3 Ways the Federal Trade Commission Can Put a Stop to Climate Greenwashing

Greg Andeck
December 11, 2023
Stronger rules and guidance from the Federal Trade Commission are critical to separate the substance from the noise. Keep reading to learn more about recent legislation and action around greenwashing.

As companies across the globe race to set greenhouse gas reduction targets and credible pathways to decarbonize their operations, many will feel the pressure to put a rosy spin on lackluster performance. Corporate sustainability buzzwords like “eco-friendly,” “sustainable,” and “carbon neutral” remain unregulated terms that can be used - and abused - by companies looking to boost their green bonafides with consumers. At its worst, unsubstantiated claims constitute greenwashing. One recent study revealed that over 70% of surveyed North American executives say their company is guilty of greenwashing.

What is greenwashing?

Greenwashing is the process of making an unsubstantiated claim that can deceive consumers into thinking that a company’s products are more environmentally or climate-friendly than is the case. A company is at greater risk of greenwashing if it spends more resources on marketing its green credentials than making necessary investments and changes to actually improve environmental performance.

Isn’t greenwashing against the law?

False or misleading claims are largely prohibited under general consumer protection laws, but in practice companies are given significant leeway to make marketing claims and enforcement action against greenwashing has been limited. The official guidance from the U.S. Federal Trade Commission (FTC) on how companies can avoid greenwashing - a document known as the “Green Guides” - has not been updated in over a decade.

Does the FTC have any plans to increase its protections against climate greenwashing?

Last December, the FTC opened a new public comment period to “make any updates necessary to ensure the Green Guides provide current, accurate information about consumer perception of environmental benefit claims.” It specifically asked for input on whether the Green Guides should include new information related to climate change and carbon offsetting.

What was the public response to the FTC Green Guides Open Comment Period?

The response to the FTC’s comment period on this issue was significant - over 1,400 comments were submitted by companies, organizations and individuals. 

Aided by OpenAI’s ChatGPT, we reviewed and synthesized a condensed set of comment letters from over 40 of the most influential nonprofit and for-profit organizations that submitted comment letters, representing over 450 pages of feedback. These organizations span a range of sectors including consumer packaged goods, energy, environmental and consumer advocacy, government, trade associations, and professional services. 

The top concerns identified by these organizations included:
  1. Deceptive Green Marketing Claims Hurt Everyone - Companies that make unsubstantiated or exaggerated claims in their marketing mislead consumers, making it difficult to make informed decisions about products and services. Over time, this erodes trust not only in the brand making the false claims but also the actions of companies making genuine progress on climate, as consumers become skeptical of all environmental assertions. Comments submitted by the nonprofit Truth in Advertising, Inc. suggest that greenwashing is pervasive across multiple industries and sectors
  1. Consumer-Facing Labels Can Help, But Don’t Always - Ecolabels are a commonly used tool to market environmental practices. They can be effective at standardizing claims, and making them more reliable and transparent. But companies sometimes get overly “creative” with their use of generic and unregulated terms, and use them in a way that imitates more rigorous and independently verified consumer-facing labels. This makes it difficult for consumers to differentiate genuine claims and efforts from less rigorous ones. 
  1. Carbon Credits Can Help, But Don’t Always - The rise in corporate demand for carbon offsets has led to a plethora of carbon credit project types, such as manufacturing efficiency, regenerative agriculture, planting trees, and directly capturing emissions from the air using purpose-built machines. Some carbon credits work, while others don’t result in real and permanent emissions reductions that wouldn’t have happened otherwise. 

Carbon credits relate to climate greenwashing because some companies use low-quality carbon credits as the basis for making claims about climate leadership and performance. Companies whose climate efforts are overly dependent on carbon credits without significant internal emission reduction efforts also risk misleading the public and undermining more structural climate actions.

What are the next steps? How can the FTC put a stop to climate greenwashing?

Stronger rules and guidance from the Federal Trade Commission are critical to separate the substance from the noise. The FTC should place special focus on developing guidance in the areas of carbon offsets and climate labels, which are top areas of concern for commenters.

Recent legislation from California and a proposed directive from the European Union are already putting restrictions on climate claims that companies can make within those geographies. The FTC should compare notes with these and other state, national and international governmental bodies.

While not as impactful as binding regulation, voluntary corporate standards for climate claims and carbon credits like the Voluntary Carbon Markets Initiative (VCMI) and the Integrity Council for the Voluntary Carbon Market (ICVCM) will also play an important role in normalizing responsible corporate marketing behavior. The Change Climate Project’s Climate Neutral Certification also continues to offer a set of clear criteria for high integrity climate claims.

We would like to thank Brandon Comstock for his support in preparing the AI analysis of FTC comment submissions and assistance in preparing this blog post.

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About the Author

Greg Andeck
Director of Partnerships

Our partnerships leader, Greg brings nearly two decades of nonprofit experience working on corporate, consumer, and policy solutions to the climate crisis. He loves to find opportunities for uncommon bedfellows to work together to protect the environment. Greg and his family can be found exploring the mountains and coast in North Carolina and searching out epic wilderness areas in Argentina.

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