ESG Update: NGOs Push Substantive Policy Agendas in Comments to FTC’s “Green Guides”

And the data supports this. A study released this year by McKinsey and NielsenIQ illustrates that consumers are rapidly shifting spending toward products with environmental, social, and governance (ESG)-related claims:

• Retail sales growth of products identified with ESG-associated attributes grew 1.7% per year faster than similar products without ESG-related branding;
• Products making ESG-related claims grew faster whether the products were more affordable or luxury goods; and
• Products making specific, narrow claims, such as being identified as “carbon zero,” grew at a faster rate than products with broader, more prevalent claims like being “environmentally sustainable.”

This marketing data explains why companies may want to tie their products to ESG. Nongovernmental organizations (NGO), in turn, are increasingly involved in the same space. Last year, we discussed how NGOs were progressively using sustainability and ESG-related claims to drive policy. Since then, we’ve dug deeper into specific efforts related to carbon and climate issues and related to plastics and “circular economy” issues. Various NGOs’ involvement related to environmental policy issues has clearly bled into the Federal Trade Commission’s (FTC) “Green Guides.” As we discuss in greater detail below, many public NGO comments on the Green Guides demonstrate that NGOs are seeking to have FTC weigh in on various hot-button environmental issues, including many usually viewed as being in the province of other agencies.

FTC’s “Green Guide” Revision Process

FTC first issued its Green Guides in 1992 to help marketers avoid making environmental claims that could mislead consumers. When product marketers make claims deemed by FTC to be misleading, FTC may pursue enforcement actions like this one, involving products allegedly improperly claimed to be “Made in the US,” or seek to have the marketers adequately substantiate their claims as it recently did to 700 advertisers of products like dietary supplements and homeopathic drugs.  

As we discussed here, FTC announced in December 2022 that it was seeking public comment on potential changes to its Green Guides, which provide guidance on “green” marketing claims. Specifically, FTC requested public comment on (1) whether there is a continuing need for the Green Guides; (2) what benefits the Green Guides provide consumers and what evidence supports any asserted benefits; and (3) whether and what modifications should be made to the Green Guides to increase their benefits to consumers.

There is no universal definition of “sustainable” in the United States, and definitions that exist tend to be particular to specific industries. (See the FTC’s discussion here.) Various other terms like “net zero” and “carbon neutral” are generally viewed as opaque. Of relevance to our discussion below, the Green Guides provide detailed guidance on marketing in a variety of environmental areas including carbon offsets, product recyclability, and whether “natural gas” makes a claim as being “natural.” We discuss these issues further below.

NGOs’ Comments

As of the date of this post, FTC’s docket shows a total of 978 comments that have been submitted regarding the Green Guides. Environmental NGOs who submitted comments include Earthjustice, Environmental Defense Fund (EDF), Sierra Club, Public Citizen, and PIRG (formerly known as Public Interest Research Group). Some of the issues they raised include:

• Further clarification of what is required for a “net-zero” carbon emissions commitment. Various NGOs question whether parties should be permitted to rely on carbon offsets or, to quote Earthjustice, “speculative or yet unproven emissions reduction techniques” to justify “net-zero” commitments. Other practices like divesting “the dirtiest, most polluting parts of the companies to non-reporting entities” are questioned.
• More transparency regarding the use of terms like “recyclable.” Whether something can be classified as “recyclable,” in various NGOs’ view, depends on (a) whether recycling is available in 60% of municipal recycling facilities, and (b) that the facilities actually recycle the materials. This contrasts with comments submitted by product marketers, who are comfortable with recycling being available as criteria, but not necessarily the confirmation that materials actually are recycled.
• Describing destruction of plastic waste as “advanced recycling” to create fuel. The Environmental Defense Fund (EDF) specifically calls out efforts in the petrochemical industry to “re-label destruction of waste plastics as ‘advanced recycling.’” EDF notes that, consumers “would not think of the burning of plastics or chemical reactions that produce chemical feedstocks” when they see the term “advanced recycling.” Further, EDF points out that these processes can raise environmental concerns in the communities where they are conducted. (We previously discussed this issue here.)
• The use of the term “natural gas.” Local bans on natural gas hookups have become more common, as we discussed here. PIRG implies that FTC should preclude use of the term “natural gas” itself in favor of using terms like “methane.” PIRG argues that “renewable natural gas” — biomethane — still is a “climate-warming pollutant” that “emits carbon dioxide into the atmosphere” and that companies should not be permitted to portray it as “clean” or generally renewable. In contrast, gas industry trade associations counsel FTC that the agency’s role does not include environmental policymaking.

Next Steps

The next steps FTC may take include revising the Green Guides or undertaking a formal rulemaking. FTC announced that it will hold a public workshop to examine “recycling” claims on May 23, 2023, in Washington, DC. Stay tuned here for further developments.

The firm’s ESG Team advises clients on understanding risks and benefits posed by increased regulatory focus on ESG and greenwashing issues and creating pathways to advance these issues at a corporate level. The Consumer Products Team provides counseling to clients at all stages of the product life cycle, from early-stage counseling and branding to compliance and litigation.