©2011 Morrison & Foerster LLP | All Rights Reserved | mofo.com sf What Happens When Green Marketing Goes Too Far – A Legal Perspective Bren School of Environmental Science & Management November 3, 2011 Workshop Brooks M. Beard - Morrison & Foerster LLP Greenwashing

2 Presentation Overview What is “Greenwashing”? Enforcement Tools in the United States International Enforcement What’s Coming Next? Avoiding “Greenwashing” Allegations Questions and Answers 2sf

3 Premium Paid for “Green” Products Recent Mintel report revealed that more than one-third of U.S. consumers would pay more for environmentally-friendly products Result increase in marketing campaigns using words such as “environmentally friendly,” “sustainable,” and “biodegradable” price premiums for such products Effect increased scrutiny increased risk of litigation or enforcement actions

4 feedstock zero-impact feedstock content ECO-SMART eco-friendly sustainable sustainability renewable renewable resource life cycle recycled recyclable biodegradable degradable photodegradable compostable RENEWABLE BIO-BASED NATURAL CONTENT environmentally friendly earth-friendly ozone- friendly cradle to cradle cradle to grave CARBON OFFSETS renewable energy credits carbon neutral carbon footprint CLEAN ENERGY environmentally preferable environmentally safe naturally derived non-toxic energy intensity energy efficient Bioenergy greenhouse gases environmental management systems (EMS) alternative fuels green purchasing

5 Definition of Greenwashing “Greenwashing” is generally viewed as the use of marketing claims or statements — whether words, names, seals, or other symbols — that deceive or mislead consumers as to the environmental benefits or attributes of a company’s product or service, or, more broadly, as to the company’s environmental practices as a whole. 5sf

6 Examples of Greenwashing Fluffy Language: Words or terms with no clear meaning Ex. “sustainable” or “eco-friendly” No Proof: It could be right, but where’s the evidence? Suggestive Pictures: Images that indicate an unjustified green impact Ex. Flowers blooming from smoke stacks Green Products vs. Dirty Company: Such as efficient light bulbs made in a factory that pollutes rivers Best in Class: Declaring you are greener than the rest, even if the rest are pretty terrible 6sf * The Greenwash Guide, Futerra Sustainability Communications

7 U.S. Enforcement Tools Federal Trade Commission Act Lanham Act State Consumer Protection Statutes BBB’s National Advertising Division FTC Enforcement Actions 7sf

8 FTC Act “[U]nfair or deceptive acts or practices in or affecting commerce are declared unlawful” (15 U.S.C. § 45(a)(1)) Is the claim likely to mislead a reasonable consumer? Viewed from the consumer’s perspective FTC will not attempt to interpret the claim language Prohibits ads that are likely to mislead a reasonable consumer Was the claim material to the consumer’s decision to buy or use the product or service? Substantiation – competent and reliable evidence 8sf

9 FTC’s Green Guides What are the Green Guides? Provide examples of how using particular environmental claims could conform or run afoul of the FTC Act Discourage use of broad unqualified statements such as environmentally friendly, eco-friendly, green, or sustainable Must be able to substantiate claims with “competent and reliable evidence” Guidance document Substantial weight by courts 9sf

10 Status of FTC’s Green Guides In the process of revising Green Guides draft guidelines have already issued Key issues in draft: general environmental benefit claims certifications and seals degradable and compostable claims recyclable claims renewable claims carbon offsets sustainability claims 10 sf

11 The Lanham Act Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)) Creates liability for misrepresenting in commercial advertising the “nature, characteristics, qualities or geographic origin” of goods or services Only competitors permitted to bring suit under Section 43(a) 11 sf

12 State Consumer Protection Statutes Many states have their own consumer protection statutes (“Little FTC Acts”) California: Unfair Competition Law (Bus. & Prof. Code § et seq.) False Advertising Law (Bus. & Prof. Code § 17500) Consumer Legal Remedies Act (Civil Code § 1750 et seq.) May be enforced by both government and private citizens Remedies can include damages, restitution, attorneys’ fees, injunctions, and civil penalties Beware of class actions 12 sf

13 NAD Proceedings National Advertising Division of the Better Business Bureau Alternative to litigation NAD routinely refers cases to FTC Self-regulation by advertising industry

14 NAD Proceedings — Continued Can be used only for review of national advertisements Compliance with ruling is voluntary (there is no formal enforcement mechanism) 95% compliance rate

15 Seventh Generation Household Cleaning Products Advertiser’s Seventh Generation claims that its products were “as gentle on the planet as they are on people” was puffery NAD noted the efficacy and benefit of the advertiser’s product NAD recommended advertiser discontinue claims linking household bleach to environmental risks; and posing potential environmental or health hazards

16 Church & Dwight (Arm & Hammer Essentials) “Harnessing the Power of Nature” More Sensible for the Environment 100% Naturally Derived Surfactants NAD found “natural” claims unsupported

17 Clorox “Green Works” Clorox claimed its “Green Works” product “cleans with the power of Clorox” NAD recommended discontinuing this claim to avoid conveying message that product has disinfectant capability

18 Mythic Paint

19 Mythic Paint - Continued Involves claims that product is non-toxic, free of carcinogens and volatile compounds (VOCs), and slogan “Safe for People, Safe for Pets and Safe for Earth” NAD determined that manufacturer had substantiation for claim that contains no VOCs, toxins, or known carcinogens and for its slogan NAD concerned about claims that traditional paints are dangerous and recommended manufacturer discontinue comparative safety claim; and modify advertising to avoid message of exaggerated risks of competitive paint products

20 Elanco Animal Health Division Elanco Animal Health Division > award does not support general claim that product is environmentally friendly

21 Dispoz-O “Enviroware” “Enviroware” tableware products “Enviroware cutlery, straws, hinged containers, plates, bowls and trays are 100% biodegradable and come with a certificate of biodegradability.” biodegradability claim unsupported

22 Your Examples Of Green Marketing Discuss examples of green marketing you brought Do they seem overbroad? Do they constitute greenwashing? Or are they sufficiently focused? 22 sf

23 International Enforcement United Kingdom France Scandinavian Countries Canada Australia 23 sf

24 United Kingdom Advertising Standards Authority Independent body used by the advertising industry to resolve private disputes The number of complaints to the ASA about green claims was four times higher in 2007 than sf

25 United Kingdom — Continued Advertising Standards Authority (cont.) ASA’s 2007 Annual Report found: “[C]onsumers were most confused about ads for carbon emission claims and green tariffs as well as green terms like sustainable and food miles” “Consumers said they typically did not read the fine print or explanatory text in ads” 25 sf

26 United Kingdom — Continued 26 sf Claim that Shell “use[s its] waste CO2 to grow flowers” and its “waste sulphur to make super-strong concrete” MISLEADING because only small amount of waste CO2 used to grow flowers and only small amount of sulphur used to make concrete. Claim that Shell “use[s its] waste CO2 to grow flowers” and its “waste sulphur to make super-strong concrete” MISLEADING because only small amount of waste CO2 used to grow flowers and only small amount of sulphur used to make concrete.

27 United Kingdom — Continued 27 sf

28 United Kingdom — Continued 28 sf ASA found that there was not yet an accepted definition for “sustainable” and disagreement exists regarding what constitutes “sustainable” ASA evaluated data relating to cotton production in the US ASA concluded that: “the meaning of the term ‘sustainable’ in the CCI ad was likely to be ambiguous and unclear to consumers[;]” and “CCI had not justified the claim”

29 France Charter of Commitment and Objectives for Eco-Responsible Advertising led by advertising professionals can impose fines and call for the withdrawal of offending material 29 sf

30 France — Continued Advertisers should not make claims that are unsubstantiated, use exaggerated language, overstate the environmental benefit, or give the impression that the product has qualities other than is actually the case. 30 sf

31 Scandinavian Countries Joint guidelines for ethical and environmental marketing claims Claims must be clear, indicate whether they apply to the product or the packaging, verifiable, and substantiated by scientific data 31 sf

32 Scandinavian Countries — Continued Claims must also be accurate and balanced, and may not exaggerate a product’s positive impact on the environment Enforced against car manufacturers to prohibit claims that cars are “green,” “clean,” or “environmentally friendly” 32 sf

33 Scandinavian Countries—Continued Norwegian senior government official has stated: “If someone says their car is more ‘green’ or ‘environmentally friendly’ than others then they would have to be able to document it in every aspect from production, to emissions, to energy use, to recycling.” 33 sf Alister Doyle, “Norway Says Cars Neither Green Nor Clean” (Sept. 6, 2007), available at

34 Canada Recent guidelines issued jointly by the Canadian Competition Bureau and Canadian Standards Authority 34 sf

35 The core principle of the Guide is that businesses should only make claims that are substantiated and verified. Substantiation means the existence and availability of supporting information for environmental claims Verification means the accuracy or reliability of such information 35 sf Canada — Continued

36 Terms such as “green”, “environmentally friendly”, “all natural”, “environmentally safe” and “eco” are discouraged because they do not convey a precise or specific meaning to consumers and are difficult to effectively substantiate. 36 sf Canada — Continued

37 Canada — Continued No claim of “sustainability” should be made because the concepts involved in sustainability are complex and under study. 37 sf

38 Canada — Continued Substance “free” claims need to be literally true and cannot convey a general impression that is false or misleading (e.g., a product claiming that it is free of a certain chemical and is safe for the environment but fails to disclose that it contains a different harmful chemical could be considered false or misleading). 38 sf

39 Canada — Continued Claims should take into consideration all relevant aspects of the product life cycle. 39 sf

40 Australia Australian Competition and Consumer Commission recently released: “Green Marketing and the Trade Practices Act” Guidelines for compliance with Trade Practices Act Penalties under the Act: Fines up to $1.1 million for companies and $220,000 for individuals Injunctive relief 40 sf

41 Australia — Continued 41 sf Claims must only be made for a real benefit (e.g., “CFC free” has no real benefit because use of CFCs is prohibited in almost all aerosols)Claims must only be made for a real benefit (e.g., “CFC free” has no real benefit because use of CFCs is prohibited in almost all aerosols) Claims must be specific and qualified (e.g., “safe for the environment” is not specific)Claims must be specific and qualified (e.g., “safe for the environment” is not specific)

42 Australia — Continued 42 sf Claims should consider whole productClaims should consider whole product Claims must not overstate a benefit (e.g., “now 50% more recycled content” is overstated if previously contained only 1% recycled content)Claims must not overstate a benefit (e.g., “now 50% more recycled content” is overstated if previously contained only 1% recycled content) Claims should make clear whether claimed benefit refers to packaging or contentClaims should make clear whether claimed benefit refers to packaging or content

43 European Union’s Eco-Label 43 sf Voluntary labeling programVoluntary labeling program The label is awarded to goods and services that are “genuinely a better choice for the environment,” based on criteria established by the EUThe label is awarded to goods and services that are “genuinely a better choice for the environment,” based on criteria established by the EU Voluntary labeling programVoluntary labeling program The label is awarded to goods and services that are “genuinely a better choice for the environment,” based on criteria established by the EUThe label is awarded to goods and services that are “genuinely a better choice for the environment,” based on criteria established by the EU

44 Group Exercise Select a product or service for which you want to tout environmental attributes through advertising existing product or service fictional product or service Consider what environmental attributes you can tout Create ad or label copy that includes the environmental claim 20 minutes, then we will discuss 44 sf

45 WHAT’S COMING NEXT?... more enforcement! sf

46 FTC Enforcement History The FTC brought 37 enforcement actions involving environmental marketing claims between 1990 and 2000 Most of the environmental claims were challenged on the basis that the company did not have sufficient substantiation for the claim it made No enforcement actions from 2000 until 2009 In June 2008, FTC Commissioner Rosch stated there have been no recent enforcement actions because: The industry has been abiding by the Green Guides; and Private enforcement under the Lanham Act and self-regulation have developed into effective alternative enforcement mechanisms 46 sf

47 Recent FTC Enforcement Actions Under the Federal Trade Commission Act, “unfair or deceptive acts or practices in or affecting commerce are declared unlawful” (15 U.S.C. § 45(a)(1)) 2009 saw first series of FTC enforcement actions for green claims in a decade biodegradability claims bamboo fiber claims

48 Biodegradability Actions FTC viewed biodegradability claims as false or misleading because products did not biodegrade under normal disposal circumstances Can only make such claims if: supported by competent and reliable scientific evidence tested under normal disposal circumstances for product

49 Bamboo Fiber Actions Labels and advertisements claimed products were made of bamboo fibers, but they were really made of rayon FTC also took issue with claims that products were manufactured using an environmentally friendly process contained the natural antimicrobial properties of bamboo biodegradable

50 Increased Enforcement Action at State Level State Attorneys General District Attorneys Regulatory Agencies New Legislation Consumer Class Actions 50 sf

51 State of California Action California Attorney General going after “biodegradability” claims on plastic water bottles lawsuit filed October 26, 2011 referred to as “first-of-its-kind ‘greenwashing’ lawsuit” claim: bottles are “100 percent biodegradable and recyclable”

52 California Restricts Claims On Plastic Bags AB1972 prohibits the sale of plastic bags and food and beverage containers that are labeled “biodegradable” or “degradable” until the legislature defines the terms Prohibits labeling a product as “compostable” or “marine degradable” unless the manufacturer can substantiate their product meets a specific ASTM standard 52 sf

53 California Environmental Representations Law California Business and Professions Code § Under this law, marketers utilizing terms such as "environmental choice," "ecologically friendly," "earth friendly,“ "environmentally friendly," "ecologically sound," "environmentally sound," "environmentally safe,“ "ecologically safe," "environmentally lite," "green product," or any other like term, shall maintain documentation supporting the validity of the representation Provide to requesting public 53 sf

54 Consumer Class Actions Plaintiff’s bar has referred to this as the next “big ticket” issue Several recent class actions filed challenging greenmarketing claims 54 sf

55 S.C. Johnson “Greenlist” Litigation Two nearly identical class actions regarding S.C. Johnson’s “Greenlist” label on its Windex ® and Shout ® products

56 Petlack v. S.C. Johnson & Son, Inc. (E.D. Wis., filed Sept. 29, 2008) Plaintiff alleged Windex ® “Greenlist” label is deceptive because it conveys that: Windex ® is “environmentally friendly” Windex ® has “been subjected to a neutral, third-party’s testing regime” S.C. Johnson “Greenlist” Litigation Cont.

57 Koh v. S.C. Johnson & Son, Inc. (N.D. Cal., filed March 2, 2009) Plaintiff alleged Windex ® and Shout ® “Greenlist” labels are deceptive Plaintiff would not have bought Greenlist-labeled products at premium price if he had known that Greenlist was a label applied by S.C. Johnson and not a third party S.C. Johnson “Greenlist” Litigation Cont.

58 Fiji Water Litigation Hill v. Roll Int’l Corp. (S.F. Superior Court, filed April 20, 2009) Plaintiff alleged Fiji Water’s label was false and misleading because: “misrepresented... to consumers that Fiji Water is an environmentally sound product.” contained a Green Drop “seal of approval” included the word “FijiGreen” used the phrase “Every Drop is Green” Plaintiff alleged that the labels trick consumers into paying more for a product that is not actually environmentally superior

59 How to Avoid Greenwashing Accusations? Pick the products or services you promote on green grounds with care Be specific with word choices Be specific about what part of your product or packaging is green Substantiate, substantiate, substantiate Do not overstate the benefit Don’t forget that images can give misleading impressions 59 sf

60 Can You Make a Green Claim? Conduct a Life Cycle Examination Natural resources Manufacturing process Packaging Transportation Distribution chain Consumer Use Recycling and waste stream 60 sf

61 Can You Make a Green Claim? - Continued Determine Your Marketing Objective Product Claim? Packaging Claim? Company Claim? 61 sf

62 Effective Messaging Establish Credibility Have the facts and figures ready to back-up your green claim Message your green claim credibly Make certain your green claim is relevant to what your customers value Differentiation: Can you market yourself so that your customers can identify what you do as green that is unique to you or your products? 62 sf

63 Dealing with Competitors Are they making misleading green claims? “Cease and desist” letter File a complaint with the appropriate agency Lawsuit (only if necessary) 63 sf

64 Dealing with Competitors - Continued Are you doing better than they are? Comparative advertising “Our product is 25% more energy efficient than our leading competitors” “ Unlike our competitors, we use 100% recyclable packaging” 64 sf

sf “Sorry, Harold, but I’m reducing our carbon footprint.”

66 What Are Companies Doing? Patagonia The Footprint Chronicles Timberland Green Index Rating Walmart Sustainability Index 66 sf

67 Questions? Have more questions? Brooks Beard, Morrison & Foerster LLP (415) sf

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