Greenwashing Litigation: Reduce the Risk of Getting Stuck in the Weeds
In recent years, American consumers have demonstrated a focus on how their consumption habits impact the environment. According to McKinsey & Company, “more than half of US consumers are … highly concerned about the environmental impact of packaging in general.” Consumers are willing to pay for “more green” and many fashion, food, and cleaning product companies are willing to provide it to them. Cognizant of the increased consumer demand for environmentally and socially responsible products, consumer-facing companies are developing and marketing more products than ever that are “sulfate-free” “all vegan” “plant-based” “non-toxic” “earth friendly” “eco-friendly” “environmentally friendly” or “carbon neutral” to remain competitive.
This increase in environmentally responsible labeled products on shelves has resulted in the rise of false advertising class action lawsuits (known as “greenwashing” litigation), which allege that the environmental claims about “sustainable” products are false or inflated. Greenwashing generally encompasses allegations that companies are misleading consumers to choose their product or service over others by implying that the company, product, or service has environmental or social merits or benefits that are in fact non-existent. Greenwashing cases are often substantially costly to companies, as plaintiffs often seek statutory penalties for a large class, attorney’s fees, disgorgement of monies, and potentially most damaging, brand trust and loyalty.
Greenwashing litigation has substantially impacted federal policies across the country. For example, the Federal Trade Commission (FTC) announced in December 2022 that it was undergoing a review of its Green Guides, which sets forth the FTC’s current views, recommendations, and guidance regarding environmental claims in marketing and advertising and are intended to help companies avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act, 15 U.S.C. § 45. The FTC’s review is notable, given that the Green Guides have not been updated in over a decade and are regularly referenced in greenwashing litigation. It is also notable that they are non-binding (in most states) and do not pre-empt state or federal laws. Consequently, even strict compliance with the Green Guides does not necessarily eliminate a company’s exposure to future greenwashing litigation.
While the Green Guides are helpful, they do not always provide perfect guidance on what is needed to support a valid environmental claim. For example, the Green Guide provides the following concerning “non-toxic” marketing claims:
- It is deceptive to misrepresent, directly or by implication, that a product, package, or service is non-toxic. Non-toxic claims should be clearly and prominently qualified to the extent necessary to avoid deception.
- A non-toxic claim likely conveys that a product, package, or service is non-toxic both for humans and for the environment generally. Therefore, marketers making non-toxic claims should have competent and reliable scientific evidence that the product, package, or service is non-toxic for humans and the environment or should clearly and prominently qualify their claims to avoid deception.
While use of the term “non-toxic” under the Green Guides is not prohibited, the guidance fails to fully explain what “prominently qualified” or “competent and reliable scientific evidence” means to set forth a standard for compliant use of the term. Such ambiguity leaves companies in the dark for marketing compliance.
Plaintiffs are capitalizing on such ambiguities as greenwashing litigation is on the rise. There has been a notable increase in greenwashing cases filed in California and New York. One noteworthy case includes Smith v. Keurig Green Mountain, Inc., 2023 WL 2250264 (N.D. Cal. Feb. 27, 2023), where California Unfair Competition Law claims were filed against Keurig for their alleged false advertising of its K-cup coffee pods as recyclable. The case was eventually settled for approximately $10 million, as the company’s statements concerning specific products were alleged to be inaccurate with respect to recyclability. Lee v. Canada Goose, 2021 WL 6881256 (S.D.N.Y. Oct. 19, 2021) is also notable, as the famous jacket apparel company, Canada Goose, was sued in New York under consumer protection statutes for alleged false labeling of coyote fur products as “ethical” and “sustainable.”
Although Courts can dismiss cases where companies show transparency about their methodology and do not mislead consumers, there is a difference with respect to aspirational corporate ethos and specific product claims. Nevertheless, judges are more willing to hear greenwashing cases today, as many cases tend to survive the motion to dismiss stage.
Moving forward, all consumer goods companies involved in the sale of environmentally and socially responsible products should adjust their marketing to avoid costly litigation and prepare for forthcoming regulatory requirements related to ESG (Environmental, Social, and Corporate Governance) disclosures. It is critical for a company to avoid making demonstrably inaccurate statements, such as labeling products as “recyclable,” “sustainable,” or safe for certain ecosystems without verifiable proof. Companies should also exercise extreme caution when using broad terms like “sustainable,” “humane,” or “earth friendly” on product labels, and always account for how a “reasonable consumer” would interpret them.
Some specific steps consumer goods companies should consider using moving forward, include the following:
- Assess compliance with the FTC Green Guides, (and monitor for updates). Although compliance with the Green Guides does not guarantee that you will avoid litigation, it is useful evidence to demonstrate efforts were made.
- Keep any environmental representations simple and specific.
- Qualify environmental marketing claims where feasible.
- Determine if the use of colors, words, or images could be interpreted as an implied environmental claim.
- Track and retain all statistics and data necessary to defend your environmental claims. Above all – keep it accurate.
This publication is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this publication is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel. The views and opinions expressed herein represent those of the individual author only and are not necessarily the views of Clark Hill PLC. Although we attempt to ensure that postings on our website are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.
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