The Federal Trade Commission’s (FTC) Green Guides have been on many corporate sustainability team’s priority lists since President Biden took office. On day one of his presidency, President Biden promised an all-agency approach to combating climate change – including FTC oversight of environmental advertising.
The FTC Green Guides were first issued in 1992 as a set of guidelines developed to help businesses avoid making false or misleading environmental claims in their advertising and marketing materials. While the Green Guides are not legally binding, they have been used in litigation to challenge false environmental claims. The Commission has been considering what changes to make to update these Green Guides, including how to address claims related to newer technologies such as low-carbon fuels and advanced recycling processes. The FTC is also considering updating guides to clarify and provide guidance on commonly used terms such as "sustainable," "carbon neutral," and "natural."
The FTC has been holding roundtables, seeking public comments, and highlighting certain company’s environmental claims over the past four years. However, no final guidance has been issued.
Meanwhile, other governments are moving forward with legislation to address greenwashing. State lawmakers in New York, Washington, California, and New Hampshire introduced bills this year against misleading claims targeting plastic products as recyclable. A Colorado law went into effect this year on what constitutes compostable materials, and a California law will require companies to support their carbon neutrality and voluntary carbon offset claims.
If and when the FTC finalizes its Green Guides, the guidance could have far-reaching business and environmental implications in the following ways:
Businesses will be impacted by how stringent the definitions are. While Green Guides are not legally binding, they are often used as justification for greenwashing lawsuits. How FTC defines “net zero,” for example, will impact how companies speak on this topic.
Varying guidance from federal agencies. Companies are monitoring not just the FTC Green Guides, but the Environmental Protection Agency and other departments on how they define and regulate sustainability practices. With so many regulatory pathways and varying agencies making decisions about emerging technologies, there are bound to be discrepancies between the FTC guidelines and other agencies’ interpretations of these definitions.
Political backlash could bring more intense scrutiny. The Green Guides will inevitably lead to political parties falling back on their traditional policy positions. This will likely incite more attacks on ESG from Republicans and attacks on FTC for not going far enough from Democrats.
Ultimately, the longer the FTC waits, the more it loses ground to states on these issues. Look no further than the SEC Climate Disclosure Rule to see how companies reacted. As the FTC continues to work on finalizing the Green Guides, it will be important to monitor any updates to understand how companies should prepare for this guidance.
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