This post originally published on the BSR blog.

 

The U.S. Federal Trade Commission (FTC) has released its long-awaited draft guidance on environmental marketing. The so-called “Green Guides” tell companies how to prevent misleading customers—and avoid FTC actions against them.

Why now? The FTC says consumers are confused about environmental claims such as “sustainable” or “offset,” which lack consistent rules for usage. In response, the FTC’s proposed guidance does three things:
  1. Requires claims to be substantiated. Companies should communicate on specific issues for which they provide competent and reliable scientific evidence and avoid ambiguous umbrella terms like “green” or “eco-friendly.”
  2. Prescribes action on targeted issues. While the FTC leaves methodology mostly to companies, it advises on a few issues where deception is rife and solutions are particularly obvious. For example, the guides say that if companies generate renewable energy onsite and then sell their environmental attributes separately, they shouldn’t also say that they use that renewable energy themselves. Categories of specific advice include: certifications and seals, degradability, compostability, ozone-safe/ozone-friendly, recyclability, free-of/non-toxic, renewable materials, renewable energy, and carbon offsets. See the FTC’s cheat sheet.
  3. Defines where to tread carefully. The FTC acknowledges that some issues are difficult to provide blanket guidance on. For example, life-cycle assessments and ecolabeling are complex and require context, while the determination of carbon offset quality may be better handled by agencies with more expertise. In cases where the FTC “lacks sufficient information on which to base guidance,” it promises to analyze claims on a case-by-case basis.
What does this direction mean for business? I asked three individuals. Kevin Myette, director of product integrity at outdoor retailer REI, told me: “Guidance on green marketing claims has been extremely loose for years, and as a result, industry and marketers have operated virtually unchecked for too long. The FTC’s action to further define the rules is not a bad thing as they are only asking for the truth.” 

Stanford Graduate School of Business Professor Erica Plambeck was similarly hopeful. She told me that the guidance “will increase incentives for retailers like Walmart to invest in the measurement of environmental performance and to provide detailed information about environmental performance to consumers. Transparency will lead to improvement.”
 
Finally, Dara O’Rourke, founder of the Good Guide—a product-rating initiative—said that more FTC involvement isn’t only good for consumers, but also for business. That’s because “the more there is transparency, the more the leading firms will do well in the marketplace. It’s a win for smart, thoughtful, progressive companies. This is basic ‘Econ 101’.”
 
What to do next: In the near term, leave any suggestions you have for finalizing the Green Guides below (with your name and affiliation) or contact me, and we’ll aggregate and submit your suggestions to the FTC before the comment period closes on December 10.