Going Green or Greenwashing? Environmental Claims and the Role of Trademarks

Seeing green

It has become increasingly common for business to make grand pledges (or claims) of sustainability or environmental and social responsibility[1]. It’s easy to see why – the commercial benefit of “going green” is not negligible as “73% of global consumers say they would definitely or probably change their consumption habits to reduce their impact on the environment” and “almost half (41%) of consumers from around the world say that they’re highly willing to pay more for products that contain all-natural or organic ingredients” (Nielsen)[2]. Indeed, corporations that adopt environmental and social responsibility programs can attract a consumer base that is willing to pay a premium for products with ingredients that are perceived to be environmentally-friendly. They may also attract highly sought-after green investment.

Green investment includes a wide range of investment themes and approaches, from investing in climate change mitigation efforts or in green sectors like agriculture and water, to sustainability and impact investing like clean energy investments and micro-finance[3]. No matter the specific approach, the common denominator remains that the investment strategy must factor ESG (Environment, Social, and Governance) standards into part of the investment decision-making process. The intention or purpose of this strategy is to generate a measurable, beneficial social or environmental impact, whilst driving value for shareholders. The boon this can provide to business is again clear – a March 2020 publication has shown that “investors are willing to pay $0.7 more for a share in a company giving one more dollar per share to charity.”[4]

Unsubstantiated environmental claims - a new kind of green-eyed monster

In a speech before the U.S. Chamber of Commerce on June 9, 2020[5], the managing director of the International Monetary Fund (IMF) emphasized the importance of the green and low-carbon economy, and indicated that it is “very interested in providing incentives for countries and companies to move faster in this direction”. Clearly, as the benefits of having environmental credentials increase, so does the motivation for businesses to shore up their environmental image by obtaining a trademark on certain “green” words, designs, logos, etc. It is important, however, not to falsely market products or services as environmentally friendly. Indeed, in Canada, pledges and claims must be made in accordance with the Canadian Competition Bureau’s Guidelines For Environmental Claims in Advertisements (“Guidelines”).[6] To do otherwise could land you in hot water, as you may inadvertently have engaged in greenwashing. Greenwashing is the unethical practice of misleading consumers, clients, citizens, or donors with unsubstantiated claims or implications of sustainable or environmentally-friendly practices.

Greenwashing usually occurs when a claim is made about a product attribute; for example, that it is biodegradable, recyclable, or flushable[7], instead of about “the environmental impact of the product’s entire life cycle.”[8] The Guidelines for environmental claims in advertisements[9] provide a multitude of examples of language that is discouraged. Some examples include making use of language that is vague and not specific, “… free” language (e.g., pesticide free), or wording that implies that a significant proportion of profits goes to a charitable organization, when in fact, it donates substantially less[10], amongst others.

Enforcement: the thin green line

In Canada, the Competition Bureau is responsible for investigating environmental claims and commencing actions against wrongdoers. It is important to note that it is possible for individuals to file private complaints against companies, organizations or individuals that they believe have violated the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act, or the Precious Metals Marking Act[11]. The complaint will be examined to determine whether an inquiry should be initiated in the file. Once the inquiry completed, the Competition Bureau then has the power to refer the complaint before the applicable court[12].

Greenwashing can and does have consequences. A recent case involved a farm that was accused, and later pled guilty, of falsely labeling their chicken as certified organic, which “create[d] an erroneous impression of its character and nature”[13]. The farm was ordered to pay $400,000.00 and sentenced to one year of probation[14]. In a number of other decisions, the Competition Tribunal deemed several corporations guilty of wrongly associating the spas they sold with the Energy Star program. Energy Star is a certification mark associated with energy efficient products[15]. The Commissioner was of the opinion that, through their advertisements, these corporations gave the false impression that the products that they sold satisfied the criteria of the Energy Star program. In order to correct the situation, the companies were ordered to remove the misleading advertisements and publish a notice on their websites wherein they clarify the true nature of their products[16].

Planting the right seeds: trademarks and certification marks

The stark reality however, is that greenwashing remains pervasive and too often goes unchecked. But this is not to say that there are no legal tools for combatting this practice. While trademarks are used first and foremost to distinguish goods and/or services from others, governments can make use of trademarks to help consumers easily distinguish which products are truly “eco-friendly”. Germany’s “Blue Angel” program, the Canadian Environmental Choice Program, the Nordic Swan, and the European Unions’ Flower eco-label are all examples of trademarks that can be attributed by governments to products if they respect the required criteria to obtain the certification[17]. The Canadian Environmental Choice Program, established in 1998, allows consumers to identify products that will “improve energy efficiency, reduce hazardous waste by-products, and make use of recycled materials”[18].

Earth Day Canada is another example of an organization that uses its trademarks to highlight businesses achieving ESG goals.  In collaboration with Durand Lawyers, they have developed and acquired a set of trademarks that include “Earth Day” and “Jour de la terre”, in an effort to ensure that the corporations associated with their trademarks comply with environmental and sustainability practices.

One of Earth Day Canada’s most successful programs is Action Réduction, a waste management certification program. Ensuring that Action Réduction and its logo are trademarks was a key step to enabling the organization to endorse its partners’ commitments to waste management, and other ESG goals. It furthermore increases the returns on the partner’s ESG activity by attracting positive customer and employee attention, making them a more attractive business and employer.

Though the Canadian Trademark Examination Manual is curiously silent on the issue of environmental claims, trademarks can still serve to support authentic envrionemental action and policy, as well as ESG and ECSR goals. Another approach, the procurement of certification marks, may be equally useful to ascertain environmentally friendly products. Certification marks are essential tools to combat greenwashing because their primary goal is to indicate to consumers that the product, with which they are associated, has satisfied a pre-established criteria or standard. In certain instances, a certification mark may be consequently more trustworthy than a privately held trademark regarding the true nature of the product in question[19]. Furthermore, there is evidence that suggests that “certification mark enforcement litigation” is the most effective method of safeguarding the interests of consumers who continuously seek eco-friendly products[20].

About Durand Lawyers

Proud partner of Earth Day Canada, Durand Lawyers brings Law & Business Together. We are a law and business advisory firm specialized in intellectual property, business strategy, as well as civil and corporate law. We are uniquely positioned to help clients in emerging technology industries such as environment, SaaS, AI, FinTech and cannabis, employing both lawyers and experienced entrepreneurs to get the best possible outcomes. For more information visit our website at www.durand-lex.com.

About Earth Day Canada

 For 25 years, Earth Day Canada has celebrated Earth Day with a wide array of awareness-raising activities on environmental issues. With its ability to mobilize local stakeholders, Earth Day Canada has developed numerous initiatives for April 22nd and every day. We aim to use Earth Day, April 22nd, as a catalyst for rallying engaged citizens and supporting organizations and municipalities trying to reduce their impact on the environment, all across Canada.

[1] Orazi, D.C., Chan, E.Y. “They Did Not Walk the Green Talk!:” How Information Specificity Influences Consumer Evaluations of Disconfirmed Environmental Claims. J Bus Ethics 163, 107–123 (2020). https://doi.org/10.1007/s10551-018-4028-6, available at: https://link.springer.com/article/10.1007/s10551-018-4028-6.

[2] See: https://www.nielsen.com/eu/en/insights/article/2019/a-natural-rise-in-sustainability-around-the-world/ as well as https://www.newswire.ca/news-releases/more-canadian-consumers-seeking-green-products-and-services-in-current-economy-515057131.html.

[3]  Inderst, G., Kaminker, Ch., Stewart, F. (2012), “Defining and Measuring Green Investments: Implications for Institutional Investors‟ Asset Allocations”, OECD Working Papers on Finance, Insurance and Private Pensions, No.24, OECD Publishing, available at: https://www.oecd.org/finance/WP_24_Defining_and_Measuring_Green_Investments.pdf.

[4] Bonnefon, Jean-Francois and Landier, Augustin and Sastry, Parinitha and Thesmar, David, Do Investors Care About Corporate Externalities? Experimental Evidence (September 23, 2019). HEC Paris Research Paper No. FIN-2019-1350. Available at SSRN: https://ssrn.com/abstract=3458447 or http://dx.doi.org/10.2139/ssrn.3458447 as well as https://www.cnbc.com/2020/02/14/esg-investing-numbers-suggest-green-investing-mega-trend-is-here.html.

[5] https://www.imf.org/en/News/Articles/2020/06/09/sp060920-from-great-lockdown-to-great-transformation

[6] Environmental Claims: A Guide for Industry and Advertisers, available at: https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02701.html. The U.S. Federal Trade Commission has also released Green Guides, which are designed to help marketers avoid making environmental claims that mislead consumers. They are available at: https://www.ftc.gov/news-events/media-resources/truth-advertising/green-guides.

[7] See: https://www.cbc.ca/news/canada/flushable-wipes-claim-environment-group-1.5117945

[8] Environmental labels and claims, available at: https://www.ic.gc.ca/eic/site/Oca-bc.nsf/eng/ca02523.html.

[9] Environmental Claims: A Guide for Industry and Advertisers, available at: https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02701.html. The U.S. Federal Trade Commission has also released Green Guides, which are designed to help marketers avoid making environmental claims that mislead consumers. They are available at: https://www.ftc.gov/news-events/media-resources/truth-advertising/green-guides.

[10] https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/00513.html

[11] https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/frm-eng/GHÉT-7TDNA5

[12] https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02930.html

[13] https://www.mondaq.com/canada/Environment/668148/Food-Truthiness-Greenwashing-In-The-Food-Industry ; https://www.inspection.gc.ca/about-the-cfia/newsroom/prosecution-bulletins/2018-02-16/eng/1518795076713/1518795078887

[14] https://www.inspection.gc.ca/about-the-cfia/newsroom/prosecution-bulletins/2018-02-16/eng/1518795076713/1518795078887

[15] https://www.energystar.gov/about

[16] The Commissioner of Competition v. Polar Spas (Edmonton) Ltd., CT-2009-013. For the full list of decisions: https://decisions.ct-tc.gc.ca/ct-tc/en/d/s/index.do?cont=%22Environmental+Claims%3A+A+Guide+for+Industry+and+Advertisers%22&ref=&d1=&d2=&p=&tf1=&or=

[17] Green Illusions : Governing CSR Aesthetics, p. 23.

[18] Environmental Claims: A Guide for Industry and Advertisers, p. 2, available at: https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02701.html.

[19] Kirchner-Freis, I. and Kirchner, A., “Legal Aspects of Green Trademarks”, in Green Innovations and IPR Management, The Netherlands, Kluwer Law International, 2013, p.75

[20] Lane, Eric L., (2010) Consumer Protection in the Eco-mark Era: A Preliminary Survey and Assessment of Anti-Greenwashing Activity and Eco-mark Enforcement, Marshall Rev. Intell. Prop. L. 742, p. 34.