Greenwashing Update: 2023 Regulatory Priorities & Actions

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Universal Counsel clients are already conscious of the increasing regulatory focus, and changing compliance risk profile, attached to environment and sustainability claims and related misleading and deceptive conduct, known as “greenwashing”. While this issue has particular relevance to our UC F&B food business clients, the regulatory focus on greenwashing extends across all industries in Australia (and is echoed around the world). 

In December 2022, our Chief Counsel, Amelia Edwards, spoke to this topic at the National Food Law Conference. Amelia noted that environment and sustainability claims were top of the ACCC’s priority list at updated in late 2022 and that recent action by both the ACCC and ASIC indicated that tolerance for ignorance or mistakes as to facts was at an all time low, indicating a strong need for businesses to approach claims of this kind with caution and a solid evidentiary base.  

Though we’re still operating on the basis of long-standing guidance (the ACCC’s 2011 Green Marketing Guide and CCNZ’s 2020 Environmental Claims Guidelines), Q1 of 2023 has already proven Amelia’s predictions true, with new actions and priorities updates as detailed below.

ACCC ANNOUNCES 2023 PRIORITIES

In March, the ACCC announced its 2023-24 priorities. Top of the list, literally and figuratively, is “consumer, product safety, fair trading and competition concerns in relation to environmental claims and sustainability”. This prioritisation will influence the allocation of resources across the ACCC’s investigation, enforcement, research, and policy teams. Expect an increase in infringement notices and enforceable undertakings as well as other off-the-record resolutions immediately. While our most recent authority from consumer case law remains the ACCC’s unsuccessful 2018-2020 action against Woolworths for its biodegradable and compostable claims on ‘disposable’ plastic plates, all signs point to a likely uptick in litigation and publicised big-ticket penalties to follow into 2024.

NEW YEAR NEW ASIC ACTION

The ACCC is not the only regulator set to battle misleading sustainability claims. In June 2022, ASIC released Information Sheet 271 on greenwashing in offering sustainability-related products. In October 2022, the Australian Securities & Investment Commission (ASIC) took its first formal action for ‘greenwashing’ against an ASX listed company, Tlou Energy Limited in relation to representations made to market regarding ‘carbon neutrality’, ‘low emissions’, and ‘clean energy’ in the supply of electricity. In February 2023, ASIC commenced civil penalty proceedings in the Federal Court against Mercer Superannuation (Australia) Limited for allegedly making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.

ACCC INTERNET SWEEP

The ACCC’s ‘greenwashing’ internet sweep was conducted between October – November 2022, with the results published on March 2023. The sweep found that 57% of 247 target business websites swept made concerning (and presumed misleading) environmental claims, including:

·       using vague or unclear environmental claims;

·       failing to provide sufficient evidence for these claims;

·       setting environmental goals without clear plans for how these can be achieved; and

·       using third party certifications and symbols in a confusing way.

Cosmetic and personal care, clothing and footwear, and food and beverage were identified as the sectors with the greatest proportion of concerning environmental claims.

RISK IN REVIEW

The ACCC internet sweep is just the latest in the series of regulatory actions targeted to crack down on greenwashing. In September 2022, the ACCC announced a special internal ‘task-force’ focused on sustainability claims and compliance aimed at building the agency’s expertise and informing and facilitating coordinated enforcement activity across all departments (and, we understand, on an inter-agency basis). The escalating attention on greenwashing underscores previous warnings to Australian businesses that they should anticipate - and prepare accordingly for - challenges to the veracity and reasonableness of sustainability and environment​ claims from all quarters. ​

The ACCC expects businesses making sustainability claims to be able to substantiate them. As Deputy Chair Lowe has affirmed that "businesses using broad claims like ‘environmentally friendly’, ‘green’, or ‘sustainable’ are obliged to back up these claims through reliable scientific reports, transparent supply chain information, reputable third-party certification or other forms of evidence." 

However, UC’s Chief Counsel, Amelia Edwards, notes that industry players seeking to avoid being tarred with the ‘greenwashing’ brush face multiple compliance challenges including:

·       fast-evolving consumer expectations/understanding; ​

·       changing and inconsistent industry/government processes, regulations, and guidance; ​and

·       quality of evidence required (scientific testing, certification, control throughout supply chain, etc).

In our experience, most businesses are trying to do the right thing, and say the right things about what they are doing, but we are also seeing a rise in ‘greenwishing’ - what some might call a ‘willful blindness’ to the scope of reasonable interpretation of claims and/or a lack of reliable evidence in the face of the acknowledged attractiveness (and even commercial necessity) of positive environment and sustainability positioning. 

The risk arising from infrastructural instability was exemplified in the late 2022 collapse of the RedCycle soft plastics recycling program, leaving retailers stranded with warehouses packed to the rafters with flammable material not compatible with standard recycling services (which they were later ordered to incinerate for safety reasons) and countless suppliers having inadvertently mislead consumers on-pack about packaging recyclability. 

In November 2022 the ACCC granted an urgent authorisation permitting otherwise potentially anti-competitive collaboration between Coles, Woolworths, and ALDI in identifying viable alternatives to the defunct RedCycle program. On 30 March 2023 this authorisation was extended following the release by the Soft Plastics Taskforce (established by those retailers) of a “Roadmap to Restart” with a trial of recommencement of soft plastics collection via retailers planned for ‘late 2023’. The proposed National Plastics Recycling Scheme is supported by the Australian Food & Grocery Council with funding from key industry partners (see https://www.afgc.org.au/industry-resources/national-plastics-recycling-scheme for more information).

WHERE TO FROM HERE?

In its recent media release regarding a response to the sweep, the ACCC’s Deputy Chair Catriona Lower emphasised that the Commission ‘will take enforcement action where it is appropriate to do so.’ She also noted that the Commission is already investigating several businesses for misleading environmental claims and conducting more targeted assessments into businesses and claims identified through the sweep.

In addition to enforcement action, the Commission promised to conduct a range of education activities related to greenwashing with businesses, including updating economy-wide guidance material, in addition to targeted guidance for specific sectors. 

Our three key watch-outs:

1. Carbon neutrality and offset claims involving carbon credits and third party services (this system is collapsing and untested reliance on third party representations won’t be a defence against M&D conduct claims).
   
   
2. Biodegradable and recyclable claims (the future is too uncertain, preference more certain claims about how materials have been sourced).
   
   
3. Reliance on third party certification (this can be an important arrow in your evidentiary arsenal but over-reliance and implied exaggeration of impact often gets businesses into trouble).

Bonus: Keep an eye on rolling expansions of State-based plastics bans in both food service and retail channels, which will have an increasing impact on packaging materials requirements (and, consequentially, claims) over the next 3 years. See our update here.

Universal Counsel will keep you posted on new guidance and case law as it emerges but it is clear that environmental claims will remain a regulatory ‘grey area’, polluted with confusion and misinformation, for some time to come. Our legal and compliance experts are help businesses across FMCG and other key industries every day to successfully navigate this space in a practical and commercial way. 

How we can make your life easier:

1. Claims auditing and matrix development, including evidence auditing and advisory services
   
   
2. Product labeling and collateral compliance reviews
   
   
3. Regulatory relationship management, investigations support, and dispute resolution
   
   
4. Environment and sustainability policy development, auditing, and operations management consultation  

Reach out to us today to access tools and solutions tailored to your business. We’re always on call - always in your corner.

contact@universalcounsel.com.au

#UCthedifference 

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