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Riding the “Green” Wave Without Wiping Out

With the proliferation of green marketing, however, has come heightened scrutiny. The Federal Trade Commission (FTC), the primary federal agency that regulates advertising, has brought eight enforcement actions relating to green marketing since 2009—after going nearly a decade without bringing any such actions. State attorneys general have followed suit. Recognizing the power of green marketing to differentiate products, the number of challenges brought by businesses to their competitors’ advertising has also sharply increased during the last five years. And, consumers—emboldened by regulators’ success—have filed lawsuits, often as class actions, claiming that they have been injured by deceptive claims about the environmental benefits of products ranging from bottled water to automobiles.

While lawsuits against large corporations make headlines, smaller businesses have also been subjected to unwanted scrutiny. For example, the FTC recently sued four relatively small companies for falsely advertising that clothing and other textiles were made of bamboo, warning that the laws governing green marketing apply “to all companies, regardless of their size.”

The penalties for making false or misleading green claims can be severe, ranging from substantial fines—of up to $16,000 per day, per violation—to protracted oversight by regulators. Some companies have been required to publish “corrective advertising,” publicly admitting that their previous marketing efforts were improper. At a minimum, a company will likely lose its investment in the marketing resources at issue. And, regardless of whether an advertisement is found to violate the law, defending litigation requires time and other resources, distracting businesses from pursuing their primary goals. Thus, green marketing is increasingly viewed as desirable—even necessary, to compete—yet involves risks. How can your company capitalize on the opportunities provided by green marketing without inviting unwanted scrutiny?

The first step is to understand how green marketing is evaluated. Courts and regulators assess green marketing, like advertising generally, from the perspective of its target audience. An advertisement means whatever a reasonable member of that audience thinks it means, regardless of whether that interpretation is technically correct—and even regardless of whether the advertiser intended to convey that claim. Thus, the effect of green marketing is key.

The second step is to ensure that any claim that might be attributed to an advertisement is supported by evidence. Significantly, even true claims must be substantiated. The type of evidence required varies based on the nature of the claim. Claims about health require more stringent proof: reliable scientific evidence, based on research conducted by qualified professionals. Because green marketing typically implicates health, it is often subject to that higher standard.

The third step is to apply those principles to your company’s green marketing. Those principles apply to all forms of marketing, including not only advertising but packaging, brand names, labels, and logos. The FTC has published guidelines, known as the “Green Guides,” to help businesses comply with laws governing green marketing. The Green Guides—which are available at http://ftc.gov/bcp/grnrule/guides980427.htm—explain the principles that govern green marketing and apply them to specific types of claims, such as claims about recycling. The Green Guides also provide dozens of examples showing how green marketing claims are likely to be interpreted, helping companies support and, if necessary, modify such claims.

Reflecting the growing wave of green marketing, significant revisions to the Green Guides are imminent. Some of those changes address specialized types of advertising claims—for example, about carbon offsets. Other changes to the Green Guides refine previous guidance about familiar concepts, such as recycling, or apply them in different ways—for example, to seals of approval by third parties. Perhaps the most significant change to the new Green Guides, however, affects claims about general environmental benefits, the kinds most commonly made in green marketing. Soon, advertisements that use terms like “eco-friendly” or “good for the environment” without sufficient qualification likely will no longer be permissible.

The Green Guides demonstrate that complying with the laws governing green marketing is partly a matter of common sense. The company that recently advertised its discovery of a way to improve the gas mileage of ordinary vehicles by converting water into gasoline probably knew that it was taking a substantial risk. However, the Green Guides also demonstrate that common sense is not enough; evaluating many types of green marketing requires specialized knowledge. For example, if your company uses packaging that includes the word “recycled,” whether that claim is deceptive or misleading may depend on the placement of the word and even the size of the type face that is used to print it. Accordingly, green marketing should be subject to the same types of review that you give to assets such as contracts with vendors and employee handbooks. Establishing a process for evaluating your company’s green marketing, obtaining expert counsel when necessary, and applying that process routinely before your company’s advertisements are published will help you take advantage of benefits provided by green marketing while avoiding the risks.