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Government Crackdown on Greenwashing | Olvera Advisors

Why is the ACCC targeting greenwashing and how does it impact your brand?

by The AFC

28 July 2022

Authored by Olvera Advisors
 

The growing consumer interest in sustainable brands has driven more and more fashion brands to promote their sustainability initiatives and efforts. But now with false claims and greenwashing becoming more prevalent, the Australian Competition and Consumer Commission (ACCC) is taking a tougher approach to false claims. Why is the ACCC targeting greenwashing and how does it impact your brand?
 

Although falling slightly behind from the rest of the world in its release of the 2022/23 compliance and enforcement report, the ACCC has announced that greenwashing is becoming its new priority. This includes targeting greenwasher's in "problem sectors" proactively, rather than waiting for complaints to come through. These steps have been taken by the ACCC to protect consumers as many businesses seek to take advantage of the public’s growing environmental consciousness. The ACCC is also concerned greenwashing can result in unfair competition, as those businesses incurring the costs of genuine environmentally friendly actions will be competing against businesses which are making misleading green claims without incurring the same costs.
 

Broad unqualified claims may give rise to issues under the Australian Consumer Law (ACL), located in schedule 2 of the Competition and Consumer Act 2010 (Cth), if they are ambiguous or cannot be substantiated. Greenwashing has negative legal implications for engaging in misleading and deceptive conduct, and may also expose your brand to reputational risks.
 

H&M, Zara and Uniqlo are among the international companies caught greenwashing over the years. These fashion brands have contributed to the massive amounts of textile waste caused by the clothing industry. According to the fashion non-for-profit ReMake, 80% of textiles globally are incinerated or landfill-bound, just 20% being reused or recycled. Of the textiles being recycled, according to the Ellen MacArthur Foundation, less than 1% are actually being recycled back into fibres to be reused in garments.
 

To help navigate between substantiated claims and greenwashing, the Australian Securities and Investment Commision (ASIC) provides a set of questions to consider. These questions will assist you to avoid greenwashing when offering or promoting the environmental credentials and/or impact of your products:
 

1. Is your product true to the label?

ASIC warns against using specific sustainability-related terminology or absolute terms in a product’s label, which would be misleading. For example, this may include label terms like ‘green’, ‘sustainable’ or ‘eco-friendly’, especially if used without explanation. Whilst these terms are likely to be seen as suggesting that a product, brand, or business as a whole has a positive environmental impact or at least no adverse impact, these claims are invalid unless a business/brand has the ability to prove it. In situations where the company is unable to prove its claims, it risks falling short of its legal obligations.
 

2. Have you used vague terminology in your communication?

Brands must be cautious when using technical terminology related to sustainability when communicating about their brand or product offerings. Many technical ESG terms do not have a ‘standard definition’, therefore it is crucial that brands explain the terminology used in their communication and promotional material.
 

3. Are your headline claims potentially misleading?

Considering that headline claims are a powerful tool for capturing your audience’s attention, it is important to avoid making misleading headline claims about sustainability-related products or actions. ASIC has noted that exceptions or qualifications such as fine print and terms and conditions to headline claims may well be insufficient to remedy misleading representations.
 

4. Have you explained how you use metrics related to sustainability?

It is advised by ASIC that several additional disclosures are made in relation to sustainability-related metrics. For example, this may include obtaining an ESG score from credible sources. In essence, an ESG score is a score calculated based on measuring a company’s relative ESG performance, commitment, and effectiveness across main themes such as emissions, environmental product innovation and human resources). A great example of this is Bassike’s recent B Corp certification achievement. Bassike has achieved B Corp certification with a high impact score of 92 in key areas including governance, workers, community and environment and customers, meaning that the brand highly values social and environmental performance, corporate governance, and transparency.
 

This information was compiled by Olvera Advisors

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