Title: The Rise in Greenwashing Claims
Speakers: Andrea Wortzel, Melissa Horne, and Vaughn Morrison
Andrea Wortzel (00:08):
Well, thank you all for joining me today to talk about greenwashing. And I guess the first question I wanna ask you is what is greenwashing and how did you first encounter it? Melissa, do you wanna go first?
Melissa Horne (00:18):
Greenwashing is generally understood as overstating the environmental benefit of a product or a service or even what a company does. I originally encountered greenwashing in the context of a series of trade press articles about claims that have been brought against beverage manufacturers for recyclable symbols on their water bottles and other types of beverage bottles. And the claim was that since it’s very difficult to recycle plastics, putting a recyclable symbol on a bottle constituted greenwashing. In the months and years since those cases were originally brought, greenwashing claims have really expanded to be brought against all kinds of things that a company might do, including saying, “We are a sustainable company,” or, “We’re trying to reduce our carbon footprint in the future.”
Andrea Wortzel (01:19):
So it sounds like it’s gone from a product specific greenwashing type claim to more company reputational and aspirational statements even that they’ve made.
Melissa Horne (01:29):
I think that’s exactly right.
Andrea Wortzel (01:31):
And how about you, Vaughn? How have you encountered greenwashing?
Vaughn Morrison (01:35):
Well, in the context of my transactional practice, I think I first encountered it when clients would ask us questions about what statements they can make publicly about renewable energy transactions they were entering into. And at the time, this was a decade ago, I was happy to discover that the Federal Trade Commission had addressed these subjects pretty directly in the green guides, which have become in some cases enshrined in state law, though they don’t have a formal legal effect at the federal level. But it’s something that a lot of industry participants look to in developing their communications protocol with respect to environmental claims.
Andrea Wortzel (02:17):
So how does a greenwashing claim get brought and typically by who, who’s bringing those claims?
Melissa Horne (02:23):
Well, it can vary. You sometimes see state attorney generals bringing greenwashing claims against businesses that operate in their state. You also see them brought by third party environmental groups who might be claiming that a particular company is exaggerating in its environmental benefit when in fact it’s committing environmental harms.
Andrea Wortzel (02:47):
And how about in the utility context? It seems like a lot of the focus that I see in the greenwashing has been focused on the oil and gas industry or other types of utilities. Have you seen that, Vaughn?
Vaughn Morrison (02:58):
Yeah, absolutely. A lot of US utilities now have renewable energy mandates or voluntary renewable energy development programs. And as part of that, they like to take full credit for that. They’re making money too in a lot of instances, but they definitely like to make announcements about how green their grid is becoming. And they’ve gotta be careful about that. Those are increasingly scrutinized.
Andrea Wortzel (03:28):
It strikes me that we’ve seen greenwashing increase as the focus on environmental social governance or ESG has increased. And so companies want to make claims in their ESG about how they want to reduce their environmental footprint in the future. Is there any danger in that, in light of the greenwashing claims that we’ve seen brought?
Melissa Horne (03:51):
It’s interesting. It feels like companies are more and more getting out there making statements about their environmental impacts because they know that people care. Yet at the same time, people care so much that they’re scrutinizing these statements and that’s where the rub is. That’s where the danger is, is that companies feel compelled to make clear what they’re doing, but then they’re getting asked a lot of questions about it. So they need to make sure that they substantiate any claims that they make.
Vaughn Morrison (04:24):
Yeah. I think in the past, companies looked at this all as kind of extra credit. It was great that they could tout their contributions to their sustainability in the public, for branding purposes the same way they might charitable contributions that they would make. And in that light, people might have been a little bit more comfortable playing fast and loose with the facts. But now we know you can’t do that anymore. This is being scrutinized by regulators. It’s being scrutinized by plaintiff’s attorneys who would love the opportunity to embarrass a Fortune 500 company by bringing some kind of greenwashing claim against them. So it’s become a lot more important to take really seriously your communications protocol about sustainability announcements.
Andrea Wortzel (05:16):
So Vaughn, you mentioned the FTC and the green guides, but are there other federal agencies that people should be thinking about when they think about greenwashing?
Vaughn Morrison (05:25):
Well, the Securities Exchange Commission, certainly for public companies, there’s some forthcoming rulemakings that are going to mandate some level of climate disclosure and put some rules on voluntary climate disclosures as well. And then at the state level, we also have a couple of California legislative developments at hand in the next few years that are going to compel companies that are not subject to SEC rules and are not making voluntary disclosures about the climate to come forward and make certain carbon accounting disclosures if they have over a billion dollars a year in revenue and otherwise do business in California. So that’s gonna bring a whole lot more folks between that and the new SEC rules, that’ll bring a whole lot more folks into the fold by requirement.
Melissa Horne (06:23):
Yeah. Interestingly, the California rules, not only are they compelling a lot of companies that aren’t doing so voluntarily to talk about their carbon footprint about their climate impact, but California also published another law at the same time that is specifically aimed at greenwashing in that context. And they are forcing companies to publicly disclose the nature of any carbon offsets that they rely on and to support claims that they make about their future goals of reducing their carbon footprint.
Andrea Wortzel (06:59):
What are some best practices you would recommend if you’re concerned about greenwashing?
Vaughn Morrison (07:05):
The big thing that I would recommend to companies who are getting into this for the first time, whether it’s because of the new SEC rules or the new California rules is don’t just stumble into your compliance plan. You need to really give some serious thought to how you’re going to grapple with some of the philosophical issues that actually underpin these disclosures and concepts of greenwashing. Whether you’re going to be comfortable relying on carbon offsets or what role that would play in your carbon accounting plan, knowing that there is a lot of fraud and overestimation in that industry. How concerned are you going to be about ensuring additionality with your carbon offset projects or other carbon reduction plans, immediacy? All these things that we’ve seen form the basis of these greenwashing complaints. What is your company’s position on them going to be?
And that’s not to say that there’s going to be one size fits all solution. There are companies with very mature sustainability programs, and they have them because their consumers really care about them. If you’re a company that doesn’t have a consumer base like that, but instead just needs to comply with the law, then you’re probably taking a different approach. But all of that needs to be understood going into your first compliance period under those new rules.
Melissa Horne (08:32):
Any corporate statements about any kind of environmental impacts really need to be a team sport. So you’ve got your marketing folks, your corporate communication folks, your environmental team, and other departments in the company that actually have the knowledge of whether you can substantiate claims that are made. So companies need to know whether they can back up broad and more specific statements that they make.
Andrea Wortzel (08:59):
I think people often think of greenwashing in the carbon context, but does greenwashing come up in any other context?
Vaughn Morrison (09:06):
Absolutely. Famously it would come up in the context of organic claims and that sort of thing. But even in the broader project development context, whether it’s an energy project or anything else, it would be common to have mitigation conditions as part of a permit or other regulatory approval. And some developers would be tempted to tout the benefits of those mitigation activities despite the fact that they’re compulsory. They’re a condition to their compliance with their permitting obligations. That you have to be very careful about. Not taking too much credit for something that you’re required to do by law, because that can get you in trouble from a greenwashing standpoint.
Andrea Wortzel (09:53):
And how about you, Melissa? Have you seen examples?
Melissa Horne (09:55):
Yes. I think a prime example of a context that’s not carbon is the beverage companies have faced a series of lawsuits claiming that recyclable symbols on their plastic bottles indicate that the bottles can actually be recycled irrespective of whether they can be recycled in the locality where they’re being used. And these have been brought as class action suits. There are also claims that can be brought just simply for claims of environmental benefit writ large, such as saying that a company is green or sustainable so that can put a company in the crosshairs and cause people to ask questions.
Vaughn Morrison (10:43):
Yeah. And I know the green guides, the FTC green guides are currently undergoing a rewrite. And part of the hope there is that we could actually get a little bit more specificity on what it means to say that you’re going green or net zero or carbon neutral so that there is greater clarity both for consumers and for companies from a compliance standpoint when they wanna make those types of claims.
Melissa Horne (11:08):
That’s exactly right. I think companies deeply desire some kind of guardrail that tells them what’s okay to say, what substantiation do we have to have to make sure that we can talk about this topic that we need to talk about, that we’re being regulated to talk about, and yet make sure that we’re staying within the law.
Andrea Wortzel (11:28):
And those green guides were last updated in 2012 so a lot of the terminology is new and there isn’t consistent definitions. Is that accurate?
Vaughn Morrison (11:37):
Yeah, not only that, but there have also been just some developments in our understanding of how these things all function. In the past few years there have been some revelations about realities around recycling in the beverage industry and plastics more generally, as well as uncovering fraud in the carbon offset industry. So the hope is that in the course of updating these regulations or guidance, the FTC can actually bring some additional certainty to how companies can address those specific concerns.
Andrea Wortzel (12:12):
Well, thank you both for joining me today. It’ll be interesting to see what the FTC comes up with.
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