In the second Don't Hug Me I'm Scared, Tony the Talking Clock said brown when washing the character even though the rhymes of the words and lyrics were leading up to green (such as mean and clean).
When the Sketchbook asked the puppets to pick their favorite color, green was not one of the options in the wheel, which is likely why green is not considered "creative." Green is also the only color picked that is not a primary color. This may imply that Sketchbook does not in fact encourage creativity, and is only trying to force its own idea of creativity onto the puppets. Or, maybe it is because green is the color of most leaves, so picking the color is not a creative idea.