In a recently announced decision, the National Advertising Division (NAD) examined environmental benefit and performance claims made by LEI Electronics Inc. (LEI) for its Eco Alkaline batteries. In response to the NAD’s inquiry, LEI discontinued certain advertising and agreed to modify most claims as recommended by NAD. However, LEI refused to discontinue the carbon neutral claim it was making for its batteries, challenging NAD’s conclusion that this claim was not adequately supported. In accordance with its procedures, NAD referred the carbon neutral claim to the Federal Trade Commission (FTC) for review.
This case exemplifies the difficulties inherent in substantiating carbon offset and carbon neutral claims. The FTC’s Green Guides require that the emissions reductions represented by carbon offsets be quantified by competent and reliable scientific and accounting methods. Advertisers are responsible for ensuring that their carbon offsets are legitimate and that their claims about carbon neutrality are adequately supported. As we’ve discussed before (see, e.g., here and here), there are many factors that go into determining whether offsets count under the Green Guides, including whether the activity truly offsets emissions, whether the activity would have occurred anyway, and how quickly the emissions offset will occur. Advertisers can be put in a difficult position when they want to be environmentally responsible by reducing their carbon footprints because they have to rely on information provided by third-party offset providers.
LEI presented life cycle assessment (LCA) to establish the carbon footprint of its Eco Alkaline batteries and certifications from third-party carbon offset providers. NAD expressed concerns that the LCA were not reliable and did not accurately calculate the carbon footprint because the assessment was limited to Canada. In addition, NAD concluded that the quantity of carbon offset by the third-party certifications was not sufficiently substantiated because no evidence of when the carbon reductions would occur were presented. Under the Green Guides, a disclosure must be made if the reductions will not occur within two years.
In the Advertiser’s Statement accompanying the NAD’s decision, LEI argued that the LCA and third-party certifications comply with the Green Guides and thus adequately substantiate its carbon neutral claim. As a result, LEI refused to discontinue this claim, and NAD said it will refer the claim to the FTC. The FTC strongly supports the NAD process, but does not always look into matters referred to it. Whether the FTC does investigate is influenced by available resources and enforcement priorities. This could be an opportunity for the FTC to provide additional guidance on carbon offsets, but time will tell whether the FTC will take the opportunity to do so.