By Scott Pink, David Kramer and Carissa Bouwer

Touting a product as environmentally friendly has become increasingly important to companies seeking to differentiate their products and appeal to consumers’ desires to protect the environment. The Federal Trade Commission (FTC) has long been concerned that many companies engage in “greenwashing” in which they overstate or mislead the public about the environmental benefits of their products. In response to these concerns, the FTC issued its first set of “Green Guides” in 1992 to provide guidance to marketers in making true and non-deceptive claims. These Green Guides were updated twice in the 1990s, but have remained unchanged for over a decade.

In response to the proliferation of “green” claims in the marketplace, the FTC initiated a review of the Green Guides in 2007. In October, 2012, after nearly five years of workshops, thousands of public comments, and other research, the FTC issued revised Green Guides. The revised Green Guides continue many of the same general principles that existed in prior versions, but contain a number of significant new principles as well as important new guidance on certifications and seals of approval, carbon offsets, free-of claims, non-toxic claims, made with renewable energy claims, and made with renewable materials claims. While the Green Guides are not agency rules or regulations, they are used by the FTC in assessing whether to bring an enforcement action for deceptive claims under Section 5 of the FTC Act.

The following are some of key new principles that marketers will need to observe when making “green” claims:

• Avoid Broad Unqualified Green Claims. The FTC cautions marketers against making broad and unqualified “environmentally friendly” or “eco-friendly” claims because of the difficulty of substantiating those claims. The FTC’s position is that marketers must substantiate all reasonable interpretations of any environmental claim and that consumers are likely to interpret such claims as meaning that the product has specific and far-reaching environmental benefits. It will therefore be important for companies to be more specific and clear about the environmental benefits of their products.

• Limits on Degradable Claims. Marketers are advised not to make a degradable claim for a solid waste product unless they can prove that the item will completely break down and return to nature within one year of a customary disposal. Moreover, the FTC also cautions that marketers should not make unqualified degradable claims for items destined for landfills, incinerators, or recycling facilities because they will not degrade within a year.

• Sixty Percent Rule for Recycling Claims. For recyclable claims, marketers should qualify the claims if recycling facilities are not available to a “substantial majority” of consumers where the product is sold. Substantial majority is defined as “at least 60 percent.” That means national products may have to include disclaimers if the manufacturers cannot ensure recycling facilities are widely available in some markets.

For the first time, the FTC has provided specific guidance on claims related to carbon offsets, certifications and seals of approval, free-of claims, non-toxic claims, made with renewable energy claims, and made with renewable materials claims. The following are some of the key principles relating to each of these new claim types:

• Carbon Offset. The revised Green Guides advises marketers to have reliable scientific evidence to support carbon offset claims, which includes using appropriate accounting methods to ensure they are properly quantifying reductions and not selling reductions more than once. Marketers should disclose if the carbon offsets will not occur within the following two years and refrain from making the claim at all if the carbon offset activity is already required by law.

• Certification Claims. The revised Green Guides make it clear that marketers are ultimately accountable for any misleading express or implied claims inherent in a certification appearing on their product. Nevertheless, there are indications that third-party certifiers could also potentially be held responsible for any unqualified claims inherent in a certification mark or seal of approval even if the underlying product is not manufactured or marketed by the certifier. Thus, marketers and certifiers alike must use care to ensure that any certification mark or seal is accompanied by sufficient qualifiers limiting the express or implied environmental claims inherent in the certification. The inclusion of such qualifiers can be challenging, particularly on product packaging where space is at a premium.

• Free-of Claims. Claims that an item is free of a substance, even if true, could be deceptive if the product contains substances that pose a similar environmental risk or the substance has not been associated with the product category. Marketers are also warned that if a product contains trace amounts of a substance it would be deceptive to say the product is free of the substance unless three requirements are met: (1) it is a trace amount, (2) its presence does not cause the material harm associated with that substance, and (3) the substance was not intentionally added to the product.

• Non-toxic Claims. Non-toxic claims are deceptive unless the product is non-toxic to both humans and the environment, including household pets.

• Made with Renewable Energy. Any direct or implied representation that a product, package, or service is made or offered with renewable energy is deceptive unless all (or virtually all) of the energy needed to manufacture the product or offer the service is renewable, or any non-renewable energy used is matched by renewable energy certificates. Qualifiers can be used to help minimize the risk of misrepresentation, including specifying the percentage and source of renewable energy used in the manufacturing of the product or offering of the service.

• Made with Renewable Materials. The FTC is concerned that consumers do not interpret “renewable materials” in the same way that marketers intend, so marketers are advised that all claims of renewable materials should be qualified. Marketers should identify the material used, explain why the material is renewable, and qualify the claim unless the product or package is made entirely with renewable materials (excluding incidental components).

With the revised Green Guides now in place, the FTC is poised to continue to expand enforcement activities in this area. As such, it is essential that companies consult with their advertising counsel before making “green” claims in order to ensure compliance with the revised Green Guides. We welcome the opportunity to work closely with you to help your company make the most of its environmentally-friendly practices while still avoiding the potential pitfalls of “green” advertising.

The full text of the revised Green Guides can be found here.