Greenwashing: An Emerging Legal Issue
Greenwashing has emerged as a significant legal concern, with increasing litigation that is expected to continue growing. The term refers to deceptive marketing practices where an entity falsely promotes its products or services as environmentally friendly. The Federal Trade Commission (FTC) has been addressing this issue since the 1992 publication of its Green Guides, which aim to help marketers avoid misleading environmental claims. However, not only the FTC but also state consumer prosecutors, the Securities and Exchange Commission (SEC), private litigants, and environmental groups are intensifying their scrutiny of such claims.
Defining Greenwashing
As per the case of McGinity v. Procter & Gamble Co., greenwashing is defined as deceptive marketing that overstates a product’s environmental benefits. This practice is particularly concerning as more consumers seek “green” products and consider environmental, social, and governance (ESG) issues in their purchasing and investment decisions. Businesses, in turn, are increasingly promoting their environmental and ESG credentials, sometimes misleadingly, to attract this growing market segment.
Regulatory and Legal Scrutiny
The SEC’s creation of a Climate and ESG Task Force and the California Attorney General’s litigation against oil companies for false greenwashing claims highlight the regulatory focus on this issue. Additionally, numerous lawsuits have been filed across various states, targeting claims of products being “environmentally friendly,” “recyclable,” or “sustainable.” The legal actions span multiple industries, from home and garden products to food and beverages, and personal care items.
The Role of the Green Guides
The FTC’s Green Guides play a crucial role, especially in California where they are incorporated into the state’s greenwashing law. The guides offer clarity on what constitutes deceptive environmental claims under the FTC Act, though they are not binding regulations. Public comment on the Green Guides has been sought by the FTC, reflecting their ongoing relevance in addressing greenwashing.
The Impact of Greenwashing Litigation
High-profile cases, such as Volkswagen’s defeat device scandal, demonstrate the significant financial and reputational risks associated with greenwashing. Volkswagen’s case, where the company falsely advertised its vehicles as “clean” and “green,” resulted in over $14 billion in settlements. This underscores the importance for businesses to adhere to consumer protection laws and regulations, including the Green Guides, to avoid similar repercussions.
Conclusion
As businesses increasingly capitalize on the “green” trend, the scrutiny of their environmental claims will likewise intensify. To avoid legal pitfalls, companies must ensure their marketing practices are transparent and in compliance with relevant laws and guidelines. This will not only protect them from legal and financial consequences but also maintain their credibility in the eyes of increasingly environmentally-conscious consumers.
About the Author
Christina Tusan is a partner at Hammond Law, PC, specializing in consumer protection and privacy litigation. Her work focuses on safeguarding consumers against deceptive marketing practices, including greenwashing.