Commentary on the FTC’s Green Marketing Guidelines: Exceeding and Defining Industry Standards

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FTC Green Marketing GuidelinesExceeding and defining industry standards – or even business standards in general – is one way that forward thinking companies will leverage their efforts from the existing guidelines and do more. Doing so will establish that they are not ‘toeing the line’ but rather ‘raising the bar’.

by Nikos Avlonas, President & Managing Director, Centre for Sustainability & Excellence in Europe and John Friedman, Co-Founder, Sustainable Business Network of Washington.

Green Marketing is the marketing of products that are presumed to be environmentally safe or friendly. Thus green marketing must take into consideration a broad range of activities, including product modification, changes to the production process, packaging changes, as well as modifying advertising according to American Marketing Association.

Consumers worldwide are increasingly admitting that their behavior has changed in the last few years to benefit the environment mainly from their purchasing decisions. Therefore, stakeholders’ purchasing decisions for products worldwide are been affected by green marketing messages. However, organizations should not get too comfortable with this trend in purchasing habits.

Statistically, a consumer will spend on average 45 sec reading a product label before making a buy-not buy decision! They are not passive buyers, but rather information seekers and eager to align organizational claims on products with their expectations, knowledge, and perceptions of value for money. Their buying decisions extend beyond their encounters with green products to include access to information regarding environmental claims of the product from trustworthy sources apart from it producer in a timely manner. The breakdown of traditional media channels to all-inclusive, rapid, real-time, divergent commentaries and news releases also plays a key role in forming opinions on the credibility of these claims.

Materiality and Sustainability
Organizations need to ensure the materiality of their claims. Materiality refers to constituents that are of high concern to stakeholders and of high strategic relevance to organizations.

Materiality is a very important part of a comprehensive Sustainability Strategy including Green Marketing. Overstatement of environmental attributes is a very common Marketing behavior leading to green washing. An environmental marketing claim should not be presented in a manner that overstates an environmental attribute or benefit, expressively or by implication. Marketers should avoid implications of significant environmental benefits if the benefits are in fact negligible. For example, if a package is labeled “50% more recycled content than before” based on the increase in recycled content of its packaging from 2 percent recycled material to 3 percent recycled material; the claim, while technically accurate, it likely conveys the false impression that the advertiser has significantly increased the use of recycled material.

A Comprehensive Sustainability Strategy is the very first step organizations should take in order to design and communicate that that they “Walk the Talk”.

There are many organizations marketing their Green Products without having applied fundamental Sustainability Practices in their operations, which increases the risk of being accused as green washers. How Sustainability is embedded within an organization influences the degree to which it is perceived as a good corporate citizen or green business.

Materiality should be based on international frameworks, such as the GRI’s G3 guidelines, and it could be implemented successfully through corporate Sustainability Assessments by Sustainability Experts.

In the United States, the Federal Trade Commission (FTC), the government body that regulates and oversees marketing and advertising, has established general principles that contain specific guidance applicable to certain environmental marketing claims.

One of the questions that are frequently raised about ‘green’ products and services is whether or not there is a receptive public that justifies companies modifying their processes and procedures to capture what may be a small niche or transitional market. The very fact that the United States Federal Trade Commission developed and released (for public comment) a set of new proposed green marketing guidelines provides an important affirmation that the government of the largest economy in the world believes in the long-term interest and importance of environmental claims in promoting goods and services. The fact that green marketing was seen as important enough to merit increased attention indicates that the environmental impacts associated with goods and services are a long term prospect.

That the FTC has asked for public comment also indicates that they are serious about making sure that the guidelines help consumers to make informed choices – and that they want to make sure that stakeholders have an opportunity to have input into the process. An open, public process is critical to have a program with both real and perceived value.

Purpose and Scope of the Guidelines

It would be difficult to summarize the guidelines in their entirety, but it is important to note some clear themes that permeate throughout. In general the guidelines focus on the importance not only for accuracy but also the need for clarity.

Accuracy
A recurring phrase that appears repeatedly and throughout the document is the need for claims to be based on “competent and reliable scientific evidence.” This is defined as to include “tests, analyses, research, or studies that have been conducted and evaluated in an objective manner by qualified persona and are generally accepted in the profession to yield accurate and reliable results. Such evidence should be sufficient in quality and quantity based on standards generally accepted in the relevant scientific fields, when consider in light of the entire body of relevant and reliable scientific evidence, to substantiate that each of the marketing claims is true.”

This should provide a great deal of comfort for those who worry about the possibility of wasting time and effort focusing on overblown or exaggerated environmental concerns. Clearly the FTC is putting its weight behind the need for scientific consensus about what is being addressed. Hand in hand with this is the natural extension of this requirement; the need for robust and accurate measurement of environmental impacts of the products themselves, all along the supply chain from their sourcing, manufacturing, packaging, distribution through to their use and ultimate disposal.

The guidelines take issue with, and offer very little tolerance for deliberate ‘green washing’ including not only misrepresentation but also the omission of salient facts. Stating that doing so is ‘deceptive if it is likely to mislead consumers acting reasonably’ the guidelines clearly are looking at ensuring disclosure as well as offering guidance for claims.

Clarity
Using words like ‘reasonableness’, the guidelines seek to establish the basis for a ‘reasonable consumer’ standard. They make a credible attempt to cover all the bases by which consumers can be influenced and/or make decisions. The guidance covers “any environmental claims in labeling, advertising, promotional materials, and all other forms of marketing in any medium, whether asserted directly or by implication, through words, symbols, logos, depictions, product names or any other means.”

Marketers will be held to a powerful standard; they “must ensure that all reasonable interpretations of their claims are truthful, not misleading and support by a reasonable basis before they make the claims.”

In some cases the guidance is very specific; for a product to be defined as recyclable, for example, the product not only must be recyclable, the infrastructure and means to recycle the product or packaging must be in place for 60 percent or more of the consumers within the markets where the products are sold.

Another area the guidelines cover is production. If the capture and re-introduction of excess materials is part of the standard production process (I.e. when scraps are routinely re-introduced into the production process) the product cannot take credit for being made with, or including, recycled materials.

The idea here is for those that distinguish themselves by going beyond the industry standard to be the only products that are able to gain the benefit from making the appropriate environmental claims.

The guidelines also seek to define the ‘rules of the game’ when it comes to packaging, marketing and advertising. Just as the government put an end to the practice of hiding clear glass balls in a bowl to give the illusion that a soup contained more meat and vegetables (by keeping them near the surface) in photographs and television commercials, the new guidelines set a framework for where and how products are positioned and even the use of the familiar triangle three-arrow recycle symbol – regulating that it be placed on the bottom on containers rather than near the name of the product when the container is what can be recycled rather than the product.

Redefining Leadership
What is clear is that the new FTC draft guidelines raise the bar in terms of expectations. As a result, companies may find that their current practices – even those that are industry leading – only go as far as to conform to the new guidelines, thereby setting a new standard. Leading companies may find that they must either extend their efforts or be willing to accept ceding their leadership position. Consumers may not look favorably on companies that were once seen as leaders when those same enterprises now find themselves engaging in behavior that meets the guidelines – and suddenly their exemplary efforts now are commonplace and common practice.

A recent study showed that physical measurements of carbon in the atmosphere are higher than they should be if all the environmental claims from all companies were added together. Clearly there is some inaccuracy in counting. The FTC guidelines seek to prevent double counting, by prohibiting companies from claiming and sharing environmental results. For example, having solar panels on your roof allows you to claim the portion of your power generated, but not if you sell the certificates. In that case, you have also sold the rights to characterize your power use as renewable. And if you have solar panels visible on your facility, unless 100 percent of the power consumed is generated thus, the company cannot claim ‘made with solar power’ as this, while true, also implies 100 percent of the power used is from this source. Instead the company must determine the proportion and is limited to making that assertion.

Truly leading companies will develop their own reporting that is more robust than the standards, perhaps using their framework and intent to guide their own actions and messages. A terrific example is the company that decided to apply safety standards not only to its own employees – as was required – but to all contractor and subcontractors working on its job sites. The immediate result was an accident rate that seemed to ‘spike’ upwards as they began counting all accidents and injuries, not just those from full time employees who earned a paycheck with their company name on it. In response to the immediate questioning of what had suddenly gone wrong, senior management was in the enviable position of pointing out that the accident rate was still the same for full time employees but that what was wrong was, in fact, an industry standard that did not value all people equally. This set a new standard and bar, above regulatory requirements but, by using the same measurement and metrics, the company was faithful to the regulations.

Conclusion
Exceeding and defining industry standards – or even business standards in general – is one way that forward thinking companies will leverage their efforts from the existing guidelines and do more. Doing so will establish that they are not ‘toeing the line’ but rather ‘raising the bar’. This can also help serve as a preventive (there is no point regulating a problem that does not exist) and help reduce costs. It also can serve as a marker for the company culture, facilitating human resources efforts to recruit and retain top talent. By reducing risks associated not only with potential environmental damage but also associated with defending against complaints due to false marketing claims, companies that engage in proactive efforts also reduce costs due to potential fines for either.

ABOUT THE AUTHORS

Nikos Avlonas
Nikos Avlonas is one of the founders and Managing Director of the Centre for Sustainability & Excellence – CSE (a global Think Tank and Sustainable Development Solutions Advisory Network based in Athens with offices in Chicago, Brussels and Dubai). Nikos is specialized in Sustainability, Corporate Social Responsibility & Governance, Business Ethics, Change and Performance Management. He has carried out numerous projects in leading organizations including Fortune Global 500 Companies   BP plc, Lloyds TSB (UK), Dubai Financial Center, TECOM, Dell Computers, Mc Cain, TNT, DHL, Lafarge, Eurobank EFG, Deutsche Post, and many others including the European Investment Bank.

He has extensive international experience in executive training & coaching  (in more than 20 countries), having taught over 2000 managers in public & private sector organizations /foundations including EFQM (Brussels), Dubai Government, BP, Coca –Cola, Mobilstar, Rolls Royce, Total, Deutsche Post, Pioneer Europe, Swiss Institute for applied Sciences, International Airport, DELL, Tasty Foods, Hellenic Bank Association, Bank of Valetta, Lloyds TSB, British American Tobacco, Cosmote, Dubai Airport, Volvo Group , Bosh Turkey, Deloitte &Touch, EDF.

John Friedman

John Friedman has more than 20 years’ experience in internal and external communications and a decade in the area of corporate responsibility and sustainability. His background includes developing and implementing effective and award-winning programs that maximize stakeholder engagement, community relations, organizational development, change management, and strategic philanthropy.  John has helped companies large and small to integrate their environmental, social and economic aspirations into their cultures and business models.

A frequent presenter and contributor on issues relating to corporate sustainability as a business strategy, John’s insights on sustainability, strategy and current events are a regular and popular feature on Sustainable Life Media. John authored “The New PR” outlining how companies must modify the way they communicate to meet stakeholders’ changing expectations and has provided chapters several chapters appearing in PR News’ “Best Practices in Corporate Social Responsibility and Green PR.” He is also co-founder and serves on the board of directors for the Sustainable Business Network of Washington (SB NOW), most recently as board chair (2008-2009).

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