Environmental and sustainability claims: Draft guidance for business

The ACCC recently released draft guidance on environmental and sustainability claims to help businesses understand their obligations under the Australian Consumer Law (ACL) and best practice when making such claims. The draft guidance aims to encourage truthful and accurate claims, decrease instances of ‘greenwashing’, and assist consumers in making informed choices.

Principles

The ACCC identified eight key principles for businesses to follow when making environmental and sustainability claims:

1. Make accurate and truthful claims: All claims should be factually correct. Even if literally true, they should not create an misleading overall impression.
2. Have evidence to back up your claims: Businesses should ensure they have clear evidence to substantiate any claims made, with independent, scientific evidence being the most credible. As stated in the guidance, “Making the research, evidence, or data that you are relying on easily accessible to consumers helps consumers to understand and trust your claims.”
3. Don’t hide important information: Providing partial information risks misleading consumers by omitting key details. Consider the full lifecycle of products and services and be transparent. As noted in the guidance, “Small print shouldn’t hide the truth.”
4. Explain any conditions or qualifications on your claims: Claims should clearly state any limitations or steps required for the benefit to be achieved. Theoretical benefits mislead if not explained.
5. Avoid broad and unqualified claims: Broad claims can mislead by implying greater benefit than is the case. Qualify claims and use specifics. As stated in the guidance, “The risk of misleading consumers is reduced when you qualify your claims by expressly referring to a specific part or attribute of a product, service or business, and clearly outlining the specific environmental benefit being achieved.”
6. Use clear and easy to understand language: Avoid scientific or technical language, and use ordinary meanings of words. As noted, “Most consumers do not have specialist scientific or industry knowledge.”
7. Visual elements should not give the wrong impression: Colours, images, symbols and branding should not imply environmental benefits that do not exist. Consider the overall impression created.
8. Be direct and open about your sustainability transition: Caution is urged around aspirational claims unless backed by actionable plans. As stated, “Be direct and open. Transitioning to a more sustainable business model takes time and is often not linear.”

The guidance provides examples of both good practice and potentially misleading claims for each principle. It also outlines the ACCC’s compliance and enforcement approach, including the use of Section 155 notices, substantiation notices, infringement notices and court action. Businesses risk significant penalties for contravening the ACL, with maximum fines per each breach of $50 million for corporations and $2.5 million for individuals, as well as up three times the gain or 30% revenue in the case of corporations.

Recommendations for energy sellers

Energy sellers are particularly susceptible to scrutiny in relation to the claims they make when it comes to the impact of their products and services on the environment. Energy sellers who claim to offer ‘renewable’ or ‘clean’ energy should carefully review their promotional and advertising material. Such claims need not be explicitly stated, they could be made by the overall impression of the relevant material.

Environmental and sustainability claims recommendations for Energy Sellers:

• Ensure all environmental and sustainability claims are truthful, accurate and substantiated. Broad or exaggerated claims are more likely to mislead consumers and attract regulatory scrutiny.
• Consider the overall impression created by your claims, and whether any further explanation or qualification is required. Look at all the information provided to consumers, including on websites, product packaging, in-store displays, advertisements, and via customer service staff.
• Have a reasonable basis for making any claims about the future, for example have actionable plans and evidence to support claims about transitioning to renewable energy or emissions reductions. Regularly report on progress against these plans.
• Avoid implying greater environmental benefit or scientific acceptance than is justified. Carefully explain the basis and any limitations of your claims.
• Consider whether visual elements like colours, images, symbols, and logos could imply a benefit that does not exist. The overall impression created by these elements, combined with your claims, should not be misleading.
• Use clear and simple language that is meaningful to ordinary consumers. Avoid overly technical terms or relying on complex scientific concepts unless clearly explained.
• Make key supporting evidence and information easy for consumers to find and understand. Be open and transparent about your environmental impacts and credentials.
• Consider getting independent third-party verification or certification for your environmental claims and credentials where possible. Explain the certification and any limits on its scope.
• Regularly review your claims and supporting evidence to ensure it remains up to date and accurate. Be prepared to revise any claims that become outdated or cannot be substantiated.
• Seek legal advice on your obligations under ACL and specific circumstances if unsure. Contravening the ACL can have serious consequences.

The draft guidance will provide an important reference for businesses looking to make accurate and trustworthy environmental claims. By following the recommended principles, businesses can build consumer trust in their environmental credentials and avoid misleading claims that risk attracting regulatory action. The ACCC is seeking feedback on the draft guidance until 15 September 2023.