Green Light Distrikt is about entrepreneurship focused on the cleantech sector. GLD U provides cleantech courses . Edited by Chris Williams with frequent guest posts from friends, experts and industry insiders from clusters across the globe. Our goal is to provide a place where cleantech entrepreneurs in various clusters across the globe can learn from one another. Green Light Distrikt is creating the "Hitchikers Guide to Clentech" to provide a resource for cleantech entrepreneurs. Read more
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August 5th, 2010
We left off last month at Enforcement in part 1 of ‘Green Marketing or Green Washing?’. The best part! So if the green guides when applied can be pretty stringent and since we can probably agree that most companies, whether or not unwittingly, violate the standards, then why don’t we have FTC actions coming out our ears?!
The Green Guides were implemented in 1992, but only 45 complaints have been brought under the guides since their inception. During the Bush Administration, not a single environmental marketing complaint was brought. Since Obama took office, seven complaints as of February 2010 had been brought and FTC Director, David Vladeck has said that tougher enforcement and guidelines are a major part of the Commission’s agenda.
Additionally, the FTC is revamping the rules to be more representative of the current green market and the language that producers, retailers, and consumers are using. A new set of guidelines has been released that preliminarily include further definitions and we should be seeing an official draft soon.
Ok, seven cases, how is the FTC enforcing these guidelines? The catalyst case thus far has been the Kmart Corporation case (07/15/2009). In this instance, Kmart engaged in the following:
- Marketed “American Fare” plates as “biodegradable”.
- Biodegradable on its own implies a complete breakdown and return to nature within a reasonably short period of time.
- 91% of solid waste in the US is disposed of in landfills, incinerators, or recycling facilities, in ways not amenable to the conditions required for American Fare to decompose.
As a fun little exercise, how could K-Mart have avoided this action? Certain disclosures perhaps? Nothing like 100 words worth of fine print to accompany your branding.
So Kmart screwed up and they were called on it. To solve this little matter, Kmart signed a “Consent Agreement” which is an admission of guilt for settlement purposes. Companies that willingly sign these can expect to see some leniency from the Court and the order against Kmart is considered to be light.
- Court required that no claims be made of degradability, biodegradability, or photodegradability unless they are true, not misleading, and based on reliable evidence.
- That there can be no other representations of environmental benefit unless those representations are true and backed up by evidence.
- For 5 years after any representation is made, Kmart has to make available to the FTC for review at any time all advertising and marketing materials and all evidence that would either support, qualify, or call into question their representation in the company’s possession. All complaints and communications with consumers or any governmental or consumer protection organization.
- A copy of the order had to be delivered to all current offices, directors, and principals and each of them were required to sign saying they have received and understand the order. Additionally they have to provide a copy of the order to all current personnel and future personnel.
- The FTC has to be notified within 30 days of any changes in ownership, control, bankruptcy, or any change that may affect compliance.
- Kmart had to submit documentation of their compliance with the order within 60 days.
- The order is in effect for the next 20 years.
That is lenient and light?!
Dyna-E International, Inc. and George Wheeler (President of Dyna-E) individually were cited for their biodegradability claims as well, when it came to their “Lightload” paper towels (12/15/2009). Whereas there was no personal liability brought in the Kmart case, in this instance the FTC went after Wheeler as the President, and therefore controller, of the company. Watch out for those fiduciary responsibilities!
Given the lack of previous enforcement in this area, the FTC is still feeling things out. Each complaint/order is a little different. Dyna-E and George signed a Consent Agreement. Dyna-E suffered the same fate as Kmart. George’s liability is that he must inform the FTC whenever he changes any contact information for the next 10 years, including if his position changes and what his new duties and responsibilities are. (This also applies if he leaves Dyna-E and goes to work with another company, bringing the new company under scrutiny. Good luck getting another job).
The Bamboo Cases have added some interesting consequences to the mix as well. There have been a number of recent cases against Bamboo sellers for textile purposes:
- In re The M Group, Inc.
- In re Pure Bamboo, LLC
- In re Sami Designs, LLC
- In re CSE, Inc.
In these cases, producers were selling their product at a premium price due to the following claims:
- Their textile fiber products are bamboo fiber;
- Their textile fiber products are manufactured using an environmentally friendly process;
- Their textile fiber products retain anti-microbial properties of the bamboo plant; and
- Their textile fiber products will completely break down and return to nature, i.e., decompose into elements found in nature, within a reasonably short period of time after customary disposal.
In actuality, these products are not Bamboo, but rather are rayon, a regenerated cellulose fiber; nor are these textiles manufactured using an environmentally friendly process but rather a process that involves the use of toxic chemicals and results in the emission of hazardous air pollutants. Additionally, the textiles do not retain anti-microbial properties of the bamboo plant; and products will not completely break down and return to nature, i.e., decompose into elements found in nature, within a reasonably short period of time after customary disposal because a substantial majority of total household waste is disposed of by methods that do not present conditions that would allow for this decomposition.[i]
The truly interesting part here is that in February 2010, The FTC sent a letter to 78 businesses warning them that they may be violating the rules by selling bamboo products where those products have non-compliant packaging/advertising. Companies receiving the letter included Wal-Mart, Kmart, and Target. So now it isn’t just the marketer/supplier that is on the hook. It is the retailer. They are on notice.
Doing business internationally? What’s happening there?
The UK (ASA, Advertising Standards Authority) implemented their environmental claims enforcement in 1995 and since 1998 they have very aggressively enforced it. In 2003 they revamped their codes to close loopholes. Some examples:
- The ASA banned a Finnair add campaign because it led consumers to think flying was eco-smart. (2010)
- Finnair had to pull all of its posters, adds, and digital versions of a campaign showing one of their planes flying over the Finnish coast with the tag line “Be Eco-Smart, choose Finnair’s new fleet.” Complainants challenged whether the claim “Be eco-smart” misleadingly implied that flying was environmentally friendly, and whether the advertiser could substantiate that the new fleet was “eco-smart” in comparison with older planes, says the ASA.
- ASA pulled a British Gas “Zero Carbon” TV commercial because it implied that their fuel was carbon neutral. (2008)
- ASA banned advertising for Cotton USA. “Soft, sensual and sustainable, it’s Cotton USA!” “Pure, sensual and renewable, it’s Cotton USA!” Cotton is a “pesticide- and insecticide-intensive crop” that could “seriously deplete” groundwater in the U.S. (therefore not sustainable or renewable) (2008)
- The ASA banned a Lexus add that claimed “High Performance, Low Emissions, Zero Guilt” because it implies that the car causes little or no harm to the environment. (2007)
In 2008, Australia and France implemented environmental marketing guidelines and Norway followed. These countries as well have been laying the smack down on green washing.
- Norway banned “green words” from any car adds within their country on the grounds that cars are never good for the environment. They can only be less harmful than other cars in the marketplace.
- France issued regulations saying that cars can no longer be portrayed in nature, as is a common practice in auto advertising. Instead, they must only be shown on roads and other routes open to traffic, where they are typically used. (showing the car in nature suggests an environmentally friendliness to the car)
- Monsanto was fined by France for false advertising after claiming that their Roundup product, the world’s most popular pesticide, was “biodegradable.”
This is just a handful. There have been many more. Obviously these countries have been more stringent in their concept of green washing; they also have more bite to their bark. While the U.S. has kept everything on an internal basis, unknown to consumers, unless they are nerds like me, the UK and France have pulled products off shelves and advertisements off of walls. That is a big financial and good will loss for those companies. It is retroactive, not just a going forward…
So what have we learned?
- The FTC is ramping up enforcement and retooling the guidelines.
- If you are a retailer, vet the products you sell.
- If you are doing business in Europe, BEWARE.
Also in the works are increased SEC regulations. The SEC voted in January to require publicly-traded companies to disclose to investors the potential economic impact of new greenhouse gas regulations. The SEC has previously existing rules about climate change reporting, but they were vague and fairly ignored. The SEC revised interpretations make reference to the fact that the EPA, our Federal Government, and State government are making fast strides to implementing new legislation, as well as international legal structures and norms that are taking place. Therefore the SEC plans to reissue new regulations after public hearings that were held in the spring and will implement tougher and more comprehensive requirements.
Added to this plethora of regulations, states are getting involved to protect their residents. California and Indiana have individually incorporated the Green Guides into their own environmental marketing laws. So producers and retailers alike (especially online retailers) need to be paying attention to state consumer protection and advertising regulations, as well as federal, and foreign if you are that lucky.
Once again, a very wordy blog from my desk…sorry about that. This is exciting stuff though and I hope I was able to break it down and bring out the fun stuff. Bottom line, if you are in a “sustainable” business, no matter what the industry, be prepared to learn your green guides and start eradicating green washing from your system. The Sherriff is on his way and you want to be a step ahead when he gets here.
[i] These actions also violated the Textile Act. You cannot mis-label or mislead consumers about what the “ingredients” are. You have to disclose the type and percentage of fibers.
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