The environment has become an important consideration for consumers in their purchasing decisions, which means environmental claims on products or in advertising can be a powerful marketing tool for companies.

Two recent cases in New Zealand and Australia alleging “greenwashing” are an important reminder of the potential risks of misleading or unsubstantiated claims about environmental or sustainability commitments.

Environmental claims and the law

All representations made by companies, including environmental and sustainability claims, must comply with the Fair Trading Act 1986 (FTA), and must not be either misleading or deceptive, or likely to mislead or deceive. One of the primary purposes of the FTA is to ensure consumers are buying products or services based on accurate information.

Environmental claims are defined by the Commerce Commission as representations "about the environmental impact of the production, distribution, use and disposal of a good or service". Greenwashing occurs when such claims convey a false or misleading impression.

The Commerce Commission’s Environmental Claims Guidelines (Guidelines) provide specific guidance to assist traders to ensure that environmental claims comply with the FTA. Among other things, the Guidelines remind traders that environmental claims must be substantiated by a credible source of information and should be clear and specific. The guidelines encourage the use of plain language to ensure consumers can understand the claimed environmental benefit. 

New Zealand - Z Energy 

In New Zealand's first greenwashing court case, Lawyers for Climate Action NZ Inc, Consumer NZ, and the Environmental Law Initiative (the Group) are seeking declarations from the High Court that Z Energy has breached the FTA by misleading consumers about its climate action. The claim focuses on Z Energy’s advertising campaign which said it was “in the business of getting out of the petrol business” and “well on track to achieving [its] carbon reduction emissions”. The advertised claims were based on Z’s emission reductions, biofuel manufacturing plant, expansion of its electric vehicle charging network, and investment in electricity retailing.

The Group alleges that Z's advertised claims gave the impression Z was making "bold changes" and "urgently mitigating its contribution to the climate crisis" when actually its total retail sales of petroleum products have increased.

A statement issued by the Group stated that while it supports and encourages Z's "positive aspirations", it needs to be able to substantiate the claims it makes, and "not make misleading or deceptive claims".

Australia - MOO Premium Foods 

The Australian Competition and Consumer Commission (ACCC) recently accepted a court enforceable undertaking from MOO Premium Foods Pty Ltd (MOO), a yoghurt manufacturer, that it will remove claims from its packaging, website and social media that its yoghurt packaging was made from "100% ocean plastic". The undertaking was provided after ACCC’s investigation revealed the plastic resin used in the manufacture of MOO’s yoghurt packaging was collected from coastal areas in Malaysia, and not directly from the ocean. 

Why does this matter?

The ongoing climate crisis has only increased the focus on ensuring environmental claims are accurate and substantiated. These cases are a reminder of the importance for businesses to regularly review any environmental or sustainability claims about their products or services to ensure they are correct and up to date. 

Please get in touch with one of our experts if you have any questions about making environmental claims or compliance with the FTA generally.

For further reading about how businesses can mitigate against claims of ‘greenwashing’ and what the consequences are for those whose ESG credentials don’t stand up to scrutiny, click here to read our recent article: The ESG laundromat.

Special thanks to Libby Muir and Eva Williams for their assistance in preparing this article.