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The Risks of Eco-Marketing



Industry should take note of revised guides on green claims.



By Thomas A. Cohn, LeClairRyan



Published May 22, 2012
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The Risks of Eco-Marketing

Even in the aftermath of the so-called Great Recession, the demand for all things green shows no sign of slowing down. According to a March 2010 report by Mintel, for example, 35% of consumers said they would still pay more for “environmentally friendly” products in spite of the downturn. In another 2010 survey, P&G and Ipsos Public Affairs reported that 74% of consumers claimed they would switch brands if doing so would save resources. And of course, makers of household and personal products tend to be disproportionately affected by this trend. According to Kline & Co., for example, “natural” personal care products continued to outperform the overall beauty market in 2011. “The global market for natural personal care products is expected to maintain strong growth with a compound annual growth rate of almost 10% through 2016,” says the research firm.

 
The industry, in other words, faces a lot of pressure, not necessarily to “green wash” its offerings per se, but to highlight whatever qualities those products might have that stand to please eco-conscious consumers. In today’s regulatory environment, however, even seemingly modest claims can carry legal risks. Indeed, the Federal Trade Commission has been closely scrutinizing marketers’ green claims under the FTC Act, which gives regulators the mandate to ferret out unfair, deceptive or unsubstantiated environmental claims. Specific compliance guidelines can be found in the FTC’s “Green Guides,” first issued in 1992 and now under revision. While a high-ranking source within the agency says the final Guides will not be issued for months, the FTC has already provided some revealing details about its plans—and the industry should take careful note of these proposed changes.

 
As outlined thus far, the revisions strongly emphasize that all marketing messages should be “clear and prominent.” At a glance, the consumer should be able to tell whether the particular claims apply to the product, the packaging or just a component of either. If the product does offer some environmental benefit worth touting, the proposed revisions make clear that marketers must not overstate the claim. It is always dangerous to make any general, environmental benefit claim unless you have competent, reliable evidence to back it up. Catch-all terms such as “green” and “eco-friendly” are all but meaningless in the eyes of the FTC. Indeed, regulators have signaled that unqualified, general environmental benefit claims are difficult, if not impossible, to substantiate and should therefore be avoided. Marketers should also limit their claims to that which is specific and quantifiable: Rather than describe that skin-cream packaging as “eco-friendly,” explain that it was produced using “X% post-consumer recycled content.”
 

Time was when marketers of household and personal products competed only on the likes of price, appearance and efficacy. Today, they must one-up the competition on the green factor as well. That might increase the temptation to tout this or that environmental certification or seal. However, one of the most significant changes in the proposed Green Guides is a new section on the use of environmental certifications and seals of approval in advertising. Any sort of certification or seal is equal to an endorsement and, as such, is covered by the previously issued FTC Endorsement Guides, which spell out the need for substantiation of all claims mentioned in an endorsement or testimonial. Whatever that certification or seal of approval happens to say, in other words, it must be truthful, and it must be substantiated. The FTC’s intent on this score was amply illustrated last year when the agency announced that it had reached a consent agreement with Nonprofit Management LLC and its owner, whom regulators accused of offering a deceptive “Tested Green” environmental certification to any business willing to pay for the honor.

 
Likewise, a “seal of approval” does not relieve the marketer of its duty to substantiate all claims conveyed by the certification, whether expressed or implied. In dealing with makers of personal care products, regulators will take a dim view of excuses such as “Well, if this isn’t truthful, it is the seal-giver’s fault.”
 

As they negotiate these dynamics, companies should analyze how closely and well their marketing and risk-management teams work together. Every compliance officer’s worst nightmare is to page through a magazine or flip on the TV and run across the company’s latest advertisement—compliance mistakes and all. With the FTC closely scrutinizing green claims, it is particularly important that marketers’ enthusiasm be balanced against compliance officers’ concerns. The best way to accomplish this is for the two camps to work hand-in-hand on the project from the start. Some companies make unsubstantiated and bullish environmental claims about their products and then, after running afoul of regulators, try to find substantiation after the fact, but the FTC requires substantiation before the claim is made. While a talented graphic designer can, with a few clicks, whip up a verdantly colored ad for, say, sunscreen or household deodorant, it is a far more daunting proposition to actually back up that ad with legally sound science. As a result, compliance must sometimes put the brakes on marketing. This can create tension, but getting it right is in everyone’s best interest in the long run.
 

Finally, terms such as “free of,” “nontoxic,” “recyclable” and “compostable” might seem straightforward enough, but the proposed revisions drill into the specific, legally acceptable usage of such language. Want to label a household or personal product as “ozone-safe” or “degradable”? Check the Green Guides first. The revised guides are available at http://www.ftc.gov/os/fedreg/2010/october/101006greenguidesfrn.pdf.


About the Author
FTC veteran Thomas A. Cohn is a partner in the New York City office of national law firm LeClairRyan. He focuses his practice on advising clients on the legal and practical aspects of compliance with FTC and state consumer protection regulations and industry self-regulation programs, as well as representing clients during investigations and enforcement actions. Prior to entering private practice, Cohn served as director of the FTC’s Northeast Region. He can be contacted at: Thomas.cohn@leclairryan.com, (212) 430-8060.
 


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