The "Green Labeling" Phenomenon: Problems and Trends in the Regulation of Environmental Product Claims
By Ciannat M. Howett
INTRODUCTION
In recent years, the American public has become increasingly concerned about damage to the environment caused by decades of irresponsible industry and consumer practices. News reports of smogchoked cities, overflowing landfills, medical waste on beaches, and poisoned rivers and lakes have forced American consumers to realize that their individual and collective purchasing and disposal decisions significantly affect the quality of the environment. As a result, consumers are demanding increased access to waste disposal alternatives such as recycling. A growing number of consumers are also comparison shopping for products, not only for price and quality, but also for the effect a particular product has on the environment. One national survey shows that twenty-nine percent of United States' consumers say that they have chosen one product over another based on an advertisement or label claiming environmental benefits. Other surveys indicate that over ninety percent of Americans are willing to pay more for products that they believe are environmentally benign.
In response to consumers' increased environmental consciousness, American advertisers and industry have eagerly repackaged and relabeled a wide variety of products. The updated marketing schemes include such claims of environmental virtue as “environmentally friendly,” “environmentally safe,” “recyclable,” “recycled,” “biodegradable,” “compostable,” “ozone friendly,” “landfill safe” and “incinerator safe.” The practice of making environmental claims on product labels is known in the advertising world as “green marketing” or “green washing.” A recent survey found that twenty-six percent of the 12,000 new household items launched in 1990 made some environmental claim. Manufacturers who for many years have reused scrap materials to make their packaging, or whose products have always had some intrinsic environmental virtue, are now trumpeting their products' environmental benefits. Some economists have estimated the U.S. market in environmental goods, the so-called “green market,” to be worth $25 billion to $50 billion a year in sales-- and climbing. While one study more conservatively estimates the green market to be worth $1.8 billion in product sales in 1990, it claims that the market will quintuple to $8.8 billion a year by 1995.
Some of the environmental claims are legitimate and accurate, reflecting an effort by some manufacturers to produce more environmentally benign products. Other claims are false or misleading and unfairly take advantage of consumer interest in the environment. Scientific uncertainty over the accuracy of many environmental claims and the absence of federal guidelines governing such claims have led to difficulty in distinguishing between accurate and spurious claims and have enabled marketers and manufacturers to use environmental claims to their own advantage. The deluge of environmental claims of uncertain validity has led to consumer confusion and mistrust of environmental claims in general. In a recent survey, forty-seven percent of consumers said that they dismissed all environmental claims by manufacturers as “mere gimmickry.”
Consumer confusion and skepticism regarding the legitimacy of environmental claims has raised a great deal of concern from all quarters and has led to a surprising consensus regarding the need for federal regulation from parties as divergent as consumer organizations, environmentalists, federal and state governments, and advertising and industry groups. Consumers and consumer organizations want clear standards and uniform definitions of environmental terms to be established in order to protect consumers from manufacturers and marketers who would take advantage of the public's increased environmental consciousness by making misleading or fraudulent environmental claims. Industry and advertising groups want to protect those manufacturers who are making legitimate claims from having to compete against others who are making fraudulent or misleading claims, while at the same time carefully guarding against regulations that would restrict a manufacturer's constitutionally-protected right of free expression. Industry representatives are also concerned that the absence of federal guidelines regarding environmental claims has led to a patchwork of conflicting and confusing state regulations that are expensive and difficult to comply with for those who market nationally. Environmentalists see “green” consumerism as a way to affect broader social policy--to encourage environmentally-responsible purchasing and disposal decisions by consumers, increase the market for environmentally-sound products and encourage manufacturers to reduce harmful impacts on the environment. Effective regulation of environmental claims must some-how balance these diverse interests by promoting environmentally-responsible purchasing and disposal decisions by the consumer, maintaining traditional policies against unfair and deceptive advertising and respecting legitimate industry interests in free trade and free expression.
Although all of these constituencies recognize the need for uniform national standards or guidelines regarding environmental claims, there is some disagreement about the best approach to preventing illegitimate claims. This Note provides an overview of and insight into the problems and trends in environmental claims regulation. Section II of this Note examines some of the special problems posed by environmental claims regulation, such as the problems of scientific uncertainty and the lack of a common terminology for describing various environmental attributes. Section II also examines some of the methods being used to address these problems, including the use of life-cycle assessments.
Section III of this Note explores the regulatory approach at the state and federal levels to limiting environmental claims. The Federal Trade Commission (FTC), the Environmental Protection Agency (EPA), and other federal agencies have begun to address the need for uniform national standards and guidelines. The FTC has also begun enforcement actions against some manufacturers and advertisers making false or misleading environmental claims under existing fair trade and advertising guidelines. Additionally, Congress has taken steps toward enacting new federal legislation regarding environmental claims.
Section III also discusses the efforts by the attorneys general of several states to wage a crackdown on illegitimate environmental claims, known as “green-collar” fraud, in response to pressure from consumer and environmental groups. State legislatures have also taken measures to define and restrict environmental claims.
Section IV of this Note examines the private litigation approach to controlling illegitimate environmental claims. Competitors may bring private actions under the Lanham Trademark Act against manufacturers and advertisers making false environmental claims. Recently, the possibility of bringing a private action under the Racketeer Influenced and Corrupt Organizations Act (RICO) has also been explored.
Section V of this Note describes methods of industry self-regulation that may be used to control illegitimate environmental claims. Two of the options that are examined are network challenges and review by the National Advertising Division of the Council of Better Business Bureaus. The alternative of industry and trade associations adopting their own guidelines is also explored. Finally, the potential antitrust liability problems resulting from such forms of industry self-regulation are examined.
Section VI of this Note examines the option of controlling environmental claims through third-party regulation. Seals of approval issued by two private organizations--Green Seal and Green Cross--and regulation by retailers are examined as alternative or supplemental methods of regulating environmental claims.
This Note concludes with an overview in Section VII of various international approaches to environmental claims regulation. This section specifically looks at the regimes of Canada and the European Community.
In recent years, the American public has become increasingly concerned about damage to the environment caused by decades of irresponsible industry and consumer practices. News reports of smogchoked cities, overflowing landfills, medical waste on beaches, and poisoned rivers and lakes have forced American consumers to realize that their individual and collective purchasing and disposal decisions significantly affect the quality of the environment. As a result, consumers are demanding increased access to waste disposal alternatives such as recycling. A growing number of consumers are also comparison shopping for products, not only for price and quality, but also for the effect a particular product has on the environment. One national survey shows that twenty-nine percent of United States' consumers say that they have chosen one product over another based on an advertisement or label claiming environmental benefits. Other surveys indicate that over ninety percent of Americans are willing to pay more for products that they believe are environmentally benign.
In response to consumers' increased environmental consciousness, American advertisers and industry have eagerly repackaged and relabeled a wide variety of products. The updated marketing schemes include such claims of environmental virtue as “environmentally friendly,” “environmentally safe,” “recyclable,” “recycled,” “biodegradable,” “compostable,” “ozone friendly,” “landfill safe” and “incinerator safe.” The practice of making environmental claims on product labels is known in the advertising world as “green marketing” or “green washing.” A recent survey found that twenty-six percent of the 12,000 new household items launched in 1990 made some environmental claim. Manufacturers who for many years have reused scrap materials to make their packaging, or whose products have always had some intrinsic environmental virtue, are now trumpeting their products' environmental benefits. Some economists have estimated the U.S. market in environmental goods, the so-called “green market,” to be worth $25 billion to $50 billion a year in sales-- and climbing. While one study more conservatively estimates the green market to be worth $1.8 billion in product sales in 1990, it claims that the market will quintuple to $8.8 billion a year by 1995.
Some of the environmental claims are legitimate and accurate, reflecting an effort by some manufacturers to produce more environmentally benign products. Other claims are false or misleading and unfairly take advantage of consumer interest in the environment. Scientific uncertainty over the accuracy of many environmental claims and the absence of federal guidelines governing such claims have led to difficulty in distinguishing between accurate and spurious claims and have enabled marketers and manufacturers to use environmental claims to their own advantage. The deluge of environmental claims of uncertain validity has led to consumer confusion and mistrust of environmental claims in general. In a recent survey, forty-seven percent of consumers said that they dismissed all environmental claims by manufacturers as “mere gimmickry.”
Consumer confusion and skepticism regarding the legitimacy of environmental claims has raised a great deal of concern from all quarters and has led to a surprising consensus regarding the need for federal regulation from parties as divergent as consumer organizations, environmentalists, federal and state governments, and advertising and industry groups. Consumers and consumer organizations want clear standards and uniform definitions of environmental terms to be established in order to protect consumers from manufacturers and marketers who would take advantage of the public's increased environmental consciousness by making misleading or fraudulent environmental claims. Industry and advertising groups want to protect those manufacturers who are making legitimate claims from having to compete against others who are making fraudulent or misleading claims, while at the same time carefully guarding against regulations that would restrict a manufacturer's constitutionally-protected right of free expression. Industry representatives are also concerned that the absence of federal guidelines regarding environmental claims has led to a patchwork of conflicting and confusing state regulations that are expensive and difficult to comply with for those who market nationally. Environmentalists see “green” consumerism as a way to affect broader social policy--to encourage environmentally-responsible purchasing and disposal decisions by consumers, increase the market for environmentally-sound products and encourage manufacturers to reduce harmful impacts on the environment. Effective regulation of environmental claims must some-how balance these diverse interests by promoting environmentally-responsible purchasing and disposal decisions by the consumer, maintaining traditional policies against unfair and deceptive advertising and respecting legitimate industry interests in free trade and free expression.
Although all of these constituencies recognize the need for uniform national standards or guidelines regarding environmental claims, there is some disagreement about the best approach to preventing illegitimate claims. This Note provides an overview of and insight into the problems and trends in environmental claims regulation. Section II of this Note examines some of the special problems posed by environmental claims regulation, such as the problems of scientific uncertainty and the lack of a common terminology for describing various environmental attributes. Section II also examines some of the methods being used to address these problems, including the use of life-cycle assessments.
Section III of this Note explores the regulatory approach at the state and federal levels to limiting environmental claims. The Federal Trade Commission (FTC), the Environmental Protection Agency (EPA), and other federal agencies have begun to address the need for uniform national standards and guidelines. The FTC has also begun enforcement actions against some manufacturers and advertisers making false or misleading environmental claims under existing fair trade and advertising guidelines. Additionally, Congress has taken steps toward enacting new federal legislation regarding environmental claims.
Section III also discusses the efforts by the attorneys general of several states to wage a crackdown on illegitimate environmental claims, known as “green-collar” fraud, in response to pressure from consumer and environmental groups. State legislatures have also taken measures to define and restrict environmental claims.
Section IV of this Note examines the private litigation approach to controlling illegitimate environmental claims. Competitors may bring private actions under the Lanham Trademark Act against manufacturers and advertisers making false environmental claims. Recently, the possibility of bringing a private action under the Racketeer Influenced and Corrupt Organizations Act (RICO) has also been explored.
Section V of this Note describes methods of industry self-regulation that may be used to control illegitimate environmental claims. Two of the options that are examined are network challenges and review by the National Advertising Division of the Council of Better Business Bureaus. The alternative of industry and trade associations adopting their own guidelines is also explored. Finally, the potential antitrust liability problems resulting from such forms of industry self-regulation are examined.
Section VI of this Note examines the option of controlling environmental claims through third-party regulation. Seals of approval issued by two private organizations--Green Seal and Green Cross--and regulation by retailers are examined as alternative or supplemental methods of regulating environmental claims.
This Note concludes with an overview in Section VII of various international approaches to environmental claims regulation. This section specifically looks at the regimes of Canada and the European Community.
