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A highly anticipated refresh of the U.S. Federal Trade Commission’s environmental marketing guides has prompted debate among some of America’s biggest consumer goods companies over potential new regulations and tighter rules over what can be labeled recyclable.
The FTC’s so-called Green Guides—referenced in courts and by the agency in enforcement—aim to help businesses avoid accusations of “greenwashing,” which is when companies mislead consumers about their environmental marketing claims. The FTC last updated its guides in 2012 after a review that it launched in late 2007. For the current review, the agency extended the public comment period by 60 days after industry groups requested an extension.
The consultation comes as regulators worry shoppers don’t understand the ballooning number of environmental terms they encounter. The FTC has asked whether it should provide guidance on the use of 19 terms, such as “sustainable,” “carbon neutral” and “net zero.” Sales of consumer packaged goods in North America carrying sustainability advertising labels rose to an estimated $269 billion as of July 2022 from $248 billion in 2021, according to NielsenIQ.
“For the average consumer, it’s impossible to verify these claims,” FTC Chair Lina Khan said in December when the review was launched.
The agency has so far received more than 7,000 comments on a host of environmental topics during this current review, and is expected to call for more comments when it makes proposals. It received a total of around 5,000 in the last review. Current rules specify that the guides be updated every 10 years since they came out in 1992. The agency has asked if the guides should be updated more frequently, which many companies have called for.
Two focal points of the Green Guides review are:
New regulations
The FTC has asked if it should pursue rule-making authority that would create regulations for deceptive green marketing. If the commission votes to approve regulations, it would, for example, empower the agency to seek civil penalties via the Justice Department for each instance a person sees a misleading advertisement. The FTC this year raised its cap on the civil penalty per violation to $50,120 from $46,517.
Lawyers say the FTC is interested in establishing regulations because a 2021 Supreme Court decision limited its ability to bring cases in federal court that seek money on behalf of consumers.
Nestlé says its Nespresso brand has been carbon neutral since 2022.
Photo:
PIERRE ALBOUY/REUTERS
Nestlé—known for more than 2,000 brands including Nescafé coffee and Perrier water—is among the companies and industry associations speaking out against such regulations. It argues the current guidelines are flexible, meaning that they can be updated as consumer perception of environmental claims change in the coming years alongside advances in technology, infrastructure and best practices.
“It therefore is critical for the FTC’s framework on environmental claims to stay flexible and nimble,” Nestlé said in its public comment.
In contrast, S.C. Johnson & Son, a consumer-goods company known for home-storage and cleaning products such as Windex, is encouraging regulations to make the guardrails clearer for the industry.
“It provides more clarity, certainty and it will provide companies to pay more attention to the rules and detail,” SC Johnson Chairman and Chief Executive
Fisk Johnson
said. “We think it’s important to create a level playing field.”
He said many companies support federal laws to simplify rules because companies are navigating a patchwork of state-by-state rules on environmental claims that conflict and drive up costs.
“Those costs will be passed onto people and the people who can least afford it will be hurt the most,” Johnson said. “What we really need is federal rules that will pre-empt that patchwork.”
A Nestlé spokeswoman agreed that a federal standard would help address the “concerning patchwork of differing state laws on environmental claims” and said the Green Guides can provide that if they are reviewed and updated on a regular basis.
Recyclable packaging
In the absence of federal laws or an agency defining recyclability, the FTC has become an authority on what packaging can be labeled as recyclable because of its mandate to protect consumers from deceptive claims. However, some companies are against the agency tightening the threshold of what can be labeled as recyclable or basing the standard on what actually gets recycled.
Current FTC guides say companies can label a product recyclable if recycling services are available to 60% of people where it is sold—whether it ends up recycled or not. The agency’s consultation sought feedback on updating that threshold without specifying a particular number.
“That [current guideline] means a package could say it’s recyclable but 40% of American families cannot recycle it,” said Sarah Dearman, chief innovation officer at The Recycling Partnership, a Virginia-based nonprofit. “Who would think that is enough?”
The FTC has become an authority on what packaging can be labeled as recyclable in the absence of federal laws.
Photo:
Ting Shen/Bloomberg News
Labels are how 78% of people decide if they should toss something in a recycling bin, according to a 2021 survey of 1,310 U.S. consumers by The Recycling Partnership. But among those who look at labels, around two-thirds say they were confused if the item is recyclable. A factor contributing to the confusion is that claims about a package’s recyclability aren’t reflected in the triangle symbols on plastic bottles, which simply indicate the grade of plastic used in the package.
About 8.7% of plastic waste in the U.S. was recycled in 2018, according to the U.S. Environmental Protection Agency. A 2022 report by climate-action group Greenpeace estimated that rate had fallen to between 5%-6% in 2021.
Published comments from
and
support keeping the current 60% threshold and say recyclable claims shouldn’t be based on how much of their products get recycled. It is unclear how many of their brands wouldn’t carry recycling labels if the standard was strengthened. Procter & Gamble and L’Oréal declined to comment further. Unilever didn’t respond to requests for comment.
Ground up plastics from recycling facilities. Less than 10% of plastic waste is recycled in the U.S., in large part due to challenges around cost and infrastructure.
Photo:
Keith Srakocic/Associated Press
“A standard based on actual recycling rates could fluctuate to the point where companies could no longer make on-label communications about the recyclability of a package, which would negatively impact recycling rates, leading to more materials entering the landfills, as well as contributing to consumer confusion,” Unilever said in its published comments.
S.C. Johnson supports the FTC taking a more aggressive approach, including potentially raising the threshold as well as companies providing more information on how to recycle in their community when the threshold isn’t met, such as through QR codes. Its CEO also said he hopes the Green Guides will be updated more regularly given the rapidly changing landscape of environmental marketing.
“These Green Guides get cast in concrete and 10 years later they get modified and by the time they get modified, the world has dramatically shifted,” he said. “Everybody would advocate for more frequent updating of these guidelines.”
Write to Dieter Holger at dieter.holger@wsj.com
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