How 'green' is my brand?

01 Apr 2009Archived News Energetics in the News

PUBLISHED: Ethical Investor, by Oliver Wagg - Dr Mary Stewart, Principal Consultant Strategy, Energetics Pty Ltd tells Ethical Investor what it takes for a business to be able to make a true green claim.

 

‘Green’ branding is getting harder to do. Tougher legislation, the economic downturn – the costs of developing and marketing a genuinely green brand can be huge – and continued uncertainty over the carbon offsets market, has left fewer companies seeking the glare of the green spotlight. Yet experts agree that green branding done well can benefit both consumers and the companies that are progressive enough to take the plunge.

Putting the hard work in

Before taking green brands into the market, companies must ensure the hard work of substantiating these claims has been completed. But best-practice examples in Australia are rare.

Dr Mary Stewart, senior consultant at consultancy Energetics, says companies have to “get their house in order” before raising their heads above the parapet.

“For a green claim to be rigorous, a company really has to participate in a ‘cradle to grave’ analysis,” she says.

One company that has done the hard work is Foster’s Group (ASX: FGL), with its carbon-neutral Cascade Green beer, a first in Australia. Taking the beer to market was metaphorically just the top of the esky.

“It’s quite a complex process to navigate your way through,” says Ben Summons, Foster’s premium-beer marketing manager.

“As well as the usual marketing, communication and strategic challenges, this one is a ‘triple bottom line’ product, which means you have to be absolutely rigorous around your approach to development.

“One key facet of that is being authentic around your product and service, as well as your intent of what you want to do. If you’re in it for a quick win … then you have the wrong intentions,” Summons says, pointing to the brewer’s decade-long sustainability track record.

Each launch is unique, but the direct costs involved with launching Cascade Green were approximately 50 per cent more than a typical launch of an equivalent product.

“Over the course of its first year in market all development and launch costs have been recovered, while ongoing costs in relation to carbon offsetting remain,” Summons says.

CHOICE senior policy officer Victoria Coleman says it is more challenging now for businesses to make green claims because substantiation can come under closer scrutiny. The Australian Competition and Consumer Commission (ACCC) in October 2007 said it would take action on misleading or false green claims. “If, for example, companies say they have a ‘small footprint’, they must have measured their footprint and be able to substantiate where they have made savings.

Interestingly, the vaguest claims include the words ‘environmentally’, ‘natural’, ‘pure’, ‘renewable’, and ‘recycled’,” she says. While some companies are getting better at substantiating their green claims, others have stated their green merits without much evidence, Coleman says. Important cases such as the SAAB Grrrrrreeen advertisement and Woolworths (ASX: WOW) Safe toilet tissue have made businesses pay attention to the details they need to include.

In January 2008, the Federal Court declared that GM Holden made false and misleading claims in its Grrrrrreen campaign which promoted the environmentally friendly nature of its SAAB range of vehicles.

And in March 2008, the ACCC inconclusively ended an investigation into the green credentials of Woolworths’ tissue products and claims about the sustainability of the fibre used. The watchdog said the matter was a complex one and it accepted Woolworths’ interim solution of putting new stickers over the labels, before rolling out new packaging.

From opportunity to risk

Whether it’s the downturn in the economy – the costs of setting up a proper validation process can be high – or the threat of exposure, making green claims that can be validated has become more difficult.

Energetics’ Stewart says companies are not necessarily seeing environmental claims as a marketing opportunity these days. Instead, many are now seeing disclosure as a threat.

Amanda Bodger, partner at lawyers Mallesons Stephen Jacques, agrees, suggesting that some companies have been “scared off” green branding by previous high profile ACCC cases.

“Some of the claims that have been seen in the press about green claims – because of ACCC investigations or maybe articles by CHOICE – have meant possibly that companies have taken a bit more care with making green claims.”

The Climate Group’s Australian director, Rupert Posner, says that in some cases it led to an unfortunate and ironical situation where companies making the best green efforts were ‘’getting hammered’’.

Competing credibility claims

To be credible, environmental claims must be verified and preferably by a non-governmental third party. It is here that a major problem of comparison arises, since different products are better served by very different certification processes.

“Fairtrade (certification) is a very good programme and produces some very good results,” says Energetics’ Stewart. “But it wouldn’t work with timber, for example, where the Forest Stewardship Council (FSC) is better applied.”

Since there are no universal standards for assuring green products, Stewart references AccountAbility’s What Assures Consumers on Climate Change (June 2007), a project that was continued here by Net Balance in 2008, and The Six Sins of Greenwashing, a project by US-based environmental marketing agency TerraChoice. One solution to assuring green claims actually live up to expectations would be compulsory corporate reporting of sustainability data. But even here, Energetics’ Stewart sees major hurdles.

“Yes we do see assurance of these reports. But the problem is there is still no universal measure of performance,” she says.

Validation through education

Green claims are no good if the consumer does not know what they mean. “If you are making a green claim, and a lot of the terminology is not precisely defined, then there is an obligation to explain what you mean by that claim to avoid an action under section 52 and 53 (of the Trade Practices Act),” says Malleson’s Bodger. But Bodger does not think the onus for providing education should necessarily lie with the companies that are selling green products.

“That role must be one for the regulator – that is fairly and squarely in the charter of the regulator.” For companies making claims that might be misconstrued, then they actually have to explain what they mean, and in that way educate consumers. But I think the education role should be with the regulators and it is an area – sustainability reports and others – which I think has been overlooked.”

Foster’s aims to communicate the 100 per cent carbon offset of Cascade on its packaging, but acknowledges there is an evolving understanding of what that means.

“What we aim to do is provide details behind that on our website, and through our carton, where there is more room to provide detail,” Summons says.

In the case of carbon neutrality claims – perhaps a well understood term globally – the federal government has even suggested that the term should not exist, The Climate Group’s Posner says.
“Now I think (carbon neutrality) is a term known across the world. You can’t make a term relevant in Australia not relevant in Australia. The public have heard of certain terms, such as the ETS and CPRS, but the reality is that very few people actually understand the complexities of these mechanisms.”

Carbon-claims confusion

A widely used and easy to understand standard is the government-approved Greenhouse Friendly logo. The program was designed to help business and industry balance the greenhouse gas emissions produced during the life of a product or service, with emission reduction activities such as energy efficiency projects, renewable energy projects, forestry plantations and fuel switching. In return, a company’s products or services can display the Greenhouse Friendly certification trade mark or logo demonstrating commitment to environmental priorities and providing a valuable competitive edge.
The government is reviewing the scheme.

But both The Climate Group’s Posner and Fosters’ Summons believe the scheme has strong merits.
“We are passionate believers in having a certification program such as Greenhouse Friendly because it ensures that anyone who wants to be seen as providing a credible solution through a marketable greener choice goes through a rigorous verification process,” Summons says.

“It’s a complicated area. To get a short, sharp, easily understood marketing claim or label or slogan around carbon neutrality or scale of emissions, is difficult - even after people start understanding the CPRS and ETS,” Mallesons’ Bodger says, noting the complexities of reporting on the issue and the challenges marketers face in summarising the claims in the typical punchy manner.

Claims about carbon emissions and carbon neutrality need an explanation as to which part of the production process the company is referring. “Very rarely would a company make a claim about carbon footprints from ‘cradle to grave’. Any claim will have to be very cleverly crafted and explained, so I think that is putting people off too,” Bodger says.

Posner notes a degree of confusion over carbon offsets, much of it because the federal government has questioned the concept of carbon neutrality itself. “To a certain extent there is a bit of ‘wait and see’ on this,” he says.

“One of the things the federal government has said is they may not want companies to be able to make claims over carbon neutrality or carbon neutral products. That would be a real shame, because I think it is important for companies and individuals to be able to do more than they are required to do by law.” The government wants to legislate for 5-15 per cent national greenhouse gas cuts by 2020. The whole area of making carbon claims is complex at the best of times, Posner says.

“You might go out and sell a carbon-neutral product but if it is fundamentally ‘bad in use’ then offsetting its carbon emissions during its production is not necessarily quite as good as the claim might be. You can see this in the car industry. It is important that any claim is very clear in terms of what it is achieving.”

CHOICE wants to take this a step further. It wants to see some minimum environmental standards to stop companies making products that harm the environment. “We are concerned that companies are continuing to try to dupe customers with misleading claims, but we are also concerned that there remains a raft of products available that simply harm the environment,” Coleman says.

One of the issues being discussed by the legislators is the area of ‘double counting’ of carbon credits.

“Basically what that means is that any company in Australia that was claiming to reduce emissions by purchasing offsets created here, these claims could now be questionable,” Posner says.

“I would have thought that, particularly considering the discussion paper the government’s put out, companies would be going back into their shells at the moment until they know how these issues are going to be dealt with.” “We are passionate believers

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