Page 1 of 6 GREEN GOES GLOBAL GREEN MARKETING CLAIMS CAN RESONATE MORE BROADLY THAN ALMOST ANY OTHER TYPE OF CLAIM

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1 Page 1 of 6 GREEN GOES GLOBAL By Ronald R. Urbach and Matthew E. Smith* GREEN MARKETING CLAIMS CAN RESONATE MORE BROADLY THAN ALMOST ANY OTHER TYPE OF CLAIM While to anyone following the news it may seem as if few commonalities exist amongst the various people of the world today, for businesses looking to sell products and services on a global scale, the opposite is true. As disparate local markets steadily converge into global ones, many brands see a world that is shrinking and a target audience that transcends national boundaries. Effective advertising increasingly must have a more universal appeal, for which there may be nothing that beats the simple truth that we all call the same planet home. Issues affecting our environment touch each of us, and that means that marketing claims about a product or company s impact on our natural environment so called, green marketing claims can resonate more broadly than almost any other type of claim. At the same time, consumers across the globe are realizing that what they purchase can affect the environment. Recent surveys have shown that a majority of consumers in the largest world economies are not only concerned with the welfare of the environment, but also care about the efforts brands are making to try to minimize their impact. And importantly, these consumers have also shown a willingness to actually change their purchasing behavior if they believe it will result in some type of environmental benefit. 1 WORLDWIDE USE OF GREEN MARKETING CLAIMS IS GROWING RAPIDLY Given these realities, it should come as no surprise that the worldwide use of green marketing claims grew by a multiple of about 15 between 2004 and Hopefully, this is a positive development, since an increase in sales of eco-friendly products and services can both help address certain environmental issues as well as increase revenues for those trying to do the right thing. Yet without adequate controls in place to ensure that claims of environmental benefit are true, green marketing runs the risk of becoming nothing more than an ineffective catchphrase. As consumers grow increasingly sensitive to green-washing, the belief that a brand is artificially inflating its actual environmental performance and investments, the bad behavior of just a few advertisers can have devastating consequences for the rest. Page 3 *Ronald R. Urbach is the Chairman of Davis & Gilbert LLP. He is also cochair of the Advertising, Marketing & Promotions Practice Group. He can be reached at or rurbach@dglaw.com. Matthew E. Smith is an associate in the Advertising, Marketing & Promotions. He can be reached at or msmith@dglaw.com.

2 ADVERTISERS SHOULD FIRST CONSIDER ACCURACY AND SUPPORT OF THEIR CLAIMS Page 2 of 6 For green marketing to be truly lasting and effective on a worldwide basis, consumers need to believe that the advertiser is actually doing what it says and that the environmental benefit advertised is real and material. For advertisers, this means not jumping on the green bandwagon without first considering the accuracy and support of claims, and without understanding how these claims may be interpreted, including in the context in which they are made, a critical requirement made more difficult when having to consider the perspectives of a global audience. And for regulators, it means staying vigilant and acting when necessary to prevent green-washing and other deceptive green marketing practices from becoming, or being perceived as being, prevalent in their countries. FTC ACTIONS, STATE ATTORNEY GENERAL INVESTIGATIONS, PRIVATE LITIGATIONS, INDUSTRY SELF-REGULATORY ACTIONS In the U.S., the FTC has used the period following the release of its revised Green Guides 3 to send a strong message to advertisers that it takes environmental marketing claims seriously. In just over a year and a half, the FTC has brought, and settled, enforcement actions against over 15 different companies for making unsupported environmental benefit claims, including claims that products destined for a landfill would degrade, and that products destined for your home were free of volatile compounds. 4 In addition, green claims were the focus of many state attorney general investigations, private litigations, and industry self-regulatory actions over the last year. RECENT SURVEY OF ADVERTISING ATTORNEYS IN 43 COUNTRIES CONDUCTED BY GALA But does stringent enforcement of green marketing practices exist outside of the U.S.? The answer is that it does. A recent survey of advertising attorneys in 43 countries conducted by the Global Advertising Lawyers Alliance (GALA), revealed that green advertising claims and issues are on the minds of regulators across the globe. The survey - Green Marketing: A Global Legal Perspective - contains unique and interesting insights about the regulatory climate for green marketing in countries from North and South America, Europe, Asia, and Africa, and ranging in terms of market size and GDP. Page 4 The first interesting revelation from the GALA survey may simply be that so many countries had so much to say on the issue of green marketing, and that so many governments across the world take this issue seriously. Out of the 43 countries surveyed, 35 reported having some form of environmental marketing regulations or formal guidance in place, including mandates in 34

3 Page 3 of 6 countries that advertising or labels for certain types of products such as motor vehicles, household appliances, and consumer electronics must contain some form of environmental disclosure in advertising or on product labels. And nearly half of the countries surveyed reported that green claims are currently one of the top regulatory concerns. So what is on the minds of these global regulators? Apparently many of the same concerns as those of U.S. regulators. The GALA survey shows that one of the fundamental considerations for marketers when thinking about making green marketing claims anywhere in the world is ensuring that their claim does not overstate, directly or by implication, an environmental attribute or benefit, or otherwise misrepresent the actual environmental benefit achieved by the claim. In other words, according to the GALA survey, environmental benefit claims should always be qualified properly so as to limit the claim to a specific and verifiable benefit. Of course, simply adding qualifications may not always be enough in every country. For example, for a product to be able to make any type of green claim in Norway, even an expressly qualified claim, the product must be among the top one-third of all equivalent products on the market in terms of its environmental impact. Another interesting discovery from the GALA survey is that green marketing everywhere appears to suffer from a lack of consensus as to what certain commonly used terminology actually means. As we all know, in the U.S., even the term green marketing has been hard to define. Fortunately, GALA ensured that would not be the case for readers of its survey by including a definition of green claim, which is a representation, in any media or on packaging, of environmental benefit or harm resulting from a product or organization s activities. Interestingly, the GALA definition includes claims of both environmental benefit and harm, which could mean that ads for products ranging from coal to airplanes may be making implied (and unintended) green claims. Page 5 The GALA survey shows that many countries are confronted with a similar problem that confronted the FTC when it was updating its green guides, namely that many general environmental benefit claims used in advertising are likely not properly understood by consumers. For example, from a consumer perception study it commissioned, the FTC learned that many U.S. consumers understood unqualified general green clams such as ecofriendly to mean that the product or service advertised had no negative impact whatsoever on the environment. Because few, if any, advertisers could substantiate that consumer takeaway, the FTC issued a de facto ban on the use of unqualified environmental benefit claims in U.S. directed advertising. Similarly, the green claims that draw the most attention on a global basis are also ones easily capable of being misinterpreted by consumers, such as environmentally friendly, green, and sustainable. (Notably, in the U.S. the term sustainable apparently causes such a broad

4 Page 4 of 6 range of consumer confusion that the FTC could not settle on how to provide guidance on use of the term in its most recent Green Guides.) In fact, an important takeaway from the GALA survey is that there is a widespread need on a global basis to move consumers towards a more general understanding that green marketing speaks to attempts to minimize harm rather than eliminate it altogether. Until then marketers would be wise to keep their green claims simple, specific, and precise. Finally, maybe the most surprising revelation in the GALA survey is that so many regulators seem ready and willing to resort to legal actions to ensure that environmental marketing in their country are not misleading or deceptive to consumers. According to GALA, hundreds of cases involving environmental marketing have been filed over the past few years across the countries it surveyed. There may not be a more telltale indication of how important green marketing has become worldwide than the fact that legal systems are actively taking up the issue. FOUR EXAMPLES OF RECENT REGULATORY ACTION INCLUDED IN GALA SURVEY Four examples of recent regulatory action included in the GALA survey really stand out, and also help to highlight the reality that while the environment is important to us all, people in different regions are motivated by different environmental concerns and may respond to marketing messages differently. Denmark In Denmark, advertising for a domestic air carrier which made a claim about the environmental benefit from its flights as compared to other air travel, was challenged by the Danish Consumer Ombudsman as being misleading because it omitted information about how it compared environmentally against other forms of transportation. The advertising, which was directed to environmentally conscious travelers, focused on the competitiveness of the advertiser s propeller-aircraft against other forms of transportation for travelers of a certain domestic route. The environmental angle was that propeller-aircraft emitted less carbon dioxide than jet airplanes travelling between the same cities, which were literally true. However regulators deemed the ad to be misleading because of what it did not say. In particular the ad failed to disclose that trains travelling the same route emitted less carbon than the propeller plane for the same trip. Page 6 Finland In Finland, a candy company s ads claimed that for every three bags of candy purchased, the company would plant one tree. The ad was challenged as being misleading, in part because regulators felt the tree planting promise

5 Page 5 of 6 held a special appeal for consumers. Regulators had discovered that the advertiser had in truth committed in advance to plant a certain number of trees, irrespective of how many bags of candy it sold, and charged that the advertiser took advantage of Finnish consumers concern for the environment by falsely implying that through their purchases they could influence the number of trees planted. A court agreed, finding the advertising to be illegal since the misleading claim regarding the ability of consumers to affect the number of trees planted was of the sort of claim that is likely to influence the transactional decision of the consumer. Italy In Italy, a bottled water company had trademarked the phrase Zero Impact, and used it in various advertising, along with environmental imagery and the phrase Respect Nature. The company qualified Zero Impact by stating that the company s carbon offset purchases rendered its bottles a Zero Impact product by compensating for all CO2 emissions in the life cycle of each bottle, and claimed that its actions were in strict compliance with European Union regulations. The challenge, however, focused on whether the qualifications used were capable of remedying the inherent consumer confusion from a term such as Zero Impact, which most consumers would reasonably understand to mean a total lack of environment impact. The Italian Authority for Market and Fair Competition found that the qualifications did not cure the misleading nature of zero impact, and as result, the advertising and marketing materials which carried the claim which was basically all product marketing since the company had trademarked the phrase were misleading and therefore illegal. Russia Finally, in the what were you thinking category, a Russian vodka company advertised that its vodka was distilled in a pristine and remote town in located in a part of Siberia that was free of any heavy industry for 300 kilometers in all directions. However an investigation by the Russian Consumer Union found that contrary to the advertiser s claims, there were actually more than 40 manufacturing plants (including ones producing toxic chemicals and metals) within the 300km zone, as well as industrial plants located in the very same town where the vodka was distilled! Page 7 GALA SURVEY PROVIDES VERY USEFUL LESSONS FOR ANYONE INTERESTED IN ENVIRONMENTAL MARKETING PRACTICES The GALA survey is full of descriptions of many additional interesting cases, and for anyone interested in environmental marketing practices, the survey should provide some very useful lessons and watch outs for critical international markets. But be forewarned that the GALA survey holds no

6 Page 6 of 6 major surprises when it comes to how to engage in green marketing. It makes clear that advertisers abroad, much like in the U.S., need to ensure that their claims are not misleading or deceptive to consumers or other businesses, and not in violation of national, state, provincial and/or local laws. In short, when it comes to environmental marketing, there are no shortcuts. Yet, while the regulatory landscape for making environmental claims can be complex, some universal truths do exist: (1) green marketing should clearly state the specific and precise benefits and not use vague language or make sweeping generalizations, (2) it should not overstate environmental benefits or create unrealistic consumer expectations, and (3) it should always use meaningful and easily noticeable and understandable qualifying language whenever necessary to properly explain an expressly stated or implied environmental benefit advertising claim. By heeding these basic principles, advertisers may find that their global future is looking very green indeed. LAWYER's REFERENCE SERVICE Green Marketing: A Global Legal Perspective -.survey of advertising attorneys in 43 countries conducted by the Global Advertising Lawyers Alliance (GALA). See also: Green Marketing: A Global Legal Perspective, The Global Advertising Lawyers Alliance, Press Release dated December 23, International Survey Shows Stepped-Up Regulation of `Green Marketing Claims, Advertising Compliance Service, Tab #27, Green Advertising, Article #31. Footnotes ed&utm_campaign=feed%3a+ipsosnewsandpollsall+%28ipsos+news+a nd+polls+-+all%29&utm_content=netvibes 2. Page # # #