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KFTC Proposes Amendment to Review Guidelines Regarding Greenwashing

2023.06.26

On June 8, 2023, the Korea Fair Trade Commission (“KFTC”) issued an advance notice on a proposed amendment to its Guidelines for Review of Environment-Related Labeling and Advertising that aims to more effectively regulate greenwashing (advance notice period: June 8, 2023 - June 28. 2023).

Greenwashing, a portmanteau of “green” and “whitewashing” refers to a form of deceptive marketing that portrays a company or its products as more environment-friendly (i.e., “greener”) than they actually are. Recently, the global emphasis on environment, social, and governance (“ESG”) values has led to a surge in the number of claims that a company or product is environment-friendly, making greenwashing a constant subject of discussion among regulators worldwide, including the KFTC, which has been working on establishing a specific set of guidelines for reviewing greenwashing-related conduct and impose sanctions. As the KFTC has publicly recognized the need to regulate greenwashing, including its annual report to the President in January, going forward, the KFTC is expected to proactively regulate greenwashing based on the details laid out in the proposed amendment.

In particular, the proposed amendment updates the criteria for assessing whether a label or advertisement is unfair by (i) bringing the Guidelines up to date with related legislations that became effective since the Guidelines were last amended in 2016 (e.g., Notifications of the Ministry of Environment (“MOE”) and foreign guidelines on greenwashing), (ii) replacing outdated terms with those used in current labels and advertisements, and (iii) presenting specific examples of each type of unfair environment-related labeling and advertising. Key details of the proposed amendment are as follows:

1.   Key Details of the Proposed Amendment
 

(1)   General Principles for Reviewing Unfairness
 

The proposed amendment reorganizes the general principles for reviewing unfairness of environment-related labeling and advertising into the principles of (i) authenticity, (ii) clarity, (iii) considerableness, (iv) substantiability, (v) consideration of a product’s entire life cycle, (vi) specificity, and (vii) completeness, and provides specific examples for each principle.
 

Principle

Examples

Authenticity

In labeling or advertising an adhesive product, if volatile organic compounds (“VOCs”) were the only type of harmful substance not detected during testing, umbrella terms and absolute expressions such as “environmentally friendly” or “non-toxic” should not be used as they may mislead consumers into thinking that the product has no potential for polluting the environment in any situation or does not release or contain toxic substances. To ensure authenticity, a label or advertisement should merely state that “VOCs were not detected”

Clarity

A label or advertisement rendered in green letters along with an image of nature (e.g., dense forest, trees) should be avoided because, although it does not make an explicit claim that the product is good for the environment, the texts and images may mislead consumers into thinking that the product had no adverse effect on the environment

Considerableness

A statement that there was a “50% increase in recycled fiber” is technically correct if the amount of recycled fiber used in a clothing product increased from 2% to 3%. However, such statement should not be used as it may give the false impression that the product contains a considerable amount of recycled fiber even though it is difficult to say that a 1% increase in recycled fiber improves the environment in a meaningful way

Substantiability

To claim that a product is “biodegradable,” the company should be able to provide objective and scientific proof of its biodegradability (e.g., conditions, time, ratio), and any advertisement making such claim should include relevant evidence (e.g., test results)

Consideration of a Product’s Entire Life Cycle

When labeling or advertising a product that has reduced its carbon emissions generated during the production process by one third, making a statement that there was “an additional 33% reduction in carbon emissions” along with a disclaimer in small font that says “excluding the transportation process” should be avoided as this may mislead consumers into thinking there was a significant decrease in carbon emissions, while in fact there was only a slight decrease because, when considering a product’s entire life cycle, most of the carbon emissions are released during the transportation process

Specificity

A label that says “recyclable” on a plastic package containing a shower curtain without further explanation may mislead consumers into believing that both the package and the curtain are recyclable even though only one of the two is. Therefore, the label should further indicate which specific part of a product is recyclable

Completeness

If only the mattress of a bed product that also includes a headrest and bed frame was certified as environmentally friendly, it should not be advertised as an “environmentally friendly bed” without further explanation as it may deceive consumers into believing that such certification was obtained for the entire product

 

(2)   Clarification of the Principle of Consideration of a Product’s Entire Life Cycle
 

The proposed amendment makes clear that environment-related labeling and advertising should be made in consideration of a product’s entire life cycle (i.e., from attainment of raw materials, production and distribution to use and disposal), and therefore even if the environmental impact of a product has been improved in some stages of its life cycle, if such improvement is offset or the net impact is harmful considering the entire life cycle, the product should not be labeled or advertised as though its overall environmental impact has been improved.
 

(3)   Examples of Unfair Environment-Related Labeling or Advertising by Representative Types of Conduct
 

The proposed amendment, reflecting the MOE’s Notification on Management System for Labeling and Advertising of Environmental Properties, newly provides examples of environment-related labeling and advertising by each of the following four types of representative unfair conduct.
 

Type of Unfair Conduct

Examples

False or Exaggerated Labeling and Advertising 

Claiming that there was an improvement in a product’s environmental properties or effects even though there was little, if any, improvement

Making an exaggerated or false claim regarding environment-related awards, certification, selection or patents, such as claiming that a product won an award that it did not or by making false claims about an award that it had won

Unauthorized use of an environment-related certification mark or falsifying details of an authorized certification mark

Using environment-related corporate or management certifications that are unrelated to the product

Deceptive Labeling or Advertising

When listing information on a product’s environmental properties or effects, failure to indicate specifically which part of the product (e.g., the product itself, packaging materials) the label or advertisement is referring to, or omitting, concealing or downplaying all or part of such information

Highlighting that a product does not contain harmful ingredients or properties that would not be included in such product in the first place, thereby falsely suggesting that the product’s environmental properties or effects have been improved due to their absence

Highlighting that matters required under applicable law were implemented as though this has improved the product’s environmental properties or effects

Stating that the environmental properties or effects of a product have improved based on an improvement in the environmental properties or efficacy of certain raw materials, even though such partial improvement did not result in a net improvement of the product’s environmental properties as a whole

Labeling or Advertising Based on Unfair Comparisons

Making a comparative statement on a product’s environmental properties or effects without specifying the product against which such comparison was made, or based on an unfair comparison conducted under unequal conditions

Failing to specify the details of or standards used in a comparison, which could mislead consumers or give them a false impression and have a significant impact on their purchasing decisions

Using absolute, exclusionary terms such as “largest,” “first” or “exclusive” without indicating the specific scope or objective grounds of comparison in claiming that the products are distinctly superior or advantageous to rival products in terms of environmental properties or effects

Comparing other false information about the product’s environmental properties or effects, and thereby misleading consumers

Slanderous Labeling or Advertising

Making slanderous statements about a rival product’s environmental properties or effects without presenting a specific basis for comparison

Highlighting a rival product’s disadvantages in terms of environmental properties or effects to make consumers think that the rival product is significantly inferior or disadvantageous than it actually is

Concealing, omitting, or downplaying information on a rival product’s environmental properties or effects

 

(4)   Update Guidelines for Specific Terms and Expressions Based on the Principle of Consideration of a Product’s Entire Life Cycle
 

The proposed amendment reorganizes the guidelines for specific terms and expressions based on three product life cycle stages - (i) composition of raw materials or resources, (ii) production and use, and (iii) disposal and recycling - and updates the terms and expressions to those currently used in related fields of expertise. Further, based on domestic and foreign legislations, KFTC decisions, and MOE notifications, the proposed amendment provides specific examples certain unfair claims that are often made with regard to each stage that should be avoided or may constitute a violation of law.
 

Stage

Unfair claims

Examples

Composition of Raw Materials or Resources
Text

Reduction of harmful substances

  • Claiming that a vitamin product contains “100% natural vitamins” even though a synthetic raw material was used in the manufacturing process (false or exaggerated advertising)

Not included

  • Suggesting that a baby food product is safe by stating that it is “100% free of harmful ingredients” even though it is impossible to block 100% of harmful substances or ingredients during the manufacturing process no matter how advanced the manufacturing facilities and systems (false or exaggerated advertising)

Production and Use

Energy saving/reduction     

  • Claiming that a product is “environmentally friendly, saves energy by OO%” as if such energy saving figures can be achieved in real life even though the figures were based on a simulation test result obtained under certain conditions (deceptive advertising)

Saving of resources and reduction of carbon emissions

  • Using expressions such as “low carbon,” “carbon emissions reduced,” or “carbon offset,” without providing information supporting such claim (e.g., where and how carbon emissions were reduced) as if there was an improvement in the product’s environmental properties

  • An airline claiming that by using their services passengers can contribute to a sustainable future through carbon neutrality, which is untrue even though some emissions could be offset by purchasing carbon credits

Disposal and Recycling

Waste treatment

  • Attaching a label that says “decomposable vinyl” on one side of a product, and another on the other side that says “only if buried underground in soil of at least 40% humidity at room temperature” where it is difficult to notice, preventing consumers from understanding that the two labels refer to the same property (deceptive labeling)

Recycling

  • Claiming that a product was “made of renewable substances,” which would lead the consumers to believe that the product was renewable and made of biodegradable substances, without providing information supporting such claim

  • Attaching on a product container a label that says “refillable” even though the company does not operate a refilling program (false, exaggerated or deceptive labeling)

Umbrella Terms and Expressions

  • Claiming that a container product is “environmentally friendly” even though it does not go beyond complying with the U.S. FDA’s safety guidelines and the hazardous substance elution standards under the Food Sanitation Act, as if the product’s environmental properties or effects are better than those of rival products (false, exaggerated or deceptive advertising)

 

(5)   Specific Guidelines for Corporate Labeling and Advertising
 

The proposed amendment requires a company, when labeling or advertising environment-related corporate goals or plans, to prepare a specific plan for implementation to secure personnel and resources to support such plan, and specify measurable goals and deadlines.

The proposed amendment also specifically prohibits companies from misleading consumers by using certain phrases, designs or colors on labels or in advertisements to suggest that, contrary to reality, their products have environmental advantages, and from falsely suggesting that the environmental property or effects of some products apply to all products under a larger brand.
 

(6)   New self-checklist
 

The proposed amendment introduces a simplified self-checklist (Link) to help companies self-assess the illegality of their environment-related labeling and advertising conduct.
 

2.   Implications
 

Going forward, any company that engages or plans to engage in environment-related labeling and advertising should become familiar with the details of the proposed amendment in preparation of the draft being finalized and taking effect. In particular, companies should look into whether there are any of the types of violations described in the proposed amendment in their current labels or advertisements, and closely monitor law enforcement developments at the KFTC regarding greenwashing.

Meanwhile, companies are also advised to monitor developments at the MOE, which currently regulates environment-related labeling and advertising under the Environmental Technology and Industry Support Act and its Notification on System for Managing Environment-Related Labeling and Advertising, as it may, later this year, release a new set of Guidelines for Labeling and Advertising Regarding Environment-Friendly Business Management Activities that will identify terminology that is often misused from a greenwashing perspective, and set a reasonable scope of interpretation.

After gathering feedback from interested parties during the advance notice period, the KFTC plans to finalize and implement the proposed amendment through resolution at a plenary hearing.

 

[Korean Version]

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