Businesses are increasingly trying to market their products as “green.” Common eco-friendly labels or claims can be found on many products, including labels like “recycled content”, “biodegradable”, and “safe for the environment.” Before making any such claims, businesses should be able to substantiate their claims or risk legal action.

How frequent are false or misleading eco-friendly claims being made on products? A 2007 survey performed by Terrachoice, an environmental marketing agency, gained national attention.  The survey found that of 1,018 common consumer products ranging from toothpaste to printers, 99% were guilty of stretching the eco-truth regarding their products. This practice is commonly referred to as “greenwashing.”

Here are just two examples of what could be considered misleading:

Example 1: A box of aluminum foil is labeled with the claim “recyclable,” without further elaboration. Unless the business establishes whether the claim refers to the foil or the box, the claim is deceptive if any part of the box or the foil cannot be recycled.

Example 2: A product is advertised as “environmentally preferable” which is likely to convey to consumers that this product is environmentally superior to other products. If the manufacturer cannot substantiate this broad claim, the claim would be deceptive.

The Federal Trade Commission can take legal action against unfair or deceptive marketing practices under Section 5 of the FTC Act. To assist businesses in determining how to stay in compliance with the law, the FTC issued the Guide for the Use of Environmental Marketing Claims, commonly referred to as the “Green Guides.” The “Green Guides” provide the following general guidance on substantiating environmental claims:

Any party making an express or implied claim that presents an objective assertion about the environmental attribute of a product, package or service must… rely upon a reasonable basis substantiating the claim…such substantiation will often require competent and reliable scientific evidence, defined as tests, analyses, research, studies or other evidence…

Because of the proliferation of green claims in the marketplace, last year the FTC has decided to perform a formal review of the "Green Guides" which were last updated in 1998.  A final version of the update guide is expected in 2009.  

As an alternative to filing a complaint with the FTC, businesses can take action against their competitors for unsubstantiated or misleading claims by filing a complaint with the National Advertising Division of the Council of Better Business Bureaus, Inc. (NAD).  Between 1988 and 2008, NAD issued nearly 30 decisions pertaining to "green" marketing claims.  While compliance with NAD decision are voluntary, they often lead to the claims being modified or discontinued to prevent a referral to the FTC for more formal action. 

As a recent example, this month GP Plastics Corp. accepted a NAD determination that the company modify or discontinue certain advertising claims related to its plastic bags. Advertising by GP Plastics was challenged by a competing provider of plastic bags for the newspaper industry.
NAD did not agree that the claims ‘100 percent oxo-biodegradable’ and ‘completely recyclable’ were substantiated.

One way manufacturers and suppliers can reduce their risk of being the target of a “greenwashing” claim is by obtaining third party verification that their claims are valid. Non-profit organizations and government programs such as EcoLogo, Green-e and U.S. EPA’s Energy Star program offer independent ecolabelling programs that provide some protection.

EcoLogo describes their process as follows:

Provides a Type I eco-label, as defined by the International Organization for Standardization (ISO). This means that the Program compares products/services with others in the same category, develops rigorous and scientifically relevant criteria that reflect the entire lifecycle of the product, and awards the EcoLogo to those that are verified by an independent third party as complying with the criteria.

Green-e describes is more of niche toward carbon offsets and renewable energy:

Green-e is the nation’s leading independent consumer protection program for the sale of renewable energy and greenhouse gas reductions in the retail market. Green-e offers certification and verification of renewable energy and greenhouse gas mitigation products.

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