• by Greg Menken , April 21, 2010

Bored at breakfast last week, I found myself reading the Tropicana orange juice carton in front of me, which read: "Recyclable only in areas where facilities exist." That got me thinking -- why not just say "recyclable?" The answer, as it turns out, is the law.

We're all familiar with truth-in-advertising regulations. The Federal Trade Commission (FTC) is empowered to prevent unfair or deceptive acts affecting commerce and may issue charges when it believes any company has engaged in such acts.

To address ambiguity in the green space, FTC established its Guides for the Use of Environmental Marketing Claims (the "Green Guides") in 1996. While not regulations in and of themselves, the FTC uses the Green Guides as a benchmark to assess whether green marketing claims are unfair or misleading.

Significantly, the Green Guides make no distinction between paid and unpaid media and marketing efforts. As a result, an organization's communications and PR efforts are held to the same standards as paid advertising. "It is easy to forget that any claim about a product -- whether made in paid advertising or not -- can be the basis of an FTC investigation," warns Gaston Kroub of the law firm Greenberg Traurig, LLP's Intellectual Property department.

Sanctions imposed by the FTC include refunds to consumers, the cessation of ads using false claims, corrective communications, and new reporting demands.

This has important implications for any company involved in green. "Companies in the cleantech space should be particularly aware of the 'sins of greenwashing,' or the act of misleading consumers regarding the environmental practices of a company or the environmental benefits of a product or service," says David Saenz, also of Greenberg Traurig's Intellectual Property department. It's not just consumers that can get angry, but the government as well.

Three years ago, the FTC began updating the Green Guides to reflect emerging environmental terminology. For instance, a product should not be listed as recyclable unless it can be recovered from the waste stream for reuse or the making of another product through an existing recycling program. Any recycling claim must also be qualified to reflect which portions of a product or package is recyclable.

I'm guessing that it is this definition of "recyclable" that led Tropicana to use the language it does on its cartons. If a local market has no established recycling program, then the carton cannot be marketed as recyclable.

The FTC's Green Guides also address new commodity markets such as those for renewable energy and carbon credits. In addition, states may have their own utilities regulations. As utility companies increase investments in clean energy sources and related marketing efforts, "it is absolutely crucial that energy service companies carefully consider the regulations of the state in which they are seeking to conduct business for requirements that must be satisfied to market green products," says Nicholas Giannasca, a partner with Blank Rome, specializing in energy markets.

Several states have requirements, including environmental disclosure requirements, which are geared toward ensuring that green claims are honest, credible and verifiable. "These requirements, if ignored, could lead to the regulatory agency canceling the energy service company's right to market power at retail in that state," according to Giannasca.

A Green Guides case-in-point involves Kmart Corp, which the FTC charged in 2009 with making false and unsubstantiated claims that its American Fare brand disposable plates were biodegradable. The FTC charged that Kmart's plates are typically disposed in landfills, incinerators or recycling facilities, where it is impossible for waste to biodegrade in a reasonable amount of time. As a result of the charges, Kmart agreed to avoid biodegradable wording on the product and provide reliable evidence to support environmental product claims.

By running afoul of the FTC, Kmart exposed itself to a double PR hit -- offending the government, as well as consumers -- a lesson for all marketing and communications practitioners.