIP #1: Be specific with the wording in your business’ consumer facing content by defining sustainability related terminology.

Words like “sustainable” or “eco-friendly” encompass many ethical standards, from environmental to social to economical. What one person considers ‘sustainable’ may differ from another’s interpretation.

Let’s use an example of a business wishing to market their product as “eco-friendly” due to its biodegradable packaging. In this situation, rather than using broad terms that can be misleading, narrow and specific language such as using the label “bio-degradable packaging” is best advised.

TIP #2: Wherever a sustainability statement or goal is made, ensure there is evidence available to support it.

This is an important one as more and more businesses adopt environmental targets for the future.

Before a business sets this kind of goal and notifies consumers, they should ensure they have undertaken the necessary groundwork. This can include (but is certainly not limited to) planning for the implementation of this goal.

Additionally, businesses should consider making information available to consumers that details how and when an environmental target is expected to be met.

TIP #3: Engage a lawyer!

We recommend engaging a lawyer to undertake a business audit to identify potential products or services that could be labelled with the greenwashing tag.

An audit will not only mitigate the risk of legal claims being brought against your business, but may also safeguard your business from unwanted reputational harm. Given its duplicitous nature, greenwashing often provokes strong consumer reactions. Pre-empt a PR crisis by staying diligent and obtaining proper legal advice!

Furthermore, ensure a lawyer provides a pre-publication clearance on labelling and marketing comms before you go to print and market. This will help you to identify (and eliminate) any problematic language and greenwashing style claims.

Further Information

If you suspect your business could be guilty of greenwashing, or you require general assistance with a commercial law, consumer law or trade mark matter, please contact us through our online form or via email at hello@studiolegal.com.au.

To learn more about your requirements as a business owner, check out our Business Legals blogs.

Written by Jennifer Tutty (Principal) and Lucy Diggle.

Published 17 August 2023.

Photo by Vivek Kumar on Unsplash.

DISCLAIMER

The information in this article is of a general nature. It does not constitute formal legal advice and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.