'Greenwashing' Claims Strike Consumer-Facing Companies: How to Avoid the Increasing Threat of Litigation

Consumers are increasingly conscious of how the products they buy impact the environment. Due to this heightened focus on environmental issues, consumer-facing companies frequently highlight the environmentally friendly attributes of their goods and services in advertising and on product labels. Unfortunately, leading companies are facing a wave of “greenwashing” class action lawsuits challenging these environmental claims. The Federal Trade Commission’s Green Guides provide some direction for companies seeking to avoid problematic environmental claims. However, the Green Guides are currently nonbinding and they do not preempt state law. The plaintiffs’ bar has seized upon this ambiguity, and many preeminent companies have faced greenwashing class actions alleging claims under state consumer fraud statutes and related common law theories of liability. The FTC has also filed lawsuits against several companies. Consumer-facing companies should take immediate action to assess whether they are complying with the Green Guides and to review their exposure to greenwashing claims.

This article provides a high-level overview of the FTC’s Green Guides, analyzes the recent wave of greenwashing class actions and identifies practical strategies that companies can use to mitigate the risk of greenwashing litigation.

The FTC Green Guides

The FTC’s Green Guides set forth the agency’s current views about environmental claims in marketing and advertising. The FTC intends for the Guides 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. See 16 C.F.R. § 260.1(a) (2012).

However, as noted above, the Green Guides are currently nonbinding and they do not preempt state law. See id. §§ 260.1(a)-(b). Consequently, the Guides “do not confer any rights on any person and do not operate to bind the FTC or the public.” Id. § 260.1(a).

The Guides “apply to claims about the environmental attributes of a product, package, or service in connection with the marketing, offering for sale, or sale of such item or service to individuals.” Id. § 260.1(c). Moreover, the Guides govern “environmental claims in labeling, advertising, promotional materials, and all other forms of marketing in any medium, whether asserted directly or by implication, through words, symbols, logos, depictions, product brand names or any other means.” Id. (emphasis added). The Guides also apply to business-to-business transactions. Id.

The Green Guides contain general and detailed guidance regarding various types of environmental claims, including claims that fall into the following high-level categories:

Id. §§ 260.4-260.17.

The Green Guides do not address usage of the following terms, which are commonly observed in product marketing and advertising:

See id.

Potential Updates to the Green Guides

The FTC recently accepted public comment regarding proposed “updates” to the Green Guides, which have not been revised since 2012. The public comment period ended on April 24, 2023. See 88 Fed. Reg. 7657-01 (Feb. 6, 2023). Thus, the agency may issue an updated version of the Green Guides in the near future.

The Recent Wave of “Greenwashing” Class Actions

Although the Green Guides provide some instruction regarding environmental claims, the plaintiffs’ bar has seized upon the ambiguity resulting from the fact that the Green Guides do not preempt state law. Many leading companies have faced greenwashing class actions alleging claims under state consumer fraud statutes and related common law theories of liability.¹

For instance, recent class action complaints have included the following greenwashing allegations:

Although a few companies have been able to obtain early dismissals of these greenwashing lawsuits, courts have denied numerous motions to dismiss, and many cases remain pending in jurisdictions across the country.²

FTC “Greenwashing” Litigation

The FTC has also pursued greenwashing litigation against companies for purportedly “deceptive” environmental claims. For instance, the FTC recently sued Walmart, Inc., and another national retail chain for engaging in allegedly false marketing of rayon textile products as “bamboo.”³ The court orders resolving the allegations required both companies to stop making green claims or using other supposedly “misleading advertising.”⁴ The companies also agreed to pay $3 million and $2.5 million, respectively.⁵

Ten Key Takeaways and Compliance Strategies

Consumer-facing companies should take immediate action to analyze their exposure to greenwashing claims. The recent court decisions in greenwashing class actions and the allegations presented in pending cases reveal a number of strategies that companies can implement to reduce the risk of litigation.

1. Assess compliance with the FTC Green Guides, but understand that compliance with the Green Guides may not be sufficient to preclude litigation.
   • Although not always a silver bullet, compliance with the Green Guides can affirmatively eliminate certain types of greenwashing claims and provide for a robust defense in litigation. Moreover, a company will be an easy target for the plaintiffs’ bar if it fails to comply with the Green Guides in public marketing and advertising.
   • However, as discussed, the Green Guides are not binding, do not preempt state law and do not govern certain types of environmental claims. Thus, compliance with the Guides will not completely eradicate the risk of litigation.
2. Be specific and keep it simple.
   • Avoid broad unqualified representations about products and practices.
   • If a company uses green terminology in its marketing, advertising or labeling, it should provide additional context, including but not limited to supplemental disclosures or limiting/qualifying language that is prominently associated with the environmental claim.
   • Environmental claims should be stated clearly and presented in language that an everyday consumer can understand.
3. Reliance on an ESG certification from a third-party organization may not be a sufficient defense to greenwashing claims.
   • As highlighted in recent decisions, certifications from third-party organizations may not be sufficient to protect against greenwashing claims.
   • Plaintiffs are increasingly analyzing the underlying merits of third-party certifications. Plaintiffs have also recently called into question the relationships between certifying organizations and litigation targets.
   • Companies that rely on third-party certifications should review their relationships with the certifying organizations and research whether the certifications or the organizations issuing the certifications have been attacked in other greenwashing cases.
4. Track and retain all statistics and data necessary to defend your environmental claims.
   • Companies must track and retain all statistics and data necessary to defend and substantiate their environmental claims.
   • Statistics or data that appear on a company’s public-facing website or in any advertising, marketing or labeling must be accurate and up-to-date.
5. Avoid potentially misleading comparisons to other products.
   • Avoid using product comparisons in marketing or advertising if the comparisons would be misleading to an average consumer.
6. Analyze if the use of colors, words or images could be interpreted as an implied environmental claim.
   • Companies must review whether their usage of certain colors, words or images in product packaging, marketing, advertisements or labels could be interpreted as a potentially misleading implied environmental claim.
7. Determine if your company’s practices match its environmental claims.
   • Ensure that your company’s operations match any environmental claims related to your products.
   • Litigation claims frequently target manufacturing practices, logistics issues, carbon emissions, recycling practices, use of recycled materials and waste disposal activities.
8. Review impact of statements concerning environmentally friendly product lines.
   • If a company markets a specific product line as environmentally friendly, it should ensure that its statements regarding that product line cannot be interpreted as representations about the company’s other products.
9. Be on the lookout for updated Green Guides.
   • If the FTC ultimately issues substantially revised Green Guides, the plaintiffs’ bar will almost certainly attempt to take advantage of the changes to assert novel claims against consumer-facing companies.
   • To combat this threat, companies should track the progress of the proposed updates to ensure that all corporate practices comply with the revised Green Guides.
10. Aim for accuracy.
• Companies should resist any urge to overstate the environmentally friendly attributes of their products.
• Provide accurate information regarding the specific qualities of individual products as well as the company’s practices, goals and timelines.

By taking a proactive approach to these greenwashing issues, companies can mitigate the risk of litigation and develop strategies to combat any legal claims that may arise.

For More Information

Our team will continue to track all developments related to the proposed updates to the Green Guides and class action cases asserting greenwashing claims. Please feel free to contact us for additional information regarding any of the subjects addressed in this article.