Green Assertions

A COMPANY CLAIMS its coffee is sustainable. A wrapper on an item bears a statement that the packaging is renewable. A chemical manufacturer adopts a more energy-efficient process for making a particular compound, buys offsets equivalent to the greenhouse gases emitted in making that material, and then advertises the product as "carbon neutral."

How legitimate these environmental marketing declarations are and what they mean is now undergoing government scrutiny. The Federal Trade Commission (FTC) is taking a detailed look at these matters as part of a review of its decade-old guidelines on environmental marketing claims. As part of the effort, FTC is giving special attention to emerging markets for carbon offsets and renewable energy certificates.

"In the past year, there's been an explosion of green marketing," FTC Chairman Deborah Platt Majoras said at a public meeting on Jan. 8. The agency, whose goal is to promote and safeguard competition and protect consumers, wants to make sure that green claims aren't deceptive, she said.

To guard against such false claims, FTC enforces a federal law that prohibits unfair or deceptive trade practices. Under this law, companies must have a reasonable basis for the claims, environmental or otherwise, that they use in marketing their products. The agency, however, has neither the legal authority nor the expertise to establish environmental performance standards or preferred practices.

FTC first issued guidelines for environmental marketing claims in 1992 and revised them in 1998. Those guidelines describe appropriate use of general terms, such as "environmentally preferable," and more specific descriptions, such as "biodegradable" and "ozone safe." The guidance also gives examples of deceptive claims using environmental terms.

The guidelines instruct marketers to provide specifics about many green claims. For instance, an unqualified assertion that a product is environmentally preferable is vague and can be deceptive, according to FTC. But a label or advertisement that touts an item as environmentally preferable because it has no potential to pollute air or is 100% biodegradable is acceptable.

In the decade since FTC last revised its guidelines, an array of new terms have cropped up, including "sustainable," "renewable," and "biobased," Majoras said. The agency is probing how these terms are used and how consumers perceive their meaning.

ANOTHER FOCUS for FTC is getting a handle on carbon offsets and renewable energy certificates, which are gaining popularity.

Purchases of carbon offsets are designed to fund projects that reduce emissions of greenhouse gases, such as planting trees or capturing methane from a landfill. What gets sold, according to FTC, are "credits or certificates that represent the right to claim responsibility for greenhouse gas emission reductions." Buyers, including companies and universities, that purchase offsets equivalent to the amount of greenhouse gases they emit may claim they are carbon neutral.

The market for carbon offsets was $91 million in 2006, according to Katherine Hamilton, carbon project manager at Ecosystem Marketplace.

Renewable energy certificates, on the other hand, come from generators of electricity from wind, solar, and other renewable sources that sell their power into the grid, just as a fossil-fueled plant does. But they also sell the renewable attributes of their electricity separately. This marketing strategy allows consumers far from a wind farm to purchase and take credit for supporting wind energy, though they may actually draw power generated at a coal-fired plant. And in some states with renewable energy portfolio requirements for power generators, utilities may meet these standards by purchasing renewable energy certificates.

"A heightened potential for deception" surrounds the marketing of carbon offsets and renewable energy certificates, Majoras warned. It's not easy for purchasers to verify that they're getting the product or service they've paid for, especially because a carbon-offset project or a renewable energy generation station may be thousands of miles from where they are. There's also the possibility that a single carbon-offset credit or renewable energy certificate could be sold more than once, she explained.

FTC isn't alone in its concern over carbon offsets. Republicans in the House of Representatives have asked the Government Accountability Office to investigate the "integrity" of carbon-offset programs.

FTC's investigation into the newest generation of green claims will include more workshops on environmental marketing and will stretch over the coming months. The outcome is likely to peel away sketchy marketing claims and sharpen how companies can promote the environmental aspects of products.