INTELLECTUAL PROPERTY - October 2023

Beyond the Green Façade: “Greenwashing” Risks and Strategies for Authentic Sustainability

By Dr Stanley Lai, SC, David Lim, Linda Shi and Justin Tay (Allen & Gledhill LLP)

Advancements in green technology and innovations in recent years have come hand in hand with a growing demand in sustainable products, services and practices. For example, a recent study by Dentsu International and Microsoft Advertising indicated that 86% of consumers were concerned by climate change and 88% of consumers would make sustainable purchases whenever possible.[1]

This wave of interest has resulted in an increasing number of technology startups that are focused on developing and monetising “greentech” i.e., technology whose use is intended to mitigate or reverse the effects of human activity on the environment. Various government initiatives throughout the world have also been launched, ostensibly to show support for this movement. For example, trademark applications related to green technology and climate change are eligible for reduced application fees under recent changes announced by the US Patent and Trademark Office in January 2023. The prevalence of this trend renders it unsurprising that the EUIPO’s Green EU Trademarks Report [2] published in February 2023 revealed that the number of green trademarks filed per year has risen to an all-time high, from 1,588 in 1996 to about 18,726 in 2021. Green trademarks currently account for 12% of all filings each year, up from 4% in 1996.

It is not uncommon to see businesses take advantage of this new wave of interest to attract consumers by employing green marketing in various ways, such as the usage of green trademarks and slogans. However, the global increase in demand for sustainable products has been accompanied by growing concerns over deceptive green marketing practices known as “greenwashing”. This refers to the use of false, misleading or unsubstantiated claims to persuade consumers that a company’s products, services or practices are more environmentally friendly than they are in reality. Greenwashing has come to be a pernicious civil wrong that has evolved to deceive and mislead potential investors and stakeholders in the fast growing environmental, social and governance (ESG) space.

This article will cover the various ways by which Singapore law presently deals with greenwashing and suggest good practices that businesses may consider adopting in their marketing strategy to avoid any unwanted allegations or potential legal consequences associated with greenwashing.

I. The regulation of greenwashing under Singapore law

Presently, Singapore does not have any specific regulations on greenwashing. In early 2023, Minister of State for Trade and Industry, Alvin Tan, stated that the government will continue to monitor developments and introduce further measures if necessary.[3] He also reminded advertisers to comply with the Singapore Code of Advertising Practice and ensure that environmental claims are adequately explained, substantiated and qualified.

Nonetheless, there are existing mechanisms under Singapore law by which greenwashing may be regulated.

1. Regulation under the Trade Marks Act 1998 (“TMA”)

The Singapore Registry of Trade Marks may refuse the registration of misleading ‘green’ trademarks.

First, in Singapore, a trade mark is registrable under the TMA only if it is, among other things, capable of distinguishing the goods or services of one undertaking from those of other undertakings and it must be inherently distinctive or have acquired distinctiveness through use.[4]

The above requirement may not be satisfied in the context of “green” trademarks. For example, EUIPO Guidelines state that trademark applications comprising “eco” or “green”, either alone or in combination with other descriptive terms, may be refused for lacking distinctiveness – see e.g. “EcoPerfect” (case T-328/11), “ecoDoor” (case T-625/11) and “Greenworld” (case T-106/14).[5]

Second, a trade mark may also be refused registration in Singapore under either section 7(4)(b) of the TMA if it is of such a nature as to deceive the public as to the nature or quality of the goods or service, or under section 7(6) TMA, which prohibits a registration in bad faith and which may include dishonest dealings and dealings which fall short of the standards of acceptable commercial behaviour.[6]

One example in the EU is the trademark application for the logo mark “PAPER 2 PAPER RECYCLABLE” for plastic cups. The application was refused for being deceptive, with the EU Examination Division commenting that “[e]nvironmentally conscious English-speaking consumers will think that [they are] buying a product that is environmentally friendly, whereas in reality [they are] buying a product that is much more harmful to the environment than paper…”.[7]

Finally, even if a trademark is registered, it may be subsequently revoked under section 23(1) TMA if it had been registered in breach of section 7. Businesses should be wary that trademarks which veer into the crosshairs of “greenwashing” may not be able to withstand an invalidation challenge. This may prove to be an obstacle in trademark enforcement, as it is common for defendants in trademark infringement proceedings to make a counterclaim under section 23 to challenge the validity of the registration.

2. Regulation under the Consumer Protection (Fair Trading) Act 2003 (“CPFTA”)

Greenwashing practices may also potentially attract liability under the CPFTA, which is Singapore’s principal legislation on consumer protection.[8]

Section 4 CPFTA can apply to greenwashing in respect of consumer transactions. Broadly, section 4 protects consumers against unfair practices, which includes but is not limited to transactions whereby consumers are being reasonably deceived or misled, false claims, and taking advantage of consumers who are unable to protect their own interests or understand the consequences of the transaction.[9] More specifically, false representations that goods or services possess certain characteristics or qualities, or that they are of a certain standard, origin or method of manufacture, may also amount to an unfair practice.[10]

In respect of alleged breaches of section 4 CPFTA, the Competition and Consumer Commission of Singapore (“CCCS”) is empowered to conduct an investigation if there are reasonable grounds for suspecting that a supplier has engaged, is engaging or is likely to engage in an unfair practice.[11] The investigative powers of the CCCS include the power to require documents, articles or information to be produced to CCCS, to enter premises without a warrant or under a warrant, and to obtain oral examination or securing the attendance before the investigation officer of any person who appears to be acquainted with the facts or circumstances relevant to the investigation.

Separately, a consumer may commence an action in the relevant Singapore court under section 6 CPFTA against the supplier, provided the amount of the claim does not exceed SGD 30,000. In this regard, certain CPFTA provisions are more favourable to consumers. For example, where any part of the transaction is evidenced by an ambiguous document provided by the supplier, the provision must be interpreted against the supplier,[12] and where a dispute arises as to whether the supplier has complied with any specified requirement of the CPFTA, the burden of proving that the supplier has so complied is on the supplier.[13]

Finally, under section 9(1) CPFTA, the relevant Singapore courts may also, on the application of CCCS, make a declaration that the practice engaged in is an unfair practice and/or grant an injunction restraining the unfair practice.

3. Regulation of green financial products / services and ESG disclosure requirements

In the realm of finance, investors are increasingly interested in ESG factors when making investment decisions. In terms of business valuation, ESG has been identified as the biggest area of focus amongst over 100 Valuation Professional Organisations and standard-setters in a survey conducted by the International Valuation Standards Council.[14] In Singapore, the sustainable debt market has grown tenfold over the last 5 years, up to more than USD 20 billion in 2022.[15]

In this regard, financial products and services such as ESG-themed investment vehicles and/or green insurance products could potentially cross the line into greenwashing if the ESG label is only used to attract investors and the actual environmental benefit is low. This is a prevailing concern given the lack of uniform disclosure standards for ESG-themed investment vehicles. For example, the non-profit think tank InfluenceMap reported in August 2021 that over 70% of equity funds under a broad ESG category were misaligned from global climate targets under the Paris Agreement.[16]

To this end, the Monetary Authority of Singapore has launched several initiatives to improve disclosures, including developing an implementation guide for climate-related disclosures by financial institutions (i.e. banking, insurance and asset management sectors).[17] Issuers are also currently required by the Singapore Exchange (SGX) to provide climate-related reporting based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) on a “comply or explain basis” commencing in financial year 2022 (FY2022), with climate reporting becoming mandatory for issuers in certain specified industries beginning FY2023 and FY2024.[18]

In a similar vein, as part of Singapore’s IP Strategy 2030 (SIPS 2030), the Intangible Disclosures Framework (“IDF”) was launched on 4 September 2023 by the Intellectual Property Office of Singapore (IPOS) and the Accounting and Corporate Regulatory Authority (ACRA).[19] The IDF outlines principles for businesses to disclose and communicate their intangible assets so that stakeholders can make more informed assessments of an enterprise’s business and financial prospects.[20] To the extent that ESG factors impact value creation, the IDF may prove to be a useful guiding tool.

It has also been reported that Singapore will release fuller ESG disclosure guidelines in the near future. For example, a public consultation exercise conducted by ACRA and the Singapore Exchange Regulation (SGX RegCo) on the recommendations by the Sustainability Reporting Advisory Committee to advance climate reporting in Singapore is ongoing.[21] Under the recommendations, listed issuers will be required to report International Sustainability Standards Board (ISSB)-aligned climate-related disclosures starting from FY2025, with large non-listed companies with annual revenue of at least $1 billion to follow suit in FY2027.

II. Recommendations and best practices

In light of the above risk factors, businesses should take care in branding and in marketing their products in order to avoid any potential allegations of legal wrongdoing relating to greenwashing. Businesses should also comply with prevailing disclosure requirements and industry practices, including seeking professional advice if necessary.

To avoid any potential liability under the CPFTA, businesses should avoid making factually inaccurate, misleading or unsubstantiated claims in relation to its business practices or products. These include claims that a product is “sustainable” when the features claimed to be sustainable are in fact standard or required features of a product, or the making of a positive environmental claim where the net environmental impact of a product is in fact negative. Instead, businesses should ensure that environmental claims are well-substantiated with credible data or evidence, which includes conducting due diligence to ensure that the entire life cycle of a product or service is taken into account. Any caveats or conditions should be clearly stated.

A sustainable product may be marketed by first applying for certification under an eco-label such as the Singapore Green Labelling Scheme (“SGLS”), which is a registered certification mark in Singapore under section 61 TMA which is capable of certifying characteristics such as the origin, material and mode of manufacture of goods or services. Certification under the SGLS may therefore provide a brand’s products with an edge over competing products in an eco-conscious era.

To be eligible under the SGLS, a product must fall within one of over 70 specified product categories and meet all the requirements for the specified product category. The assessment takes into account the product’s environmental impact across its entire life cycle, including raw material composition, manufacturing process, distribution, packaging, usage and disposal. The SGLS is a useful certification strategy that sustainable businesses should consider deploying alongside traditional trade mark protection, so as to maximize branding for green credentials that have been earned and merited.

AUTHOR INFORMATION

Dr Stanley Lai, SC is the Head of Allen & Gledhill’s Intellectual Property Practice and Co-Head of the Cybersecurity & Data Protection Practice.
Email: stanley.lai@allenandgledhill.com

David Lim is a Senior Associate in the Intellectual Property Practice at Allen & Gledhill.
Email: david.lim@allenandgledhill.com

Linda Shi is an Associate in the Intellectual Property Practice at Allen & Gledhill.
Email: linda.shi@allenandgledhill.com

Justin Tay is an Associate in the Intellectual Property Practice at Allen & Gledhill.
Email: justin.tay@allenandgledhill.com

REFERENCES

[1] See https://about.ads.microsoft.com/en-us/insights/g/the-rise-of-sustainable-media (accessed on 5 September 2023).

[2] See https://euipo.europa.eu/tunnel-web/secure/webdav/guest/document_library/observatory/documents/reports/2023_Green_EUTM_report_update_2022/2023_Green_EUTM_report_2022_update_FullR_en.pdf (accessed on 5 September 2023).

[3] See https://www.mti.gov.sg/Newsroom/Parliamentary-Replies/2023/03/Oral-reply-to-PQ-on-enforcement-of-Consumer-Protection-Fair-Trading-Act (accessed on 5 September 2023).

[4] Sections 2(1), 7(1) and 7(2) TMA.

[5] See https://guidelines.euipo.europa.eu/2058843/1951946/trade-mark-guidelines/2-word-elements (accessed on 5 September 2023).

[6] Wing Joo Loong Ginseng Hong (Singapore) Co Pte Ltd v Qinghai Xinyuan Foreign Trade Co Ltd [2009] 2 SLR(R) 814 at [103]–[104].

[7] See https://www.lexology.com/library/detail.aspx?g=fdb0ac47-ad11-404d-aeaf-eaa922c810a5 (accessed on 5 September 2023).

[8] Supra note 3.