by William Sarni

It is time to get serious about your green performance claims. This means being sure your claims are well grounded in quantitative performance.

The recent guidance by the SEC recommending that companies report risk from climate change coupled with increased scrutiny by the FTC on green claims means that companies must (no longer optional) quantify and carefully communicate sustainability performance both at the company wide and product level.

For the past several months the Federal Trade Commission (FTC) has been working on updating their “Guides for the Use of Environmental Marketing Claims” better know as Green Guides. Section 5 of the FTC Act gives the agency the ability to “intervene” when businesses are misrepresenting their green performance. The original Green Guides have not been updated since 1998, which in view of all the progress with the greening of the global economy seems like an eternity.

For some perspective on what is happening at the FTC, there were no complaints filed by the Agency during the previous administration. However, over the past year seven claims have been filed. According to the FTC this sudden activity is in response to the dramatic increase in green marketing and the emergence of terms such as “sustainable” and “carbon neutral.”

Notable enforcement by the FTC includes going after Kmart Corp., which advertised paper plates as biodegradable. The FTC deemed this to be misleading as the plates would not decompose in municipal solid waste facilities. K-Mart ultimately agreed to change the marketing claims. The FTC also filed two other claims against the biodegradability of products, as well as four against companies using environmental claims in the marketing of bamboo clothing.

This is significant in that it will drive increased demand for verifiable data on energy, water, carbon and material use by companies. Moreover, it will require increased scrutiny of the quality of carbon offsets, renewable energy credits and eco-labeling.

These moves by the SEC and FTC are good for the industry. Adding rigor to sustainability performance will benefit all stakeholders, in particular consumers and investors. If I am going to buy a product or invest in a company, which makes claims that they are “sustainable” or “green”, I want assurance as to what this actually entails.

And finally I will be very pleased to see claims of “carbon neutrality” and hopefully “water neutrality” be examined carefully. They have been thrown around way too much over the past few years with little transparency to support the claims.

Reprinted with permission from Earth & Industry