No Result
View All Result
SUBSCRIBE | NO FEES, NO PAYWALLS
MANAGE MY SUBSCRIPTION
NEWSLETTER
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • CCI Magazine
    • Writing for CCI
    • Career Connection
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Library
    • Download Whitepapers & Reports
    • Download eBooks
    • New: Living Your Best Compliance Life by Mary Shirley
    • New: Ethics and Compliance for Humans by Adam Balfour
    • 2021: Raise Your Game, Not Your Voice by Lentini-Walker & Tschida
    • CCI Press & Compliance Bookshelf
  • Podcasts
    • Great Women in Compliance
    • Unless: The Podcast (Hemma Lomax)
  • Research
  • Webinars
  • Events
  • Subscribe
Jump to a Section
  • At the Office
    • Ethics
    • HR Compliance
    • Leadership & Career
    • Well-Being at Work
  • Compliance & Risk
    • Compliance
    • FCPA
    • Fraud
    • Risk
  • Finserv & Audit
    • Financial Services
    • Internal Audit
  • Governance
    • ESG
    • Getting Governance Right
  • Infosec
    • Cybersecurity
    • Data Privacy
  • Opinion
    • Adam Balfour
    • Jim DeLoach
    • Mary Shirley
    • Yan Tougas
No Result
View All Result
Corporate Compliance Insights
Home Compliance

When It Comes to Climate Disclosures, SEC and FTC Speak Different Languages

What you share about climate change with investors (SEC) may not be permissible with your customers and prospects (FTC)

by Tony Subketkaew
May 11, 2022
in Compliance
test image for new AR

Expanded climate reporting will likely tempt marketing teams to try to capitalize on favorable climate performance as disclosed in reporting. But be warned: Disclosure language meeting the SEC’s reporting requirements does not necessarily meet the guidelines of the Federal Trade Commission (FTC).

Picture this: Acme Widgets decides to launch an advertising campaign highlighting its efforts to be more environmentally friendly. Thinking it would be low-risk, the marketing team pulls climate-related language from the annual report running it verbatim as ad copy:

“All of the packaging used by Acme Widgets is recyclable, and Acme Widgets has set a goal of using recycled materials only in its products by 2030.”

This ad copy is then sandwiched between two romance-copy statements on Acme Widgets product labels:

“At Acme Widgets, we care about the environment. All packaging used by Acme Widgets is recyclable, and Acme Widgets has set a goal of only using recycled materials in its products by 2030. Each purchase of an Acme Widget product helps ensure a cleaner planet for future generations.”

Weeks after the first batch of products with this new label text hits store shelves, Acme Widgets receives a warning letter from FTC alleging that the company’s marketing claims are unlawful.

What went wrong?

Just because disclosure language satisfies reporting requirements under SEC regulations, that does not necessarily mean the same language is acceptable as an environmental marketing claim under FTC regulations. Even though the text is unchanged, the context in which it is presented and the purpose for which it is used determines whether the SEC or the FTC has jurisdiction.

It is unlikely that statements appearing in SEC filings would be viewed as promotional content by the FTC. But using those same statements outside of the SEC filing context could make them promotional and potentially violate the FTC’s guidance.

SEC’s proposed rule

The SEC presides over environmental, social and governance (ESG) disclosures in financial markets. The SEC has extended the comment period for its proposed rules from May 20, 2022, to June 17, 2020. When finalized, these new rules will add significant climate-related disclosure requirements for registrants. As explained by the SEC in a news release, the proposed rule is intended to provide clarity to companies about how to disclose climate-related risks as well as how to meet investor demand for such information.

Notably, the proposed rule would require companies, to the extent present, to disclose climate-related targets or goals. Under proposed Section 229.1506, the disclosure must, among other requirements, include:

  • The scope of activities and emissions described in the target or goal
  • The unit of measurement, including whether the target is absolute (a fixed quantity) or intensity-based (a target rate)
  • The defined time horizon by which the target is intended to be achieved and whether such time horizon is consistent with other goals established by treaty, law, regulation, policy or organization
  • How the registrant intends to meet its climate-related goals

FTC’s ‘Green Guides’

Sharing climate-related goals — and how a company intends to meet those goals — outside of the SEC filing context could run afoul of FTC advertising requirements. The FTC has jurisdiction over environmental marketing claims. Its Green Guides generally prohibit advertisers from making claims that are false and/or misleading.

Even though codified, these serve only as guidance. That is, they cannot independently provide the basis for enforcement on their own. However, violations of the Green Guides can serve as evidence. In other words, while FTC authorities generally prohibit false and/or misleading advertising, the Green Guides tell us how environmental marketing claims can become false and/or misleading.

States can also adopt the Green Guides into law to add clarity to the requirements for environmental marketing claims made within their jurisdictions. This is how California adopted the Green Guides into its California Business and Professions Code § 17580.5.

Standards for most of the environmental marketing claims in the Green Guides track with common sense. That is, companies should not:

  • Suggest a product is endorsed by an independent third party if it is not
  • Imply that a product is “free of” a substance if it is not
  • Represent that a package is refillable if it is not

But other Green Guide standards are significantly more prescriptive. For example:

  • General environmental benefit claims: Claims suggesting environmental benefits (e.g., “green,” “eco-friendly” or “sustainable,”) must include qualifying language that limits the scope of the claim to that which is substantiated by the advertiser. As an example, instead of using the claim “eco-friendly” to describe a product, the advertiser could revise the claim to say “eco-friendly: made with recycled materials” to clearly describe how the product is eco-friendly. [16 CFR 260.4]
  • Carbon offset claims: Claims must clearly and prominently disclose if the carbon offsets represent emission reductions that will not occur for two years or later. [16 CFR 260.5(b)]
  • Recyclable claims: Unqualified “recyclable” claims should be made only when recycling facilities that can process the recyclable content are available to 60 percent or more of the consumers or communities where the product is sold. [16 CFR 260.12]
  • Renewable energy claims: Unqualified renewable energy claims should not be made when fossil fuels or electricity derived from fossil fuels are used to manufacture any part of the advertised product. [16 CFR 260.15]

How can companies avoid, or at least mitigate, advertising risks?

In a perfect world, Acme Widgets’ financial counsel would handle SEC filings, while its advertising law counsel would handle advertising. The two would cooperate on climate change disclosures and statements, and in the meantime, the marketing team would know where to turn for specific advice on how to structure its associated claims, slogans and promotions.

In practice, expanded climate change reporting for the SEC will likely spur ever more vocal and demanding consumers looking for climate-friendly products and services. Marketing teams will detect this demand and seek to move rapidly to adjust the company’s messaging.

This may be new ground for many. But the marketing team must be informed that climate-related disclosures in SEC filings are not automatically approved for use in promotional materials and that further review may be required. Implementing this type of process can help companies avoid making environmental marketing claims the FTC might deem misleading or unsubstantiated.

What should companies be watching for in this space?

The law and guidance across these fronts are by no means settled science, but rather, a continuously moving target. Matters to pay attention to moving forward include:

On the SEC front …

  • Changes to the final rule: The comment period for the proposed rule ends May 20, 2022. The SEC could potentially discuss the advertising issues in its final rule if comments raise those issues.
  • Climate and ESG Task Force in the Division of Enforcement: The SEC announced the creation of a task force in March 2021 “to develop initiatives to proactively identify ESG-related misconduct” in financial reporting. Enforcement actions arising because of this initiative may give registrants insight about the types of activities the SEC is actively monitoring.

On the FTC front …

  • More exposure (via the proposed rule) equals more enforcement? With companies potentially having to provide deeper climate-related disclosures, there may be a corresponding increase in the use of environmental marketing claims from companies hoping to repurpose existing disclosure language into advertising. Greater focus equals greater risk.
  • Revised Green Guides: Initially issued by the FTC in 1992 then revised in 1996, 1998 and 2012, the Green Guides are due for review in 2022. However, it is uncertain whether the FTC will address the SEC proposed rule in its latest revision.

Follow the right standards

In sum, both investors and consumers want more information about the climate and ESG impacts of businesses, products and services. But companies must take care when mating SEC-regulated reporting to FTC-regulated marketing materials. There are significant differences between the two agencies’ standards — and it is the duty of compliance teams to make certain the marketing and sales teams understand the nuances.


Tags: ESGFederal Trade Commission (FTC)SEC
Previous Post

As Musk’s Tweet Inadvertently Illustrates, the Letter of the Law Has Its Limits

Next Post

Accenture Annual Compliance Risk Study 2022

Tony Subketkaew

Tony Subketkaew

Tony SubketkaewTony Subketkaew is an associate at Haynes Boone in Washington, D.C. He helps clients with a range of FDA and advertising matters, including advertising litigation, preparing responses and challenges before the National Advertising Division of the Better Business Bureau, Proposition 65 compliance reviews and assessing market claims.

Related Posts

sec building sign

What to Expect From Atkins-Led SEC

by Jaclyn Jaeger
May 6, 2025

Former Bush-era commissioner returns with mission to streamline regulations and enhance capital markets

eu flags brussels

EU’s Regulatory Retreat? The Omnibus Package’s Impact on Sustainability Reporting

by Jon Solorzano, Kelly Rondinelli and Jacob Baltzegar
April 28, 2025

Extended timelines and reduced requirements offer relief as substantial reforms remain under consideration

federal trade commission building

[Q&A] Big Tech & Free Speech Under the Microscope: FTC’s New Direction

by FTI Consulting
April 28, 2025

What compliance teams need to know about the changing approach to consumer protection and data privacy

data abstract green purple

66% of CISOs Worry Cyber Threats Are More Advanced Than Companies’ Defenses

by Staff and Wire Reports
April 25, 2025

US business sector falling behind in adoption of renewable energy

Next Post
Accenture Compliance Risk Study 2022 Cover 2

Accenture Annual Compliance Risk Study 2022

No Result
View All Result

Privacy Policy | AI Policy

Founded in 2010, CCI is the web’s premier global independent news source for compliance, ethics, risk and information security. 

Got a news tip? Get in touch. Want a weekly round-up in your inbox? Sign up for free. No subscription fees, no paywalls. 

Follow Us

Browse Topics:

  • CCI Press
  • Compliance
  • Compliance Podcasts
  • Cybersecurity
  • Data Privacy
  • eBooks Published by CCI
  • Ethics
  • FCPA
  • Featured
  • Financial Services
  • Fraud
  • Governance
  • GRC Vendor News
  • HR Compliance
  • Internal Audit
  • Leadership and Career
  • On Demand Webinars
  • Opinion
  • Research
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Well-Being
  • Whitepapers

© 2025 Corporate Compliance Insights

Welcome to CCI. This site uses cookies. Please click OK to accept. Privacy Policy
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT
No Result
View All Result
  • Home
  • About
    • About CCI
    • CCI Magazine
    • Writing for CCI
    • Career Connection
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Library
    • Download Whitepapers & Reports
    • Download eBooks
    • New: Living Your Best Compliance Life by Mary Shirley
    • New: Ethics and Compliance for Humans by Adam Balfour
    • 2021: Raise Your Game, Not Your Voice by Lentini-Walker & Tschida
    • CCI Press & Compliance Bookshelf
  • Podcasts
    • Great Women in Compliance
    • Unless: The Podcast (Hemma Lomax)
  • Research
  • Webinars
  • Events
  • Subscribe

© 2025 Corporate Compliance Insights