Following a 4-0 vote earlier this month on “whether to publish a Federal Register notice commencing a regulatory review of the Guides for the Use of Environmental Marketing Claims, known as the ‘Green Guides,’” the Federal Trade Commission (“FTC”) is seeking comment on potential updates and changes to the Green Guides. In a release on December 14, the regulator said that it is requesting “general comments on the continuing need for the guides, their economic impact, their effect on the accuracy of various environmental claims, and their interaction with other environmental marketing regulations.” It is also seeking “information on consumer perception evidence of environmental claims, including those not in the guides currently.”

First issued in 1992 and were revised in 1996, 1998, and 2012, the Green Guides provide guidance on environmental marketing claims, including how consumers are likely to interpret particular claims and how marketers can substantiate these claims to avoid deceiving consumers. A potential new revision comes as “consumers are increasingly conscious of how the products they buy affect the environment, and depend on marketers’ environmental claims to be truthful,” according to Bureau of Consumer Protection Director Samuel Levine.

As for specific issues on which the FTC says that it expects to get many public comments, those include …

Carbon Offsets and Climate Change: The current Guides provide guidance on carbon offset and renewable energy claims. The Commission invites comments on whether the revised Guides should provide additional information on related claims and issues.

The Term “Recyclable:” Among other things, the FTC seeks comments on whether it should change the current threshold that guides marketers on when they can make unqualified recyclable claims, as well as whether the Guides should address in more detail claims for products that are collected (picked up curbside) by recycling programs but not ultimately recycled.

The Term “Recycled Content:” Comments are requested on whether unqualified claims about recycled content – particularly claims related to “pre-consumer” and “post industrial” content – are widely understood by consumers, as well as whether alternative methods of substantiating recycled content claims may be appropriate; and 

The Need for Additional Guidance: The Commission also seeks comment on the need for additional guidance regarding claims such as “compostable,” “degradable,” ozone-friendly,” “organic,” and “sustainable, as well as those regarding energy use and energy efficiency.

THE BOTTOM LINE: Reflecting on potential changes to the Green Guides, Beveridge & Diamond PC stated in a note that “the most direct impact of the Green Guides refresh will be on federal enforcement regarding allegedly false or misleading environmental marketing claims.” However, they state that the Green Guides “also serve to guide: 1) Enforcement of state consumer protection laws; 2) @ourt decisions on civil suits, including class action greenwashing suits; and C) competitor challenges brought before the National Advertising Division of the Better Business Bureau.”

As such, even if the Green Guides remain non-binding, the Beveridge & Diamond attorneys assert that “any refresh will the potential legal consequences stemming from environmental claims. Beyond federal and state regulation, companies should also take note of the growing risk of consumer and class action litigation related to corporate sustainability marketing claims.”

UPDATE (Jan. 31, 2023): The FTC has announced that “at the request of several interested parties,” it has extended the public comment period for 60 days, until April 24, 2023. The regulator stated that its vote to approve extension of the public comment period, which was set to expire on February 21, was 4-0. 

This article was initially published on December 14, 2022.

There have been many reports released as of late that center on the striking amount of waste produced by the fashion industry, with many including images that depict vast wastelands filled with clothing, many of them located in developing nations. As for how clothing gets from store shelves to beaches in Ghana and Chile’s Atacama Desert, traditionally, they are “donated” from wealthy nations to developing ones, but in many cases, the items end up as waste in landfills. This demonstrates the fact that the end user becomes responsible for the environmental impacts and disposal of the items, and it begs the question: Who should be responsible for the problem of discarded garments and accessories?

Extended producer responsibility

Extended producer responsibility (“EPR”) is an approach that places significant responsibility for the disposal of manufactured goods on the manufacturer. The aim is to incentivize manufacturers to extend the life of their products and to shift some of the environmental costs associated with product disposal from the consumers and the environment to the producers themselves. While such policies remain scarce around the world, this is set to change with the global focus on the circular economy, particularly in the retail-clothing, textile, footwear, and leather (“R-CTFL”) industry.

In South Africa, the paper and plastic packaging, lighting and electronic and electrical goods sectors are regulated by the National Environmental Management: Waste Act, 2008 read with the Extended Producer Responsibility Regulations, 2020 (“EPR Regulations”).

In France, numerous EPR schemes apply to a variety of industries, including the textiles and footwear industry. The French EPR program is the most extensive in the European Union and is set to double in its application from 12 to 22 industries over the next three years. Although the collection of old clothes by the producer responsibility organization (“PRO”) in France is effective, once collected there are no facilities in the country to recycle or upcycle the textiles. Furthermore, manufacturers are charged a mere EUR0.01-0.06 per clothing item, depending on the type and durability of the garment and the incorporation of recycled fibers. These measures do not seem to disincentivize overproduction and once collected, items are likely to end up elsewhere.

The South African EPR Regulations provide various options for the management of an EPR scheme. Independent PROs have been established and producers can voluntarily join or establish and manage an EPR scheme in-house. However, unlike France, which has a single PRO per industry, the options available in South Africa lead to competition concerns since not all producers join the same PRO, resulting in hefty administration costs for those who comply. It has also been argued by the industry that the penalties for non-compliance are not persuasive enough.

Pre-loved & the secondary market

Interestingly, luxury and fast fashion brands alike have recently indicated the inclusion of second-hand clothing platforms to serve their existing customer base. The second-hand market is set to grow globally to $14.5 billion in the next five years. This shows that voluntary EPR programs may prove more effective than legislative interventions. For a successful second-hand market to exist, overproduction must be minimized, and the quality of the clothes improved for longevity.

Many industry specialists worry that the current speedy trend-based brands are interested in the financial value of this sector and present another example of greenwashing. Perhaps the potential profits associated with the growing second-hand market will incentivize improvement or at the very least, better quality of virgin items to ensure longevity for the second-hand market.

Local retail-clothing textile, footwear & leather industry

In South Africa, landfills are running out of capacity although clothing and apparel are not yet a constraint in this regard. The local R-CTFL industry must regain its market share which is recognized in the South African Retail-Clothing, Textile, Footwear and Leather Value Chain Masterplan, signed in 2019. Signatories to the R-CTFL have committed to local production of 65 percent by 2030. The list includes: (1) Truworths Limited; (2) Woolworths; (3) Mr Price; (4) the Foschini Group; (5) Edcon (Edgars); (6) Pepkor; and (7) Pick n Pay Clothing.

For now, with rising costs, current and historic imports of cheaply made clothing may be all that many South Africans can afford. However, the environmental impacts should not be borne by the consumer alone. It appears that the EPR scheme may be particularly well suited to synthetic clothing items. The influx of clothing from abroad caused a stumbling block for the local manufacturing industry. An EPR program for the R-CTFL industry could assist in the prevention of R-CTFL wastelands and provide environmental regulation of excessive imports.

EPR scheme to assist local industry & curtail excessive imports

The EPR Regulations seek to hold producers, importers, brand owners and in some instances retailers, responsible for the entire life cycle of a product. The ultimate goal is a “cradle-to-cradle” as opposed to a “cradle-to-grave” fate for products included in the EPR scheme. The inclusion of importers and brand owners would result in the application of the EPR regulations to imported textiles and clothing.

An intelligently drafted EPR scheme for the R-CTFL industry could solve industry waste mountains and hold importers accountable for the ultimate environmental impacts of the R-CTFL industry. The implementation of such an idea would be environmentally conscious and would encourage the production of clothes that can stay in circulation for an extended period. Fashion trends are often circular or cyclical, so clothes which have the potential to circulate with repairs or upcycling over time should be the gold standard.

Carlyn Frittelli Davies is a Consultant in ENSafrica’s natural resources and environment practice.

Njabulo Mchunu is a Candidate Legal Practitioner at ENSafrica.

The Federal Trade Commission (“FTC”) says that it will vote on “whether to publish a Federal Register notice commencing a regulatory review of the Guides for the Use of Environmental Marketing Claims, known as the ‘Green Guides.'” In an announcement on December 7, the FTC stated that a “Regulatory Review of the Guides for the Use of Environmental Marketing Claims” is among the “current business” before the Commission, noting that the Green Guides “outline principles that apply to all environmental marketing claims, as well as guidance regarding specific categories of marketing claims.”

The announcement follows the FTC modifying its ten-year regulatory review schedule in July 2021, in connection with which the consumer protection agency revealed that it intended to initiate its review of the Green Guides in 2022 after last revising the sweeping eco-centric guidelines back in 2012. Aimed at helping marketers to make “truthful and non-deceptive” claims about the environmental attributes of their products, the 2012 revision of the Green Guides mandates, for instance, that marketers must “not make unqualified general environmental benefit claims because ‘’it is highly unlikely that marketers can substantiate all reasonable interpretations of these claims.’”

More specifically, the FTC’s 300-plus page Guides Guides take on some of the common “green” labels. For example, the FTC states that labeling a product as “green” because it is made with recycled content could be deceptive if the environmental costs of creating and using the recycled material exceed the benefits of using it. In terms of labeling a product as “biodegradable,” the FTC mandates that the product must “completely break down and return to nature” within one year for such a term to apply.

The Financial Reporting Council (“FRC”) recently published a briefing entitled, In Focus: Corporate Purpose and ESG, this spring as a companion piece to the Creating Positive Culture – Opportunities and Challenges report, which was released in December 2021. The FRC’s briefing looks to draw out what it views as an “inherently interlinked” relationship between a company’s purpose, values, and culture and its environmental, social, and governance (ESG”) objectives. While the idea of linking corporate purpose with ESG is not new, it is notable that the FRC has decided that it now warrants a publication in its own right.

The briefing builds upon the “Principles” and “Provisions” included in the FRC’s UK Corporate Governance Code (“CGC”), in particular, “Principle B,” which states that a “board should establish the company’s purpose … and satisfy itself that [it] and [the company’s] culture are aligned.” The CGC – which is aimed at premium-listed companies – is intended to provide a framework for good corporate governance. The CGC is not mandatory, but the FRC does require that those companies to which the code applies either “comply” or “explain” should they elect to depart from the CGC.

Most readers will be familiar with the concept, succinctly articulated in the FRC’s briefing, that corporate purpose can serve as a “moral anchor” for a company. Readers may also be familiar with the potential risks in the event that a business finds itself without a strong corporate purpose and thus, exposed to changing tides of “cultural drift.” 

In its briefing, the FRC goes to considerable lengths to stress that the adoption of a corporate purpose does not “come at the expense of profit.” Rather, it provides examples of successful “purpose-led” businesses across a number of sectors. While not a panacea, a well-embedded corporate purpose can help to foster a culture where decision-makers not only take into account short-to-medium term objectives, as may be articulated in a company’s strategy, but also consider the impact of their decisions in the longer-term and through the lens of the values which flow from a well-articulated corporate purpose.

An organization that has a value-centric culture, supported by appropriate corporate governance arrangements (i.e., which ensure board-level accountability) can provide a fertile ground for consideration of ESG-issues, including, for example, climate-related risks. Where decision-makers are empowered to consider and monitor an organization’s progress on ESG-issues, both at a strategic and operational level, they will, ultimately, be best placed to determine whether any mitigation is required to protect the long-term value of a company. This is clearly in the interests of all stakeholders.

Stepping back and considering the FRC’s briefing in a wider context, it is possible, to see it as part of a wider movement in the corporate landscape. Increasingly, businesses are departing from the orthodox approach centered on “shareholder return maximization” towards one of “stakeholder value creation.” This emerging shift has come about in response to concerns that “shareholder primacy” as a model for corporate governance leaves businesses ill-equipped to respond to ESG-related risks.

Even the UK’s own model of “enlightened shareholder value” – as drafted in Section 172 of the Companies Act 2006 – has been found to be limited. The UK’s approach of allowing directors to consider the interests of other stakeholders – beyond shareholders (insofar that the interests of the former align with the latter) – is creaking under growing pressure from investors and consumers. Consequently, corporations in the UK and across the “developed” world are increasingly turning to market-based “soft law instruments” (i.e., the OECD’s Principles of Corporate Governance) to fill perceived voids in mandatory or quasi-mandatory corporate governance frameworks.

As the stark reality of the limitations on national governments to curb GHG emissions, tackle modern slavery in supply chains, and address entrenched inequalities becomes increasingly clear, the need for businesses to step up is more apparent than ever. Similarly, just as expectations on businesses have risen, a growing chorus of voices in the business community is calling on governments to do more. In the UK, for example, the “Better Business Act” campaign is lobbying to amend the law to embed purpose and stakeholders’ concerns into all businesses by default.

Legislators across the globe have long struggled to keep pace with societal change and reflect this in law. As such, it may be a while before we see substantive legal changes which codify a “stakeholder value creation” model. Nothing in the UK’s existing legislative framework, however, prevents a client from considering whether their existing corporate purpose can be said to be “ESG-aligned” and whether it cascades through its culture to its strategy and long-term objectives.

Dean Hickey is an associate at Slaughter and May in London, where his practice focuses on Sustainability and Climate Change.

Companies’ adoption of “green trademarks” is on the rise. A “first of its kind” report released last year by the European Union Intellectual Property Office (“EUIPO”) looked at the number of applications for trademarks that relate to sustainability and/or the environment between 1996 and 2020, and found that applications for “green” marks (i.e., ones whose goods/services descriptions make mention of sustainability terminology) increased “both in absolute figures and as a proportion of all European Union trademark filings.” Analyzing more than two million trademark filings for the presence of environmental, social, and governance (“ESG”)-centric terms, the EUIPO revealed that it was on the receiving end of 1,588 green-focused trademark filings, whereas in 2020, that number jumped to nearly 16,000.

The key takeaway of the EUIPO report – which is that a growing interest in sustainability is, in fact, being reflected in the trademark applications that companies are filing – is not limited to applications being lodged with the EU trademark body, as other trademark bodies are seeing a rise in environmentally-centric trademarks of their own. The U.S. Patent and Trademark Office (“USPTO”), for example, has seen rising ESG-focused applications in recent years due to consumers’ and companies’ growing attention to sustainability, which is, in turn, helping to shape the development of trademark portfolios of companies across industries. 

The EUIPO study focused primarily on trademarks in which ESG elements are included in the descriptions of the goods/services for which the marks are being (or will be) used, but a broader trend is seeing companies incorporate ESG imagery or terminology directly into the trademarks, themselves, in order to communicate environmentally-friendly products, services, or practices. LVMH-owned Veuve Clicquot’s “ECOYELLOW” word mark comes to mind, as does Louis Vuitton’s recycling arrow-inspired logo, Prada’s Re-Nylon arrow mark, Gucci’s globe-centric EQUILLIBRIUM mark, and adidas’ “End Plastic Waste” globe icon. 

Louis Vuitton and Prada arrow logos

Interestingly enough, while companies are increasingly looking to sustainability-focused indicators of source (as TFL first reported last year), these trademarks applications are not necessarily run of the mill filings, at least not in theory. In the midst of a rise in ESG trademark filings a decade ago, the USPTO started taking “a more rigorous review of trademark applications using ‘green’ in their marks,” Scarinci Hollenbeck attorney Kenneth C. Oh noted back in 2012, stating that “much like the Federal Trade Commission’s Green Guides, the new USPTO approach,” presumably prompted by a growing number of trademarks that make use of green terminology, “requires applicants to provide supporting evidence to trademark applications that contain ‘environmentally friendly’ claims.”

Regulating Green Trademarks

The USPTO is “already authorized to regulate ‘green’ trademarks under Section 2(a) of the Lanham Act, which addresses false and deceptive marks,” Oh stated at the time, asserting that existing federal precedent – which established that a trademark is considered deceptive when “(1) the term is misdescriptive of the character, quality, function, composition or use of the goods; (2) prospective purchasers are likely to believe that the misdescription actually describes the goods; and (3) the misdescription is likely to affect the decision to purchase” – extends to “green” trademarks. 

As for what this actually looks like in practice, it is hard to tell, as to date, few filings have been met with pushback on this front. While Veuve Clicquot’s “ECOYELLOW” mark, for instance, has faced pushback from the USPTO, it has not been to request information about the company’s “eco” efforts. Louis Vuitton’s recycling-centric logo – which was registered by the USPTO this summer for use across a number of classes of goods/services, including “advertising services for communication and public awareness in the field of environment, ecology, sustainable development and social issues” – similarly avoided any requests for substantiation about such ESG development activities from the trademark office. Prada’s own arrow mark – which it describes as consisting of the stylized word “PRADA” above the stylized wording “RE-NYLON” along with the outline of an inverted incomplete triangle formed by an arrow – was similarly registered by the USPTO without issue. 

Eco-yellow trademark app

Other marks that have been registered by the USPTO without any sustainability/ESG-related pushback: adidas’ “End Plastic Waste” logo for use on apparel, footwear, “sports bags,” and “organizing and conducting events for cultural purposes and training programs in the fields of the environment and sustainability for educational purposes, and its “Primegreen” mark for use on apparel, footwear, and “sports bags,” etc. Nike was issued a notice of allowance for marks in this vein, including the “Move to Zero” mark for use on footwear, as well as the promotion of “public interest and awareness in … environmental sustainability issues.” 

As for Gucci’s relatively-recently-filed applications to register its “Equilibrium” logo, which consist of its interlocking “GG” mark inside a stylized earth formed by green lines outlining and intersecting a blue circle, those are still pending before the USPTO.

While trademark offices like the USPTO do not appear to be calling on companies to substantiate their sustainability/ESG marks, that does not mean that companies could not face false advertising issues from watchdogs and/or consumer plaintiffs in the event that they market themselves by way of these marks as “green” or “eco” – or imply that their offerings are recycled or recyclable thanks to arrow-centric marks – but fail to act accordingly. 

“Investing in and integrating environmental protection and sustainability into a company’s brand [growth and] protection strategy can add value,” according to Pinsent Masons’ legal director Désirée Fields, given that there is “so much focus on these important issues globally.” While that remains true in light of rising regulator crackdowns on misleading sustainability marketing, including “general environmental benefit” claims – and the willingness of consumers and independent watchdogs to call out brands and/or initiate litigation in some cases, brands would be wise to consider the balance the benefits of using such branding with the potential ramifications.