The Australian Competition and Consumer Commission (ACCC) has released its final guidance on making environmental claims, establishing eight key principles to follow when making environmental and sustainability claims (Guidance). The Guidance sets out what the ACCC considers to be misleading conduct under the Australia Consumer Law (ACL) (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) and highlights good practice when making environmental claims. The Guidance replaces the ACCC's draft guidance released in July 2023 (see our previous alert: ACCC releases long awaited draft 'green' claims guidelines, and incorporates feedback received on that draft from over 150 stakeholders across consumer, business and environmental organisations. Although the key principles are largely the same as those in the draft, the Guidance contains a far greater volume of explanatory material, including practical examples of what the ACCC considers to be 'good' and 'bad' practice.

ACCC Chair, Ms Gina Cass-Gottlieb, commented:

"We hope this guidance will help reduce both the risks of greenhushing, where businesses aren’t sure what’s needed to make accurate claims and so decide against promoting their environmental benefits at all, and greenwashing – where businesses make unsubstantiated or inaccurate environmental claims. Ultimately, we want businesses to be able to compete fairly for the green dollar, making truthful and accurate environmental claims so consumers can exercise their informed choice."

Eight principles for trustworthy environmental and sustainability claims

The ACCC has identified eight key principles (and elements under each principle) that businesses can use to mitigate risk when making environmental and sustainability claims. These principles largely reflect those in the draft guidance, however the ACCC has provided a number of new examples and slight variations. These principles include:

1. Make accurate and truthful claims
2. Have evidence to back up your claims
3. Do not hide or omit important information
4. Explain any conditions or qualifications on your claims
5. Avoid broad and unqualified claims
6. Use clear and easy-to-understand language
7. Visual elements should not give the wrong impression
8. Be direct and open about your environmental sustainability transition

Importantly, the ACCC recognises that environmental claims will continue to evolve as markets, available technologies, and its understanding of environmental impacts develop. The ACCC notes that it will review and update this guidance as new information becomes available.

We have set out a brief summary of each principle below.

1. Make accurate and truthful claims

Any environmental claims should be accurate, true and factually correct. This extends to products provided by a third party, where the ACCC expects businesses to undertake reasonable steps to ensure the claims are accurate and truthful, including steps to verify supporting information provided by the suppliers.

Claims that are not true or only partially true should not be made. By way of example, in the recent investigation into MOO Premium Foods yoghurt tub, the ACCC was concerned that the representation "100% ocean plastic" gave the impression that the yogurt tubs were made from plastic waste collected directly from the ocean, whereas investigations revealed that the plastic resin used was collected from coastal areas in Malaysia, not the ocean. In November 2023, the ACCC accepted a court-enforceable undertaking from MOO Premium Foods that committed to conducting internal audits of the "ocean bound plastic" resin used in their packaging, as well as implementing an Australian Consumer Law compliance program.

The Guidance also outlines sub-principles that businesses should follow, including:

• do not overstate the level of scientific acceptance – for example, if the scientific basis for a claim is under dispute or not conclusive, it should not be presented as being universally accepted;
• do not exaggerate environmental benefit or understate an environmental harm – importantly, the ACCC cautions against statements that a product, service or business has an overall “positive” effect on the environment, as most products, service or businesses will have some negative environmental impact;
• only make meaningful claims showing a genuine environmental benefit – the ACCC recommends against advertising environmental benefits which are irrelevant, insignificant, or simply advertise the observance of existing law; and
• make sure comparisons are transparent and fair and a true reflection of the impact of the products, services, or businesses being compared.

Additionally, there are special rules that apply to representations about future matters. An environmental claim about something that will happen in the future will be deemed to be misleading unless there are reasonable grounds for making the claim. This is particularly relevant to sustainability goals – such as goals to reduce emissions, achieve "net-zero" targets or reduce water consumption. The ACCC has set out good practice guidance when setting environmental sustainability goals. The ACCC warns that it is more likely to take enforcement action in respect of representations about future matters regarding environmental claims where a business did not have reasonable grounds for making the representation, does not have an intention or plan to implement initiatives, or knew or was reckless about whether the claim was untrue or incorrect.

2. Have evidence to back up your claims

Businesses should have a reasonable evidentiary basis for making an environmental claim. The Guidance notes that it is good practice to be able to substantiate any environmental claims made with clear evidence, including scientific and independent evidence where relevant. The Guidance includes a number of tips when choosing supporting information, for example, using accepted methodologies in relation to reducing emissions. The ACCC recognises that industry schemes or standards may assist in ensuring there is a reasonable basis to claims or can help guide industry best practice. However, compliance with an industry scheme or standard does not automatically mean compliance with ACL obligations.

The Guidance makes clear that the ACCC will consider whether genuine efforts and appropriate steps were taken by the business to verify the accuracy of any information relied on, recognising that the scope and extent of due diligence undertaken will vary depending on the size of the business. However, the ACCC does acknowledge that sharing supply chain information may not be possible for all businesses. Importantly, the ACCC has updated the good practice case study to include "environmental and social sustainability" – suggesting the ACCC is focusing on environmental and social claims.

Care should be taken when relying on a third-party certification to ensure that a false or misleading impression about what the certification means or does is not created. Particular care should be taken when relying on a certification scheme for offsets and emissions. In this regard, the ACCC has flagged that it will release further guidance for businesses and consumers on emission and offset claims, as well as further guidance on trust marks, in early 2024.

3. Do not hide or omit important information

Incomplete information may also be misleading, for example, highlighting the positive aspects of a product, while omitting information about the negative aspects of a product or burying information in fine print away from the headline claim. Importantly, businesses should consider the full lifecycle of the product or service and make clear if a claim only relates to part of the life cycle.

4. Explain any conditions or qualifications on your claims

If environmental claims are qualified or accurate only in certain conditions, this should be made clear to consumers – for example, if "recyclable" coffee cups can only be recycled in store, rather than through publicly available or home recycling collection systems, this should be apparent. Such claims can be misleading if the conditions or required steps are not clearly stated or are unlikely to be realised during ordinary consumer use.

5. Avoid broad and unqualified claims

The ACCC warns against the use of broad or unqualified claims as they may not clearly explain the environmental impacts of a product, service, or business and as such, risk misleading consumers.

First, the ACCC has once again cautioned against the use of broad and unqualified claims such as "green", "environmentally friendly", "eco-friendly" or "sustainable." These types of claims convey sweeping benefits that can mean different things to different consumers and without further qualification or clarification, consumers can easily be misled about the product. Importantly, the ACCC has added the word "clean" to its good practice guidance.

Secondly, the ACCC also cautions against claims about the impact of the product that are absolute or vague, such as "made from recycled materials", "renewable", "produced with renewable energy", "plastic free" or "uses less water". Without additional explanation of the specific aspect of the product, service, or business that the claim applies to, consumers are likely to assume that these claims apply to the entire product.

Thirdly, the ACCC has specially called out emissions related claims, noting consumers are unlikely to readily understand what is meant by broad headline claims like “Carbon Neutral”, “Climate Neutral” or “Net-zero”. The Guidance includes good practice guidance when making these claims.

Finally, the ACCC also notes that emissions intensive businesses, such as those that rely on or sell fossil fuels should be extra cautious when making environmental claims. Although this is largely similar to the principle in the draft guidance, the ACCC has added further comments to presumably reduce the risk of "greenhushing" – where businesses are not sure what is needed to make accurate claims and so decide against promoting their environmental benefits altogether. In particular, the ACCC notes that businesses in these industries should not feel discouraged from making any environmental claims if they have put genuine and meaningful measures in place to reduce their environmental impact.

6. Use clear and easy to understand language

Claims can be misleading if they are worded in a way that is difficult for ordinary and reasonable consumers to understand. In particular, the Guidance recommends that businesses:

• avoid using scientific or technical language – unless it is easily understood by ordinary and reasonable consumers, noting that in some cases scientific language will be the clearest way of presenting a claim; and
• use words according to their ordinary, common meaning.

7. Visual elements should not give the wrong impression

Images and visual elements should be used with care. The use of environmental images, for example the colour green, images of trees and the recycling loop, may be interpreted by consumers to be making a broad claim of an environmental benefit. When determining if visual elements suggest an environmental benefit, the ACCC notes it is important to consider the overall impression given to an ordinary and reasonable consumer.

The Guidance provides further commentary on the use of (1) symbols, (2) trust marks and (3) third-party labels and certifications.

In this regard, the ACCC has flagged that it intends to release further guidance on the use of trust marks in early 2024. In its June 2023 submission to the 'Senate Inquiry into Greenwashing' the ACCC noted that it is currently considering two trade marks, including; the Department of Climate Change, Energy, the Environment and Water’s current application to register the Climate Active Carbon Neutral trade mark to certify a business has taken action to reduce or offset greenhouse emissions; and Circular Energy’s current application to register the Sustainable Energy Commitment trade mark to certify that an organisation has made a commitment to acceptably meet Sustainable Energy Commitment Criteria.

8. Be direct and open about your environmental sustainability transition

Finally, whilst the ACCC encourages businesses to take genuine steps to improve their environmental performance and share their progress with consumers, it cautions against promoting goals and making claims about a business's sustainability transition that are vague and unclear or give the impression that transition is more progressed than it is. The ACCC has expanded its good practice guidance and has added a new case study in this regard.

The ACCC’s Compliance and Enforcement Approach

The ACCC foreshadows the potential use of Section 155 notices, substantiation notices, infringement notices and penalty proceedings for false or misleading representations or engaging in misleading or deceptive conduct. This is largely the same as the commentary provided in the draft guidance.

The ACCC also highlights the factors which it will take into account when determining whether to take enforcement action (as outlined in its Compliance and Enforcement Policy.

Risks from ACCC enforcement action in relation to misleading environmental and sustainability claims are significant and increased penalties now apply.

The maximum penalty available for each contravention by a corporation is the greater of:

1. $50 million;
2. if the Court can determine the benefit obtained that is "reasonably attributable" to the contravention, 3 times the value of that benefit; or
3. if the Court cannot determine the value of the benefit, 30% of the corporation's adjusted turnover during the relevant period.
   Individuals can also be responsible for contravening the ACL with a maximum available penalty of $2.5 million per contravention.

So what – and what's next?

Although commonly misunderstood, the Guidelines reinforce the fact that 'greenwashing' is not a 'separate law', but misleading or deceptive conduct that relates to an environmental or sustainability-related claim. In this regard the eight key principles set out in the Guidance do not set out any 'new law'. However, they undoubtably present a useful, contextual explanation of the high-risk traps into which many Australian companies continue to fall in making environmental claims.

The ACCC enforcement priorities for 2023/2024 include consumer, product safety, fair trading and competition concerns in relation to environmental claims and sustainability. Following the release of this Guidance and the investigation into MOO Premium Foods, it is expected that the ACCC will initiate further enforcement action against greenwashing.

The ACCC will release further guidance for businesses and consumers on emission and offset claims, as well as the use of trust marks in early 2024. The ACCC will also develop guidance to help consumers confidently assess and rely on environment claims.

Finally, the Senate is currently conducting an inquiry into greenwashing, particularly claims made by companies, the impact of these claims on consumers, regulatory examples, advertising standards, and legislative options to protect consumers. Following an extension of time being granted, the report is due to be released on 28 June 2024.

Next steps for businesses

As a priority, business should now undertake a specific review of their marketing practices and approvals processes against the Guidance, and ensure that the eight key principles are duly integrated. In practice, both the ACCC and the Courts are unlikely to take kindly to any future greenwashing defendant who has not observed these principles.

MinterEllison offers deep, integrated expertise to assist clients to holistically navigate the complexities and risks of sustainability and environmental claims through our team of experts who practice in both Climate and Sustainability Risk and Consumer Law. Please reach out at any time to one of our experts.