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The Commerce Commission has vowed to focus on any businesses making carbon claims to ensure they are accurate, appropriately substantiated and do not mislead consumers, warns Bryan Gundersen and Hayden Wilson from Kensington Swan. Failing to do this may result in a breach of the Fair Trading Act and the possibility of incurring hefty penalties. The Commission recently released a document entitled “The Fair Trading Act: Guidelines for Carbon Claims”. These guidelines supplement the “Guidelines on Green Marketing” document that was released last year with the intention that ‘together these guidelines will provide valuable resources to assist businesses to understand their obligations under the Act’. These guidelines have been released to inform both businesses who are providers of carbon offsets and those that purchase offsets to promote their green credentials and will help businesses comply with their obligations under the Act, and ensure consumers are only exposed to accurate and substantiated carbon claims. The guidelines state that: ‘Carbon claims should clearly inform consumers as to exactly what is being offset and how it is being offset. If accurate and easily understood, carbon claims demonstrating a business’s approach to environmental issues and carbon offsetting will assist consumers to purchase according to their preferences. Vague, unsubstantiated, confusing or misleading information will reduce consumer confidence… and disadvantage ethical traders.’ They are divided into three parts; an examination of the Act, an assessment of the broad principles to consider when making carbon claims, and a checklist which businesses can use to help identify misleading material.
The Fair Trading ActSections 9 to 12 of the Act contain broad prohibitions against misleading and deceptive conduct. The conduct in question does not actually have to mislead anyone – it just has to be capable of misleading. Intention to mislead or deceive is also irrelevant. According to the law in this area, silence can also amount to misleading conduct if there is a reasonable expectation that, in the circumstances, information should be disclosed. Sections 13 to 16 deal with false or misleading representations about goods and services. These fall into two categories. The first is false representations as to goods being of a particular ‘standard, quality, grade, quantity, composition, style or mode or as having had a particular history or prior use’. This basically means goods must comply accurately with any description that is provided in advertising or on labelling. The second category is representing that a particular good or service has characteristic, benefit, sponsorship or endorsement when in fact it does not. The penalties for breaching the Act can be severe. They range from a declaratory order or interim injunction by civil action, to a hefty fine of up to $200,000 per offence for a company imposed by the District Court under criminal proceedings. For this reason, it is vital businesses avoid contravening the Act when making claims.
Principles of making carbon claimsThe guidelines provide a number of examples of what forms of behaviour will trigger an investigation by the commission. This includes ensuring that ‘additionality’ can be proven in the creation of any carbon offsets, warnings against inappropriate use of forward credited offsets or using double-counted offsets. Providing or purchasing low-quality credits can also leave businesses vulnerable to investigation, as can claims referring to a future or anticipated state of affairs. The guidelines recommend that, if a business wishes to make carbon claims, the following principles should apply: ‘Always consider your audience and what message they will take from the claim; provide accurate and complete information for consumers to make their decisions; spell out exactly what is included in your claim to avoid misleading consumers; if making statements about the future ensure you have a reasonable basis for making them; misleading conduct can include silence, so do not withhold any information that may be relevant to the claim; and because there are many different standards of measurement, accounting and accreditation, explain in full what your claim refers to and direct consumers to additional information if possible.’ This list is not complete, and the guidelines themselves go into further detail as to the principles that should be applied. However, it offers a good indication as to the level of accuracy the Commission expects from businesses when making carbon-related claims.
Avoid a breach of the lawThe guide strongly recommends an in-house compliance programme be implemented by businesses to ensure any potential breaches are identified as early as possible. This is especially important due to the fact that an unintentional or non-deliberate breach of the Act still leaves the maker of the claim vulnerable to legal action. Also, the existence of such a programme is likely to be viewed favourably by the Court if action is ever taken against the business, and may provide a full or partial defence if one of its agents or employees acts in contravention of the Act. The commission has made it clear that unsubstantiated carbon claims will not be tolerated. Businesses that do not comply with their obligations under the Fair Trading Act have been warned.
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