“Greenwashing” construction materials & products

The increasing awareness of the impact of greenhouse gas emissions on the environment has resulted in substantial growth in demand in the construction sector for “green” building materials, products and processes.

Trade Practices Act

Concerns about potential breaches of the Trade Practices Act (TPA) in relation to “green claims” are relevant not only to the enforcement powers of the Australian Competition and Consumer Commission (ACCC) but also to causes of action in private legal proceedings.

Section 52 of the TPA prohibits a corporation from engaging in conduct that is misleading or deceptive, or that is likely to mislead or deceive.  There are numerous penalties and remedies associated with a breach of section 52.  There are similar prohibitions addressing misleading and deceptive conduct in State fair trading legislation.

ACCC Issues Paper on green claims

The ACCC published an Issues Paper entitled “The Trade Practices Act and carbon offset claims” on 16 January 2008, addressing claims of “green credentials”.  Bearing in mind the ACCC’s concerns, caution should be exercised in making representations in relation to allegedly green building products, materials and processes including:

• claims of carbon-neutrality based on an inaccurate carbon footprint. The carbon footprint could be calculated in good faith but by using an inaccurate “calculator” or a calculator that provides no substantiation with regard to its calculations
• a claim of carbon-neutrality made without substantiation. (Consider representations that could be made by manufacturers and suppliers of products and materials for construction)
• claims of a transition to a position of carbon neutrality (representations about future matters) could have particular relevance for designers, owners and landlords of buildings that receive “green upgrades”
• claims of “low carbon” in particular products, materials or services can be too broad. This could mean “lower carbon” compared with other products or services. Alternately, it could be understood by consumers as being low in emissions or in effect carbon-neutral

In addition, there could be significant exposure under the TPA where, say, a new “green development” is completed and over time is shown not to achieve its objectives where there has been a series of representations at the tendering and contractual negotiation stage as to likely outcomes.  For example:

• what pre-contractual representations were made as to the performance characteristics of green products, materials and processes or the as-built result? Bear in mind that the TPA can make it difficult to enforce “entire contract” type clauses addressing prior understandings and representations, as well as certain types of disclaimers
• are there in house compliance programs that are aimed at educating project participants, manufacturers, suppliers, technical personnel, employees, managers, marketers and agents about potential exposure under the TPA in relation to “green claims”?
• what representations are being made about the life-cycle analysis, long term durability and maintenance in terms of the evaluation of green products and materials, apart from assessing the overall environmental impact and energy savings?
• is the description of the green building product or material specific enough to dispel misunderstandings – for example, is there a representation that the product or material is “natural”, superior due to being “natural” as opposed to being a human made or synthetic product or material?

The unqualified use of “green terms” should be avoided.  Rather, there should be:

• a clear explanation as to what part of the product life cycle is covered by a carbon neutrality claim
• a clear explanation as to what emissions are covered by the carbon neutrality claim, for example whether it is only direct emissions as a result of making the product or material, or whether it extends to emissions that can be associated with the source of energy that is used to produce the product or material or that are attributable to the downstream consumption of the product or material
• clarity in a claim that a product or material is “low carbon” so that it specifies the products against which it is being compared and is made only about a product that actually has a low absolute level of carbon
• an assessment as to whether claims are being made about the performance of a type or class of products or materials in comparison with others

ACCC Background Paper

The ACCC released its background paper “Carbon Claims and the Trade Practices Act” on 27 June 2008, which explores concerns identified in response to the Issues Paper. Key pointers arising out of this background paper include:

• in relation to approvals, businesses engaged in the manufacture and supply of materials for use in green projects should not claim to have approval from a government agency or licensing board when no such approval has been given, where such approval has lapsed or where the approval relates to other matters
• in relation to performance characteristics, businesses should not claim falsely that their products or services have certain capabilities or effects that they do not have, such as overstating the impact in relation to a product or service
• in relation to benefits, businesses should not claim that a product or service has carbon-related environmental benefits if these claims cannot be substantiated
• businesses should avoid engaging in conduct that is liable to mislead the public (even through inadvertence, mistake or mismanagement) as to the nature, the manufacturing process, the characteristics, suitability for purpose or the quantity of goods
• if representations are to be made about future matters (for example, expected building performance characteristics), then there must be reasonable grounds for making these representations

All participants and stakeholders in a green project, including its supply chain, must appreciate their potential exposure under the TPA in the above respects.  Advice should be sought if there is any doubt as to whether particular practices, representations or a course of conduct may fall foul of this legislation.

Author: Stuart Miller