The ACCC has released its findings from a recent internet sweep of environmental claims. The sweep occurred between 4 October and 14 October 2022 and looked at 247 different businesses across eight sectors. The aim of the sweep was to identify industries or sectors which commonly use environmental and sustainability claims, and to assess whether these claims have the potential to mislead consumers (i.e. to greenwash).

Why is greenwashing a priority for the ACCC?

Last year, the ACCC announced that as part of its 2022-23 Compliance and Enforcement Priorities, it is prioritising consumer and fair-trading issues in relation to environmental and sustainability claims.

As community, industry and government support for the transition to a net zero economy grows with each passing day. Consumers are now, more than ever, interested in purchasing sustainable and environmentally friendly products. When making these purchasing decisions, consumers are guided by business' sustainability claims and environmental credentials. However, consumers' inability to readily verify the veracity of sustainability claims places them at risk of being misled by claims which may be false, vague, absolute, unsubstantiated or otherwise have no reasonable basis.

According to the ACCC's report, greenwashing breaches consumer trust and undermines consumer confidence in both the claim itself and sustainability claims generally. In addition, false and misleading sustainability claims disincentivise businesses from genuinely striving to supply sustainable products and services to consumers, given the increased production and research costs typically incurred in the process.

This internet sweep forms a core part of the ACCC's work in actively monitoring greenwashing in the market.

What did the internet sweep find?

Perhaps above all else, the internet sweep has revealed that the risk of greenwashing is widespread, with a significant proportion of businesses making vague or unclear environmental claims across all eight sectors targeted. Of the 247 businesses reviewed during the sweep, 57% were identified as having made concerning claims about their environmental credentials. The cosmetics and personal care sector was identified as the sector with the greatest proportion of concerning environmental claims (73%), followed by the textiles, garments and shoes (67%) and the food and beverages sectors (65%).

The key issues identified in the sweep are as follows:

• Vague or unclear environmental claims: The most common issue identified was the use of vague and unqualified claims. For example, many businesses used terms such as 'green', 'eco-friendly' and 'responsible' when describing their products. The ACCC highlighted that these terms have a variety of different meanings and therefore provide little value to customers attempting to make an informed purchasing decision. The ACCC identified that many businesses also made unqualified claims by, for example, describing a product as being made using 'sustainable' materials. The ACCC stated that without explanation of which materials are being used and why they are more sustainable, such claims can be confusing to consumers.
• Insufficient evidence for claims: Many businesses were found to have made sustainability claims without providing any evidence to back these claims up. The ACCC noted that while such claims may be accurate, this was difficult to verify without evidence. The need for supporting evidence is particularly important where businesses have made absolute claims about their products and services, such as '100% plastic free'. Given these types of absolute claims give a strong impression to consumers, businesses should to take particular care to ensure they are backed up by robust evidence.
• Exaggerations and omissions: Several businesses were also found to have exaggerated the sustainability benefits of their products and / or omitted negative attributes which may be relevant to a consumer's purchasing decision. For example, many claims made by businesses did not reflect the entire lifecycle of a product. Some businesses claimed that their products generated zero emissions, yet the claims only considered the emissions associated with the use of that product and did not include emissions from the production, transport or disposal of that product.
• Aspirational goals without substance: Several businesses were also found to have made aspirational claims about their environmental and sustainability goals (such as net zero targets) with no clear plan on how these goals may be achieved. In some cases, goals were very general and incapable of measurement. While some businesses provided updates about their progress towards their goals, this information was often outdated and in some instances, it was unclear whether goals were still in progress or had already been achieved.
• Unhelpful comparisons: Some businesses also made claims which compared the benefits of their product to products sold by other businesses or products made from different materials, such as a claim that a product generates less waste compared to conventional alternatives. In many instances, such comparisons are potentially misleading as they do not allow consumers to accurately assess the merits of one product over another and may give an inflated impression of a particular product with only minor benefits.
• Confusing third-party certifications and symbolism: The sweep also identified several instances in which businesses claimed affiliation with a certification scheme, yet the nature of the certification scheme was unclear, as well as whether the certification applied to the entire product range, certain products or to the business as a whole. Several businesses also utilised symbols on their websites and packaging which appeared to be trustmarks (nature-based imagery such as leaves and the planet). The ACCC found that many of these symbols were concerning as consumers may be misled into believing that the business or product is certified by a third-party, when that was not the case.

What's next?

The ACCC has emphasised that enforcement action will be taken where appropriate, stating 'it is critical that consumer trust in green claims is not undermined'. The ACCC will be asking businesses to substantiate their claims where concerns have arisen during the sweep, with a 'number' of businesses set to be investigated, according to its recent media release. In order to do so, the ACCC may issue substantiation notices or utilise its powers under section 155 of the Competition and Consumer Act.

Notably, the ACCC is also encouraging businesses to come forward to the ACCC if they believe they have made misleading claims, stating that 'businesses who co-operate and advise of any issues with their operations will be considered more favourably than those who wait for the ACCC to unearth these problems.'

Informed by the recent sweep, the ACCC will also provide updated economy-wide guidance material in addition to targeted sectoral-specific guidance. This will be of use to businesses, given a lack of current, detailed guidance from the ACCC. The ACCC has stated that it will conduct a range of education activities and engage directly with businesses and industry associations in an effort to improve ACL compliance. According to ACCC Deputy Chair Catriona Lowe, '[w]e want to see businesses taking steps to ensure that environmental claims are accurate as well as meaningful for consumers. Our sweep has shown that claims are most useful where they are relevant, clear, reliable and transparent.'

ASIC also taking aim at greenwashing

The focus of the ACCC on this issue mirrors that of the securities regulator, the Australian Securities & Investments Commission (ASIC), who has also flagged greenwashing as a key enforcement focus in 2023. Following the issue of Information Sheet 271 How to avoid greenwashing when offering or promoting sustainability-related products in June 2022, ASIC has significantly increased its enforcement posture in this area. It issued a number of Infringement Notices in respect of greenwashing in financial product and service offers in late 2022 and early 2023, and only this week commenced its first enforcement proceeding. At the AICD's annual Corporate Governance Summit in Melbourne on Tuesday, ASIC Chair Joe Longo stated: 'this is just one of the investigations we have on foot. We will do what we need to do to make sure entities are not misleading the market. It is worth noting that greenwashing is not just about environmental claims. It also includes statements about the extent to which products are sustainable or ethical.

For advice and assistance in relation to understanding potential greenwashing concerns within your business, including to respond to any ACCC or ASIC questions or interest in your business, please contact our team.