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Saturday, April 22, 2023 is Earth Day. As we celebrate Mother Nature and our planet, many companies are joining in with their marketing showing how environmentally friendly they are.

And it’s good business as many consumers consider how environmentally friendly the product and/or the company is before they buy. The IBM Institute for Business Value said that three out of five consumers claimed half their last purchases consisted of socially responsible or sustainable products and that 49% were willing to pay a premium for such products.

In other situations, being environmentally friendly could reduce costs. Think about the last time you went to a hotel and they had energy saving lights that automatically turned off or they asked that you reuse your towels? All this was to help them reduce energy and cleaning costs.

But in the rush to celebrate all things green, there is a dark side to this marketing.

What is “Greenwashing?”

Have you ever heard of the term “greenwashing?”

Leading up to and on Earth Day, you are probably seeing a lot of companies talk about how “green” or environmentally friendly they are. They want to be seen as helping the environment, from protecting parks to reducing their carbon footprint.

But often these claims are exaggerated by companies. Or as consumers, we cannot verify their claims. This is called greenwashing.

Greenwashing: exaggeration of a company’s environmentally friendly efforts or credentials.

The European Commission did a sweep of corporate websites and found that half of green claims lacked evidence, potentially in breach of EU consumer laws.

The Problem with Greenwashing

You may think that you are avoiding bad publicity by saying you are environmentally friendly, but when that is exposed, your business will suffer serious brand reputation issues.

While you may not see it as much of an issue when a company practices greenwashing, it ultimately erodes consumer trust and brand credibility. And that will lead to reduced sales.

In some cases, particularly when it comes to labeling, there may be medical issues that could lead to serious liability for your company. For example, if you mislabel the textile material that is used and someone is allergic to that product, you could be on the hook for any damages caused by an allergic reaction.

Furthermore, actually failing to be environmentally friendly or following environmental regulations has its own host of issues. Businesses are subject to hefty fines and penalties when they do not abide by federal, state, and local environmental laws and regulations.

Finally, greenwashing itself sets the company back from making true progress that will help protect or improve the environment. We want truly sustainable products and practices in our businesses and our lives.

Bottom line: do the right thing.

Legal Push-back Against Greenwashing

Deceptive and False Advertising

One of the limits on First Amendment Free Speech rights is that when we advertise products, we must do so in a truthful and accurate way. This includes things like being accurate in the labeling, which Kohl’s and Walmart found out in 2022.

The FTC filed lawsuits against both companies for making deceptive claims that certain products were made with bamboo but were actually made with rayon. That led to $2.5 million and $3 million settlements for the two companies to resolve the deceptive advertising claims.

Kohl’s and Walmart are paying millions of dollars under the FTC’s Penalty Offense Authority for mislabeling their rayon products as bamboo. False environmental claims harm both consumers and honest businesses, and companies that greenwash can expect to pay a price.

Director Samuel Levine of the FTC’s Bureau of Consumer Protection

And it’s not just in the United States. Lawsuits have been filed against companies in Australia, the European Union, South Korea, and many more.

Federal Trade Commission Looking Into New Regulations

Earlier this year, the FTC decided to look into how companies market their efforts to be environmentally friendly. The first step was updating the Green Guides for the Use of Environmental Claims, which were last updated in 2012.

The FTC is also considering whether to make new rules to allow for greater fines and penalties for companies that are guilty of greenwashing.

What Your Business Should Be Doing

The bottom line for your business is that you need to be able to back up any claims that your brand or product is eco-friendly. This includes accurate labels for the materials used, receipts for the carbon credits you purchase, and studies that show your greenhouse emissions are actually down.

Your marketing should be as specific as possible as to the environmentally friendly promises – and avoid general, overbroad conclusions or statements.

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