Note, marketing Green building is one of the key topics that will be discussed at our upcoming seminar “The Law Of Green Building In Maryland.” Information about the seminar, scheduled for both August 7th at 8 – 10 a.m. and August 12th at 5 – 7 p.m. can be obtained via email from skaplow@stuartkaplow.com or by telephone at 410-339-3910.

A study earlier this year by the CoStar Group confirmed, what others had anecdotally suggested, Green buildings outperform non-green assets in occupancy, sale price and rental rates. In an effort to capture those Green premiums, owners are aggressively marketing their Green buildings.

And the value of Green building construction in the United States is projected, by McGraw-Hill Construction Analytics, to increase to $60 billion each year by 2010. The Green building products market, tracked by the Green Building Alliance, will exceed $40 billion annually by 2010.

In response to these market shifts, the Federal Trade Commission (FTC) is hosting a workshop ‘ftc – eco in the market’ on July 15, 2008 “to examine developments in green building” including how the public interprets Green claims and the substantiation necessary to support them.

Claims that buildings are “green” or that building products are “environmentally friendly” raise potential consumer perception and substantiation issues. Sellers and marketers are making Green claims for a wide variety of buildings and products, including such terms as “sustainable” and “renewable.” In addition, some marketers advise consumers to consider the life cycle of the building products before purchasing (e.g., whether the products are made of materials that are rapidly renewable or sustainable and whether the materials can be reused or recycled when the item wears out).

In the Green building market, owners are increasingly using certification programs to highlight the environmentally friendly aspects of buildings. LEED and Green Globes are among the third-party certification programs that establish criteria for Green buildings. Typically, the building must meet certain thresholds, set forth in the certification program; however, builders may choose among numerous alternatives to reach the desired goal. For example, a Green certified home might generate less waste during construction; be located near public transportation; include appliances, windows, and insulation that reduce energy use; and, utilize high efficiency water fixtures. The FTC has suggested that these certification programs raise a variety of potential consumer protection issues.

Additionally, today’s market offers a myriad of Green building product choices, including paint, carpeting, wallpaper, flooring, cabinetry, lighting, windows, insulation, appliances, as well as heating and cooling systems, and more.

This growth in the Green building marketplace provides potential benefits to businesses and homeowners alike, who nevertheless face challenges highlighting the environmental attributes of building and products.

The Federal Trade Commission

The FTC is charged with preventing deception and unfairness in the marketplace. The FTC has the power to bring enforcement actions against false or misleading marketing claims, including environmental or Green marketing claims. The FTC issued its Environmental Guides, often referred to as the “Green Guides,” in 1992, and revised them most recently in 1998. The Guides indicate how the Commission will apply Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices, to environmental marketing claims.

The FTC regulates all forms of marketing for products (including buildings) and services: advertisements, labels, package inserts, promotional materials, words, symbols, logos, product brand names, and marketing through digital or electronic media, such as the Internet or email. They regulate any claim, express or implied, about the environmental attributes of a product, package or service in connection with the sale, offering for sale or marketing of the product, package or service for personal, family or household use, or for commercial, institutional or industrial use.

How the public interprets Green claims and the substantiation necessary to support them are the subject of the July 15th FTC workshop ‘ftc – eco in the market.’ Curiously, that day long workshop will consider both “green building & textiles.”

The result from that FTC workshop is anticipated to be a revised FTC Environmental Guide, indicate how the Commission will apply Green building and textile marketing claims. Given that such a revised Guide should not be expected this calendar year, current environmental marketing should follow existing general guidance. The FTC looks at advertising from the public’s perspective: what message does the advertising actually convey to the public, so that marketers can avoid making false or misleading claims? All marketers making express or implied claims about the attributes of their product, package or service must have substantiation, that is, a reasonable basis for their claims.

An Example of an Environmental Claim

An oft cited example of an environmental product marketing claim may provide great guidance to claims related to a building. The FTC has said that an environmental claim should specify whether it refers to the product, the packaging or both, or just to a component of the product or its packaging. A box of cereal is labeled “recycled package.” The package consists of a paperboard box with a wax paper bag inside holding the cereal. By itself, the claim “recycled package” could apply to both the box and the bag. If only the box is recycled, the claim is deceptive. It should be qualified to say, for example, “recycled box.” However, a steel can that contains vegetables and is labeled “recycled” requires no qualification for that claim because it is obvious to consumers that the can is recycled, not the vegetables.

State Regulation

States are generally following the FTC’s lead in enforcement of false and deception Green claims and Maryland has a state statute, that is the Consumer Protection Act, Title 13 of the Commercial Law Article, which reads, in part,

“It is unlawful to engage in an unfair or deceptive trade practice in the rental or sale of consumer realty, or in the offer for rental or sale of consumer realty, regardless of whether or not a consumer is in fact deceived or damaged as a result. Unfair or deceptive trade practices include but are not limited to the following: 1) a false or misleading oral or written statement, visual description, or other representation which has the capacity, tendency or effect of deceiving consumers; 2) representation that consumer realty has a sponsorship, characteristic, use, etc., which it does not have, or that it is of a particular standard, quality, or style which it is not; ..”

The Maryland statute, while broader in scope of practices regulated, is less all encompassing than the FTC’s authority because Maryland only seeks to protect “consumers” and not the marketplace in general when it defines “consumer realty .. as real property which is primarily used for personal, household, family or agricultural purposes”. So, while binding with respect to consumer Green building and products, this state statute also serves as guidance to those marketing to those other than consumers.

Conclusion

That Green buildings outperform non-green assets in occupancy, sale price and rental rates is no longer, seriously, in dispute. As owners market Green buildings in an effort to capture those Green premiums, understanding and complying with the evolving statutes and regulations will be increasingly important.