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Over the past five years, products making environmental, social and governance (ESG) claims have outpaced those that do not, according to a joint McKinsey and NielsenIQ study. ESG products now account for nearly half of all retail sales in examined categories.
Companies that value sustainability also want to deepen brand loyalty with consumers who prioritize purchasing products that have a reduced impact on the environment. Thus, misleading claims about environmental benefits, aka greenwashing, pose a substantial risk to gaining traction with consumers who put their trust in such claims. Advertisers run reputational risks by making misleading environmental marketing claims, as well as substantial regulatory and litigation risks.
As the Federal Trade Commission gears up for its once-a-decade update to the Green Guides, scheduled for release in 2024, advertisers should be paying attention. Updated Green Guides should provide marketers with the tools needed to navigate the environmental marketing landscape with confidence, ensure they maintain consumer trust and comply with up-to-date regulatory standards in an era where such claims significantly shape consumer purchasing decisions.
The BBB National Programs’ National Advertising Division (NAD)—the independent regulator monitoring for truth in advertising—has referenced and relied upon the FTC’s Green Guides in more than 40 cases spanning diverse product categories, filling gaps and applying the Green Guides to claims we see in marketing today that might not be specifically addressed in the decade-old guidance.
Consumers benefit when advertisers and marketers lean into this guidance when crafting and substantiating their claims because truthful environmental advertising helps consumers better understand the impacts of the products they purchase. Companies large and small also benefit when advertising claim substantiation is held to common standards because it levels the playing field, allowing for fair competition.
Adherence to standards set in the FTC’s guidance builds consumer trust when “sustainable” or “green” marketing claims are used consistently whether a person is buying toothpaste, detergent, soda or even fuel for their cars. Consistent standards similarly protect against litigation risk, as consumers are not misled by green claims that are used consistently across industries.
Approach green marketing with these guardrails in mind to help build consumer trust in green claims.
Specific claims and clear definitions
“Eco-friendly,” “green,” “sustainable.” Marketers may think these general terms are so broad they don’t require substantiation, or that initial efforts to improve sustainability will back up such claims. However, the Green Guides make clear that the opposite is true: Claims that are subject to multiple interpretations require that the advertiser substantiate all reasonable takeaways.
Take a popular term like “clean beauty.” What does it mean? For most consumers, it is likely seen as vague and subjective. It could mean that no toxic ingredients are used, that the product is vegan or that the brand does not test the product on animals. Or is it referring to labor practices? Consumers need clear and precise definitions in advertising and on product packaging to identify products that align with their values and preferences to make informed choices.
Rather than using vague, broad or easily misunderstood terms, highly specific claims provide clear and tangible information about a product’s environmental benefits. Specific claims also offer consumers a precise understanding of what makes that product environmentally friendly. By stating that a product “reduces water consumption by 50%,” the public can more easily grasp the product’s impact on the environment. Additionally, specific claims are easier to verify, and businesses can provide evidence and data to support their specific claims.
Remember, a brand is responsible for all reasonable takeaways of a vague claim, making them particularly risky. That responsibility extends to influencer marketing, endorsements and PR placements as well.
Aspirational claims
Addressing aspirational claims, especially those like “net zero” that go beyond current Green Guide guidance, requires careful consideration. Businesses must have clear and achievable objectives for reaching such goals before advertising them, and set specific targets and timelines together with a plan to reach those milestones. Additionally, these objectives should be realistic and backed by sufficient investment to achieve the target, with robust monitoring to track progress.
Recently, the National Advertising Review Board, NAD’s appellate body, recommended that a major meat producer discontinue certain claims related to its goal of achieving net zero emissions by 2040 because the company was still in the exploratory stage of this effort without a concrete plan in place to achieve the goal.
Transparent partnerships
In environmental advertising, transparency about partnerships with environmental groups can be beneficial. Instead of merely mentioning these partnerships, businesses should limit their advertising to the tangible benefits they offer. This transparency not only builds trust but also helps consumers understand the genuine commitment to sustainability. Here, it’s important to position the marketing in such a way that the consumer is not misled as to the extent of the benefits of the partnership.
Recently, NAD assessed claims made by a major beverage corporation regarding its recycling program. While certain claims were supported, others regarding the company’s participation with third-party partners overstated the actual work being done. If the message is intended to convey future plans or goals rather than current work, it must be clearly communicated.
Thriving in the evolving landscape
The NAD’s advertising self-regulation provides companies with a way to uphold standards for advertising claims and keep competitors accountable for the accuracy of their claims, contributing to the overall integrity of green marketing practices. Advertising that may be misleading or deceptive harms both consumers and fair competition.
Fostering a fair and transparent marketplace maintains the value that green claims provide to brands and supports their investments in sustainability initiatives. More broadly, however, it builds progress on lofty goals like reducing carbon emissions across industries.
The FTC’s upcoming Green Guides update reminds businesses that environmental marketing strategies should align with updated guidance. By prioritizing accuracy and transparency, companies can build consumer trust, avoid greenwashing risks, potential litigation and penalties, and, hopefully, lessen their impact on the planet.
These updates aren’t just about compliance; they’re an opportunity for businesses to demonstrate their commitment to sustainability, build value for their investments and contribute to a more trustworthy marketplace and a more sustainable future for all.
