Federal and State Regulation of Environmental Marketing: A Manager's Guide
Davis, Joel J., SAM Advanced Management Journal
Managers who wish to promote the environmental attributes or benefits of their regional or national products face a confusing array of federal and state regulation of environmental marketing and advertising claims. Individual state regulations are difficult to interpret and often conflict with each other.(1) In addition, the Federal Trade Commission has issued its own guidelines which, unfortunately, have failed to provide the clarifying direction managers need. This is because the FTC guidelines do not have the force of law, and as a result, they do not pre-empt state regulations.(2) As a consequence, managers who wish to promote their product's environmental benefits nationally or even across several states must still comply with each state's regulations to avoid litigation on the same level.
Given the current regulatory environment, managers who decide to promote a product's "greenness" have two options. First, they can differentially manufacture, label and advertise the product in a way that satisfies the specific requirements of each state in which the product is distributed. Second, they can develop and market their product in a way that satisfies the requirements of the most stringent state or combination of state regulations in the product's distribution area.
To determine which option is the most desirable, managers must have a clear understanding of the nature of the specific regulations governing environmental marketing and advertising claims on the state and federal levels. To assist managers in understanding the regulatory environment, and thus to help them better understand their manufacturing, marketing and advertising options, this paper analyzes and reconciles existing federal and state regulations governing the use of eight environmental claims, and provides managers with specific actions and recommendations related to alternative compliance options.
The environmental claims examined in this paper fall into three broad areas and are those whose use in marketing communications(*) is regulated through either federal or state action. These areas are: environmental impact (general environmental benefit claims such "environmentally-friendly" and ozone claims such as "ozone safe" and "ozone friendly"; physical product characteristics (recycled content. packaging, or other source reduction); and post-usage product characteristics (recyclable, degradable, compostable, or refillable). FTC guidelines address all specific terms within each of these areas. Since not all states regulate each area, Figure 1 summarizes the areas and specific terms addressed by individual state regulation, while Figure II provides the legislative sources of all applicable guidelines and regulations.
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Regulation of Specific Environmental Claims
Generalized Environmental Claims
The FTC, California, Indiana, and Rhode Island specifically address the usage of generalized environmental claims such as "environmentally friendly," "ecologically safe" or any similar term intended to convey in a general way the idea that the product is not harmful to or is beneficial to the environment. Additionally, while not expressly regulated by other states, the use of these terms has received significant attention by many state regulatory agencies under the authority of existing regulation of advertising deception.
Rhode Island presents the most stringent regulations, taking the position that terms such as "environmentally safe" are inherently inaccurate and misleading to consumers. As a result, it absolutely forbids manufacturers, distributors, and retailers from imprinting any packaging with the term "environmentally safe" or comparable terms. California, Indiana, and the FTC, as well as other states which regulate these claims under general advertising regulation, share Rhode Island's concern. In general, they regard these terms as misleading or deceptive because they are believed to be: 1) too general, not containing sufficient disclosures or explanations of the environmental benefits offered; 2) too difficult for consumers to interpret accurately; and 3) misleading, since, depending upon their context they may suggest more specific and far-reaching environmental benefits than what the product or package actually offers. …