Update on Green Guides
It is likely that the Green Guides will soon be updated. The Green Guides were last updated in 2012. The FTC recently stated that they plan to review them to update them in 2022. The Green Guides cover a variety of claims. These include compostable, nontoxic, recyclable, recycled content, free of charge, and carbon offset claims. The Green Guides are informed by the FTC’s “views on how reasonable consumers likely interpret certain claims.” While the FTC has not yet indicated what areas may be under review in 2022, we may see the FTC renew its guidance for recyclable claims and also potentially address sustainable, organic, and natural claims, which the FTC declined to review for its 2012 update.
New state legislation
Some states and localities have been active in regulating environmental marketing claims over the years, in addition to federal oversight. For example, with the passage of SB 343 and AB 1201 in 2021, California is out in front of other states in enacting restrictions on the use of the “chasing arrows” symbol surrounding resin identification codes (RIC) on plastic containers and updating its restrictions on compostable and degradable marketing claims pertaining to the sale of plastic products in the state. Under the Green Guides, “inconspicuous” use of the RIC, such as at the bottom of a container, does not in and of itself constitute an unqualified recyclable claim, but under SB 343, any use of the RIC is deemed a recyclable claim under state law that became effective January 1, 2022. California’s requirements for RIC are particularly interesting because they may not allow claims of recyclability of plastics that could arguably comply with the Green Guides. States other than California have enacted their own laws governing environmental claims, such as Washington’s standards for compostable and degradable claims, which became effective in July 2020.
States have also adopted legislation to ensure the recyclability. Manufacturers should be aware that various state initiatives regulate packaging requirements for different consumer products and support the recyclability plastics. California and Washington, for example, have set minimum postconsumer recycled content requirements on certain types of plastic packaging.
Maine and Oregon have enacted, and several states are contemplating, so-called “extended producer responsibility” or EPR laws. EPR laws, which require packaging material manufacturers to pay fees to support recycling programs expansion and improvement, generally speak to the same thing. Regulated industries should monitor the evolving patchwork state requirements around certain labeling claims and marketing claims, as well as what enforcement might look like at state level. Marketers should monitor the Green Guides for updates and keep track of FTC enforcement.
International Considerations
While the above considerations are primarily focused on the U.S., companies must also consider international considerations. These can come in the form of international conventions, national or local legislation, industry guidance such as the International Chamber of Commerce’s Framework for Responsible Environmental Marketing Communications, or corporate pacts, for example. International regulators are also increasing their scrutiny of green claims. Keurig Canada was fined almost CAN$4,000,000 by the Competition Bureau Canada (CBC). This was due to recyclability claims that Keurig Canada made on its K-cup pods. These claims were allegedly false or misleading and they were not accepted for recycling. Keurig also agreed with the CBC to qualify some recyclable claims. Canada also released draft regulations to ban certain single-use plastics. It also issued a Notice Of Intent on the development regulations that would establish minimum recycled content requirements for certain plastics. Similarly, the European Commission recently proposed amendments to its Unfair Commercial Practices Directive to prohibit marketers from making generic, vague environmental claims, such as “environmentally friendly,” “eco,” or “green,” among other things. And there is a framework of international conventions, such as the Basel Convention, and voluntary multinational pledges, such as the Ellen MacArthur Foundation’s New Plastics Economy Global Commitment, that contemplates a circular economy for plastic. These are just a few examples from the many stakeholders and requirements that could impact multinationals as they make environmental commitments.
SEC Climate Disclosure Rules: Regulatory intermixing for Climate Claims
Public companies often disclose information about their sustainability efforts through corporate responsibility, sustainability reports (ESG), or in their public filings to the SEC. The SEC’s regulation of material information pertaining to sustainability—particularly climate change—is quickly evolving. As discussed in detail in our recent advisory, “SEC Proposes Rules to Require Climate Related Disclosures,” the SEC proposed rules on March 24, 2022 that would require SEC registrants to make public disclosures of climate change risks and emissions targets in their registration statements and periodic reports. The SEC’s proposed rules intend to standardize climate-related disclosures, recognizing a growing investor desire for standardized ESG information.
Public companies must be aware that certain claims governed under the Green Guides could be used in conjunction with the proposed SEC disclosure obligations. For example, a public company making a carbon offset claim, such as on a product’s packaging, in marketing materials, or in an ESG report, must ensure that the claim is supported by competent and reliable scientific evidence, as required by the Green Guides, and be prepared to disclose the role that carbon offsets play in the company’s climate-related business strategy. This example illustrates the importance of aligning business and marketing strategies across product claims and ESG reports and SEC filings to comply with all federal and State requirements.
Litigation Landscape – Challenges on the Rise
Marketers should not only comply with federal and state laws but also assess their exposure in the face of NGO and consumer litigation. These environmental marketing claims have been a hot topic in recent years. Not only are they being challenged by consumers or NGOs (Greenpeace or Earth Island), but also investors and competitors. These challenges have affected packaging labels, ESG reports websites, executive statements and other media. Consumer plaintiffs who seek to litigate or certify a class action often focus on product labeling claims.
Sustainability claims, such as “sustainably sourced” and “sustainably caught,” were the subject of consumer class actions in 2021. For example, one putative class action alleged that Red Lobster’s sustainable claims for its Maine lobster and shrimp products are deceptive because the restaurant purportedly sources its products from suppliers that use environmentally destructive and inhumane practices. In another challenge, the Southern District of California recently denied Nestlé’s motion to dismiss a putative class action because the plaintiff plausibly alleged that the company’s claims, including “sustainably sourced” and a “UTZ” certification, on its chocolate products are deceptive because Nestlé purportedly sourced cocoa from plantations that rely on child labor, contribute to deforestation, and use other practices harmful to the environment. It remains to be seen if the plaintiffs in these cases can present sufficient evidence to support their claims in order to survive summary judgement.
With a particular focus on single use plastic products and their ability for recycling by municipal recycling facilities, the topic of recyclable, biodegradable, or compostable claims is also under increased scrutiny. Keurig has, for example, defended its recyclable claims from the District of Massachusetts and the Northern District of California since 2018. The plaintiffs alleged that Keurig’s single serve plastic coffee pods were deceptive, as the pods cannot be recycled at all. The Northern District of California certified Keurig product purchasers. The parties reached a principled settlement.
Although the industry is active in addressing various issues related to green claims (e.g., consumer labels, the Terracycle program and various product certifications), and corporate plastics reduction promises (both individual and broker), some NGOs have taken an a skeptical stance. Greenpeace and Earth Island filed lawsuits in 2020 and 2021 against numerous corporations in California, D.C., and other states regarding the recyclability plastic bottles. Other than consumer false advertising theories that are often used to challenge labeling claims and the alleged non-recyclability plastic products, other legal theories such as nuisance, negligence and strict liability have been used to challenge the claim.
These are just a few examples of the marketing claims that are more at risk. They do not just extend to food products and plastic packaging—we are also seeing challenges to environmental claims associated with cleaning products (e.g., nontoxic) and personal care products (e.g., plant-based) and other consumer goods (e.g., biodegradable trash bags). As marketers continue to look to distinguish their products and as the plaintiffs’ bar views environmental labeling claims as another frontier, the rate of lawsuits challenging environmental marketing claims is likely to rise. The use of certain chemicals and other substances, such as PFAS, glyphosate, or chemicals on California’s Proposition 65 list, may also present increased risk where certain environmental claims are made.
Best Practices
Marketers must use best practices to avoid enforcement actions and reduce the risk of litigation. Marketers should consider these best practices:
- Partner with counsel to monitor legislative and regulatory trends.
- Utilize marketing and legal teams for review of both current and future on-package or off-package statements. Take into consideration evolving regulatory and litigation considerations.
- Understanding the support required to substantiate claims is key. The company should evaluate whether it can leverage internal findings or whether additional evidence may be needed. Although third-party certification bodies can be useful in supporting claims, it is not enough to completely protect marketers from risk.
- Other risk-mitigation strategies, such as disclaimers, aspirational, and qualifying language, can be implemented.
- Take into account supply chain and packaging requirements in order to anticipate stricter state or local plastics measures throughout the supply chain.
- If applicable, align product marketing and branding with ESG reporting or SEC disclosures.
- Through disclosure controls and procedures, ensure that sustainability disclosures have been properly vetted.
These are just a few broad points for consideration—green marketing and consumer lawsuits are not going away. Marketers trying to use environmental marketing claims have to tread carefully. They must be able to convey the environmental impact and avoid litigation or enforcement action. Understanding the changing regulatory landscape and litigation landscape is the first step towards finding that balance.
The authors would like to thank the following for their assistance: Barbara Jones-BinnsThis advisory was written by and researched by an analyst in regulatory affairs.
Download the PDF version of the Advisory
[View source.]