Cynthia Faur

Companies whose product or service has some environmental benefit, or a component that is less environmentally harmful than a competitor, have a significant motivation to get the word out to consumers.

In fact, a 2007 study by The Hartman Group, a consumer research firm, found that most consumers – 93 percent – have at least some interest in purchasing a product or service because of its perceived positive environmental aspects.

It's no wonder that the marketplace has responded to this overwhelming interest. That same year, market-watchers identified more than 300 new "environmentally friendly" products. The number of products and services that aren't new but that carry new environmental claims has similarly exploded.

New types of claims like "earth friendly" or "carbon neutral" exist alongside more familiar claims such as "recyclable" or "biodegradable."

At the same time, enforcement of the laws governing environmental marketing claims has been spotty. From 2000 to 2008, the Federal Trade Commission ("FTC") reported no enforcement actions at the federal level. That is changing. There have been several high-profile enforcement actions in the past two years.

Because of the motivation to reach consumers, the sheer volume of claims and the inconsistent enforcement, the business climate has had a high tolerance for false or misleading environmental claims. One study found that as many as 98 percent of environment-related claims on goods and services are misleading or even outright false. But enforcement is increasing, and consumers are more closely scrutinizing the environmental aspects of their purchases. As a result, it is important for companies to make their green claims accurate and in compliance with the law.

Although there are also state and industry regulators with jurisdiction in this area, the FTC is the federal agency principally responsible for monitoring marketing and advertising for truthfulness and substantiation. The FTC has the authority to prosecute advertising claims that it determines are unfair, deceptive, unsubstantiated, or misleading. Penalties for noncompliance with FTC regulations can be significant. The FTC can seek both civil penalties and injunctive relief, which could involve removing the product or service from the market entirely. The agency can also require corrective advertising to publicly counteract a misleading or deceptive claim, disgorgement of profits, and payments of restitution to affected consumers. However, there is a limited supply of precedent for companies to draw on when crafting their marketing materials, particularly if the company is using newer terms, like "green" or "carbon neutral."

FTC regulations are known colloquially as the "Green Guides." They are not firm rules, but instead are guidelines that provide a safe harbor for companies to compare their claims against.

Many states also require compliance with the Green Guides. Last revised in 1998, the Green Guides became outdated as "green marketing" exploded over the last 10 years.

In October 2010, the FTC finally proposed its long-awaited revisions to the Green Guides. These proposed revisions include new guidance on claims that have become more common in the marketplace, like the use of product certifications and seals of approval and renewable energy claims. Perhaps the most sweeping change, however, is the limitation on general environmental claims. Many products claim to be "environmentally friendly," "eco-friendly" or "green."

In the proposed Green Guides, the FTC states that companies should not make these general environmental claims in part because an FTC study showed that almost one-third of consumers interpreted a general claim like "green" or "eco-friendly" to mean that a product had no negative environmental impact. In the vast majority of cases, that would not be true and in any event would be almost impossible to prove.

While the proposed revisions to the Green Guides address many new types environmental claims, the general principles have not changed. Generally, an environmental claim will be considered not deceptive if:

• The claim is specific instead of vague.
• It clearly states any qualifications or disclosures that are necessary to ensure the claim is not misleading or deceptive.
• It clearly states whether the claim applies to the product, the packaging, or both, or to a service.
• Substantiation for the claim is in place before the company started making the claim.
• It does not overstate the claim.
• In the case of comparative statements (e.g., 20% less waste), the basis for the comparison in the claim is clear.

While these principles appear straightforward, their application to specific claims can be difficult. Issues that arise include what exactly constitutes an environmental claim, what qualifications are necessary to make a claim accurate, and what type and quality of information is needed to substantiate a claim. (Substantiation is the evidence the company has to support its claim, which can be based on information from suppliers, product tests, or other information.)

Practical tips

The following considerations may assist a company as it reviews and implements its green marketing strategy:

• Qualify claims as necessary to promote clarity.
• Ensure that all claims asserted or implied are truthful.
• Substantiate the claim before advertising, selling, or displaying any product or service with the claim, and keep evidence of the substantiation on file.
• Be aware that regulators and consumers are paying greater attention to green claims, and consider the benefits and challenges to the company in light of that scrutiny.
• Be alert for changes to the proposed revised the Green Guides — the FTC is reviewing public comments on the proposed regulations, and there could be additional changes to the proposal that impact your claims.
• Consult with an expert to evaluate environmental marketing claims for compliance with all applicable federal and state laws and regulations.

Green is good and it's here to stay, but before you make an environmental claim, be sure you have the facts to back it, that it follows the most current of regulations, and that it can stand up to public scrutiny.