Published on October 21st, 2010 | by Guest Contributor3
What the FTC’s Green Guides Mean for the Market
After 12 years of sitting almost silent as the ecolabels proliferated, early this month the Federal Trade Commission (FTC) released an update to its Guides for the Use of Environmental Marketing Claims (“Green Guides”). The Guides, which were initially issued in 1992 and updated in 1998, provide guidance to businesses about how to make environmental claims that are not misleading. They are the latest in several recent moves the FTC has taken to curb greenwashing.
The FTC has recently filed several complaints against companies whose claims were seen as misleading to a “reasonable consumer.” From warnings to retailers about labeling rayon a “bamboo fabric” to challenging just how biodegradable a company’s paper products are, the FTC is cracking down.
But is it all too little, too late?
In 2008, 99% of the green claims on products at Big Box retailers like Walmart and Target were false or misleading. Although these numbers improved in 2009, the change was miniscule—to 98%. This data, from Terrachoice Environmental Marketing, points to an important trend: market forces are working to bring trustworthy and transparent information to consumers—but it’s happening at a glacial pace. The Guides will help, but only in certain limited ways. They will help snuff out two of the “sins of greenwashing” identified by Terrachoice: the “sin of no proof” (26% of the total) and the “sin of vagueness” (11%). However, the most common sin identified by Terrachoice is the “sin of the hidden tradeoff” (57% of the total), in which a firm crows about one or more of a product’s good points, while failing to point out other areas in which it might fall short. The Guides are unlikely to inhibit this practice, since claims that are narrow and incomplete, but well-documented, will probably pass the FTC’s muster.
To more quickly stamp out greenwashing—which stands to benefit ecopreneurs—all of the stakeholders need to fill specific roles in the months and years ahead:
- Civil society supporting guidelines – although the FTC has opened up the Guides for consumer feedback before they are finalized on December 10, it is more likely to receive impact from consumer products makers. Perhaps more effective in addressing society’s needs will be the Green Products Roundtable, a voluntary non-profit working group organized by the Keystone Center. It will soon release the “Green Purchaser Pledge” to challenge large institutional purchasers to commit to purchase products that abide by the FTC’s guidelines. [Full disclosure: the Erb Institute is a participant in the Green Products Roundtable.]
- Business playing by the rules – The Guides are not laws, merely guidelines. To build consumer trust for the businesses that truly are making environmental improvements, all companies must avoid making general claims and instead focus on narrower claims that can be clearly substantiated.
- FTC policing the market – Part of the reason greenwashing has become so rampant is that previous iterations of the Guides were not enforced. With new ones, and on the heels of filing recent complaints against deceptive company claims, the FTC must hold its ground by aggressively pursuing action against companies who fail to comply
- Third parties creating certified seals –Ecolabels driven by trade associations or for-profit certifiers can undermine the ecolabels sponsored by groups focused on improving the environment. Consumers need a clear and simple signal about how a product stacks up overall. The only way to provide this is through third-party certification that is widely trusted by consumers, like LEED for the building and design industry.
Much more research is still needed to understand exactly how ecolabels, certifications and standards can create measurable environmental benefits. However, the revised Guides signal a turning point in the market for greener products and a call to action for ecopreneurs who truly care about meeting the demands of their customers and the environment alike.
Thomas P. Lyon is Director of the Erb Institute for Global Sustainable Enterprise, University of Michigan.