US: FTC moves may signal start of 'greenwashing' crackdown

Publisher Name: 
Greenwire

The Federal Trade Commission is expected to crack down on
"greenwashing" when it updates its environmental marketing guidelines
for the first time since 1998.

The agency's Guides for the
Use of Environmental Marketing Claims, or Green Guides, define terms
such as "recyclable" and "biodegradable" and explain how businesses
should back up environmental assertions. Though FTC cannot force
businesses to adopt greener practices, Section 5 of the FTC Act
authorizes the agency to intervene when businesses are misrepresenting
their practices to clients -- in other words, turning greenwashing into
fraud.

FTC did not use those guidelines to file any
complaints regarding environmental claims during the administration of
President George W. Bush, but it has filed seven since Obama took
office.

David Vladeck, director of FTC's Bureau of Consumer
Protection, told the Senate Subcommittee on Consumer Protection last
summer that tougher enforcement and environmental guidelines are a
major part of the commission's agenda.

"In response to the
explosion of green marketing in recent years, the agency initiated a
review of its Green Guides to ensure that they are responsive to
today's marketplace," Vladeck said in his written testimony. The
commission is looking into topics beyond the scope of the existing
guides, he noted, "because many currently used green claims, such as
'sustainable' and 'carbon neutral,' were not common when the Commission
last revised the Guides."

Industry and environmental groups
are also eager to find out whether the revised Green Guides will weigh
in on the largely unregulated markets for carbon offsets, renewable
energy credits and environmental certifications, all of which were
addressed during public workshops in 2008. Regulatory experts say
stricter marketing guidelines would fit into the Obama administration's
efforts to expand environmental oversight by the executive branch.

"If
they can't get climate change regulations passed through Congress, the
administration is going to do whatever it can to keep moving the ball
forward," said Hamilton Hackney, an environmental attorney and
shareholder at the Boston office of Greenberg Traurig LLP. "Sometimes,
these 'collateral regulations' can have almost as much of an impact."

Most
industry groups are closely following U.S. EPA's efforts to regulate
greenhouse gas emissions, Hackney said, but even agencies historically
uninvolved with environmental issues have started assuming
environmental oversight responsibilities. The Securities and Exchange
Commission, for instance, voted last month to require publicly traded
companies to disclose to investors the potential economic impact of new
greenhouse gas regulations (E&ENews PM, Jan. 27).

Environmental
groups are excited that FTC is examining the issue of greenwashing,
though they are not sure what to expect. The agency has remained
tight-lipped on details of the revisions, said Claudette Juska, a
research specialist at Greenpeace. "It's been a little bit hard to see
into the process," said Juska, who submitted a comment during the
public review process in 2008.

FTC's information-gathering
process was completed in the fall when the results of a consumer
perception study arrived, said James Kohm, director of the commission's
enforcement division, in an interview. The commission has begun
deliberating on revisions, he said, but no timeline has been announced
for their release or implementation.

Fighting greenwash

FTC takes action on relatively few
environmental cases. Around 45 complaints have been filed under the
Green Guides since their initial implementation in 1992, according to
commission data.

While the complaints might only scratch the
surface of greenwashing, Juska said, they serve as a deterrent. She
said Greenpeace would like to see the Green Guides become stricter, but
FTC could achieve the same goal by cracking down on greenwashing using
the standards that are already in place.

"The Green Guides themselves serve as great guidelines," Juska said. "But if they're not being enforced, they're not useful."

As
part of its environmental enforcement campaign last year, FTC went
after Kmart Corp., which ultimately agreed to change the marketing for
a line of house-brand paper plates. Kmart had advertised the plates as
biodegradable, which FTC deemed misleading because the plates would not
usually decompose in municipal solid waste facilities, where about 90
percent of garbage is disposed.

The commission filed two
other complaints over the biodegradability of products, as well as four
against companies using environmental claims in the marketing of bamboo
clothing. In all four of those cases, FTC argued that because the
clothing material had been made from bamboo into rayon using harsh
chemicals, consumers were being misled by claims that the use of bamboo
was environmentally friendly.

Stricter guidelines could
signal an intention to step up enforcement, but revisions would also
have an impact beyond the agency's own enforcement mechanisms,
environmental attorneys say.

California state law has
incorporated the Green Guides into its own environmental marketing
laws, as has Indiana. The statutes defer to the Green Guides whenever
certain environmental marketing claims are made, opening up violators
of the Green Guides to criminal penalties and civil suits rather than
just administrative action by FTC.

In emerging industries,
where there is little legal precedent, courts would likely look to
federal guidelines even if they lack the weight of law, said Brad
Mondschein, an alternative energy and green development attorney at
Hartford, Conn.-based Pullman & Comley LLC.

"The Green
Guides would become extremely persuasive to a court, especially in the
early cases, because the courts would otherwise have very little
guidance to go on," said Mondschein, who has written about the
guidelines. "While they certainly won't be definitive, I would think
they probably hold a lot of sway."

New markets

FTC's consideration of guidelines for the
marketing of renewable energy credits and carbon offsets has prompted
particular debate, most of it hinging on the lack of a regulatory
framework to ensure that the purchase of offsets actually reflects
greenhouse gas reductions. Various studies have suggested a significant
fraction of offsets are linked to projects that were already close to
completion or that would have been completed regardless.

Terrapass
Inc., a San Francisco-based carbon offset provider, submitted a letter
to FTC during the comment process saying the integrity of the market
depends on the interpretation of this concept, typically referred to as
"additionality."

"If the offsetting reductions would have
happened without a carbon market, the market as a whole will fail to
achieve its environmental objective," the letter said.

Rep.
Edward Markey (D-Mass.) specifically cited the carbon offset market as
an area to examine when he asked FTC to begin review of the Green
Guides in 2007, and the attorneys general of nine states submitted a
letter during the review process urging the government to intervene in
that market.

"The lack of common standards and definitions,
along with the intangible nature of carbon offsets, makes it difficult
if not impossible for consumers to verify that they are receiving what
they paid for and creates a significant potential for deceptive
claims," said the letter, sent by the office of Vermont Attorney
General William Sorrell (D). "We need to ensure, by law, that carbon
offsets are real, additional, verifiable, enforceable, and accompanied
by some system that will permit average consumers to make informed
decisions as to whether and what to buy," the letter went on to say.

Some
industry groups asked FTC to avoid weighing in on the industry, saying
oversight would quash the emerging market and the commission lacked the
authority to impose new regulatory standards or testing protocols.

The
Edison Electric Institute, which represents publicly held utilities,
submitted a letter saying any attempt by FTC to define additionality
would lead the commission into a "conceptual thicket."

"Any
further encumbrance on qualifying offsets projects based on
additionality would create confusion and be a barrier to GHG
reductions, avoidances and sequestration from a policy standpoint," the
group wrote.

Though some offset and renewable energy credit
providers might currently provide a greater environmental benefit than
others, FTC would have a hard time judging marketing practices as
misleading, Hackney said.

"Most people at the consumer level
are buying them as a feel-good sort of thing, which is a lot different
from buying a $2,000 refrigerator on the assumption that you're going
to save $500 over its lifetime through energy efficiency," Hackney said.

Kohm
said FTC is careful not to issue guidelines that would stifle the
development of an industry, such as the market for carbon offsets.

"The
commission traditionally has been wary of getting involved in new
technologies where the science isn't clear and where the market is
developing," Kohm said. On the other hand, he added, "there's outright
fraud, and the commission would always be concerned by that."

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