Mitigating Greenwashing Risks: FTC Solicits Input on Current Green Guides

For the first time since 2012, the Federal Trade Commission (FTC or Commission) is actively evaluating potential updates to its Guides for the Use of Environmental Marketing Claims (Green Guides or Guides) to provide clarity to companies and marketers labeling products or making claims that products are:

• "recyclable" or
• "having recycled content"

In the December 2022 publication initiating the review, the FTC sought comment on several overarching issues, including the continuing need for the Green Guides, their economic impact and their effect on preventing deceptive advertising claims. (See Holland & Knight's previous alert, "FTC Seeks Input on Potential Updates to Its Green Guides," Dec. 19, 2022.) The publication also invited comment on the Guides' interaction with other environmental marketing regulations and whether the FTC should consider rulemaking to establish independently enforceable requirements to address unfair and deceptive environmental claims. Finally, because the FTC seeks to ensure the Green Guides appropriately respond to changes in consumer perception, the Commission solicited consumer survey evidence and consumer perception data addressing environmental claims, including "recyclable" claims.

The FTC's request for comments follows the commission chair's acknowledgement that the average consumer is not able to personally verify claims of "low carbon footprints," "energy efficiency" or "sustainability" and the FTC's advancement of 36 enforcement actions since 2013, with the largest penalty advanced in the amount of $5.5 million.

The request for comments yielded more than 7,000 comments from a wide range of stakeholders, including environmentalists, industry groups and companies. The FTC also held a public workshop on May 23, 2023, to examine "recyclable" advertising claims as part of its review of the Green Guides. The event covered the current landscape of the recycling market and recycling-related advertising claims, consumer perception of such claims and the future of the Green Guides – specifically, the need for any updates or changes related to such claims.

In conjunction with the May 23 workshop, the FTC requested additional public comment until June 13, 2023, to accommodate those who wished to provide input on the topics discussed at the workshop.

Based on a review of several of the submitted comments, the general sentiment is that there is a continuing need for the Green Guides. However, a common request is for the FTC to clarify aspects of the guides, including guidance related to "recyclable" and "recycled content."

The first in a series by the Holland & Knight Greenwashing Mitigation Team, this alert summarizes key themes that emerged in stakeholder comments related to "recyclable" and "recycled content" claims, as solicited by the FTC, and analyzes their input on specific marketing claims under the Green Guides

Stakeholder Input: Summary of Key Themes Emerging

A significant component of the Green Guides is whether and how companies and marketers can claim products or packages they sell are "recyclable."

The current guidance specific to "recyclable" claims holds that it is deceptive to misrepresent, directly or by implication, that a product of package is recyclable. The Guides presently create three tiers of permissible "recyclable" claims. If the item is accepted for recycling in 60 percent or more of communities where it is sold (i.e., a "substantial majority" of communities), the business or marketer may make an unqualified claim that the product is recyclable. If the rate of acceptance for recycling in the community is between 25 percent and 60 percent, the business or marketer may make a qualified claim and, if the rate of acceptance for recycling is less than that, the marketer should make a heavily qualified claim. Many of the comments submitted to the FTC addressed claims regarding the recyclability of products made on a product or packaging. A wide range of stakeholders weighed in on this topic, including consumer brands companies, industry trade associations, and environmental and consumer protection organizations.

Key issues and trends addressed in the comments include:

• Consumer Protection: Several groups submitted comments to explain how the Guides are critical to protecting consumers from corporate greenwashing and unfounded claims about sustainability. They also explained that a lack of consistency in terminology and standards in environmental claims creates confusion for consumers and erodes their trust. Many comments from advocacy groups reflect consumer protection and environmental concerns related to purported inadequate labeling standards, definitions and greater accountability in such claims.
• Evolving Recycling Market: Numerous industry and advocacy groups shared ideas on how to update the agency's recyclability guidelines to align with modern markets and recycling infrastructure. The comments acknowledge that the U.S. municipal solid waste recycling system currently faces a number of challenges, including confusion about what materials can be recycled, recycling infrastructure that has not kept pace with today's diverse and changing waste stream, and reduced markets for recycled materials. These comments are aligned with U.S. Environmental Protection Agency (EPA) findings through its efforts related to the National Recycling Strategy, which aims to reach a national recycling goal of 50 percent by 2030. The recycling rate of municipal solid waste in the U.S. was last measured at 32.1 percent in 2018, according to the EPA.
• More Frequent Updates: Three senators – Tom Carper (D-Del.), Sheldon Whitehouse (D-R.I.) and Ron Wyden (D-Ore.) –  submitted comments urging the EPA to issue more timely updates of the Green Guides to reconcile the guidance with the realities of a constantly evolving recycling market. They noted that more regular updates could help businesses and marketers navigate increased activities, including legislation, from state or foreign authorities that impact labeling requirements.
• Threshold for Recyclability: Currently, the Green Guides state that companies and marketers should not claim their products are "recyclable" unless recycling facilities for those products are available to a substantial majority of consumers or communities where the item is sold. The 60 percent level is deemed a substantial majority. Through its regulatory review, the FTC is assessing whether there is evidence to support adjusting that threshold, especially given the evolving recycling market (as discussed above).

In its submitted comments, the EPA challenged the FTC to increase its threshold for recyclability claims above the current 60 percent target to a "very high bar." The EPA states that the FTC "should not further complicate the issue by adding hurdles."

• Capability vs. Actuality: Several commenters suggested that businesses and advertisers should not be able to make recyclable claims unless they have evidence that a product is actually recycled or that claims of a product's recyclability should reflect whether a product is ultimately recycled.

The EPA encouraged the FTC to clarify that products and packaging may be marketed as "recyclable" only if they have a strong end market. A strong end market should be defined to mean that materials collected and sorted by the recycling facility can reliably be sold for a higher price than the cost of disposal (e.g., the tipping fee) for the same materials, with some accounting for market fluctuations.

Several state attorneys general (AGs), led by those in California and New York, submitted joint comments arguing that overuse of the term "recyclable" exacerbates solid waste recycling inadequacies and may actually hinder recycling efforts. For instance, inaccurate "recyclable" claims induce consumers to put items that likely will not be recycled into their recycling bins, which may actually hinder recycling efforts. The state AGs urged the Commission to update its guidance to explicitly state that "recyclable" means that when the consumer properly disposes of a recyclable item, it is actually recycled.

• Rulemaking and National Standardization: The FTC sought comment on whether it should pursue a rulemaking regarding deceptive green marketing claims. In the wake of a recent U.S. Supreme Court decision, which held that the FTC does not have the authority to seek equitable monetary relief in federal court under Section 13(b) of the FTC Act, the FTC is increasingly relying on other legal tools, such as alleging rule violations, to enable the FTC to seek civil penalties and/or consumer redress.¹

Commenters were generally split on whether rulemaking should be initiated to impose mandatory rules, rather than the current advisory guidelines. Several commenters argued in opposition to adopting regulations on the basis that the current guidelines are flexible and can be updated as consumer perception of environmental claims changes in the coming years alongside advances in technology, infrastructure and best practices. In contrast, others encouraged the Commission to adopt regulations in order to make the guardrails clearer for industry and simplify rules as companies navigate a patchwork of conflicting state-by-state rules on environmental marketing claims.

• Increased Coordination Between EPA and FTC Regarding Plastics Recycling: The EPA affirmed that it supports strengthening requirements for environmental marketing claims and combating greenwashing, including requiring higher thresholds for plastic products and marketing packaging claims as "recyclable." The EPA's recommendations are intended to complete the agency's ongoing efforts to address plastics pollution and to promote a circular economy.² (See Holland & Knight's previous alert, "EPA Releases Draft of National Strategy to Prevent Plastic Pollution," May 8, 2023.)
• Interplay with State and Foreign Authorities: Several commenters point out that numerous state laws and international standards differ from the standards for evaluating "recyclable" and "recycling content" claims in the Guides, which creates a tenuous patchwork of differing laws, standards and requirements for industry to navigate. For instance, one commenter urged the FTC to "remember that what it does will reverberate internationally" in order to reduce the "substantial costs" associated with complying with "different and inconsistent standards;" "We encourage the commission to consider ways in which it may be reasonable and appropriate to harmonize the Green Guides with other international laws, regulations, and standards." Further, and notably, the Green Guides do not currently preempt federal, state or local laws. However, the FTC has indicated that compliance with those laws will not necessarily preclude an FTC enforcement action.

Conclusion

In our practice, clients are also facing the challenges raised by commenters. For instance, some clients prefer to implement measures that lead to compliance across any and all jurisdictions, such as using recognized international third-party certification systems to achieve the most stringent requirements across all of the jurisdictions in which they market their products as "recyclable" or as containing a certain percentage of "recycled content." Some prefer to scale their marketing practices by jurisdiction, which typically requires internal compliance programs that frequently intersect with their "environmental" programs within their larger ESG programs. The authors, along with other members of the Greenwashing Mitigation Team, also frequently assist with evaluating individual marketing pieces to mitigate enforcement and litigation concerns.

For more information or any questions, please reach out to the authors. 

Notes

¹ The text of Section 13(b) expressly allows the FTC to seek injunctive relief (temporary restraining orders or preliminary injunctions in aid of administrative proceedings, as well as permanent injunctions in "proper cases") but is silent on whether the agency can also seek equitable monetary relief. Nonetheless, courts for years have ordered consumer redress, including disgorgement and restitution under Section 13(b) in response to agency requests.

² "Circular economy" is defined in the Save Our Seas 2.0 Act as "a systems focused approach and involves industrial processes and economic activities that are restorative or regenerative by design, enable resources used in such processes and activities to maintain their highest values for as long as possible, and aim for the elimination of waste through superior design of materials, products, and systems (including business models)."

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.