DECEPTIVE COMPANIES ‘GREENWASH’ TO RAISE PROFIT MARGINS
By: Hannah Russell
As consumers grow increasingly eco-conscious, governmental agencies in the EU and US begin to crack down on corporate “greenwashing.” Modern consumers demand a variety of clean, eco-friendly products to reduce their carbon footprints.[1] These products range from compostable trash bags and nontoxic hand soaps to electric cars and carbon-neutral flights. Patagonia and Levi’s are two examples of pioneers in sustainable business that meet eco-conscious demands and elevate the environmental movement.[2] However, while some enterprises genuinely believe that conscious consumerism deserves a place in business, other companies see environmentalism as the new, trendy marketing platform with the potential to raise profit margins.[3] These companies, such as Daimler AG and Walmart, reel in and mislead eco-conscious consumers by “greenwashing” their merchandise and services.[4]
WHAT IS GREENWASHING?
“Greenwashing” describes embellished, misleading, or false claims about the environmental sustainability of a company’s products, operations, or services.[5] Environmentalist Jay Westervelt coined the term in 1986 to describe marketing that intentionally deceives customers into believing that a company practices environmentally friendly procedures and policies.[6]
Spotting greenwashed products can be easy if one knows what to look for. Advertisers generally rely on similar greenwashing methods to trick customers.[7] To tackle greenwashing, the European Union (EU) recently released a small list of common words and phrases that shoppers should beware of when perusing through store aisles.[8]
The EU specifically warns shoppers to look out for companies that use terms such as “biodegradable” and “compostable” to insinuate that their products don’t commit to plastic pollution.[9] A 2022 study found that 60% of plastics marketed as “home-compostable” cannot completely decompose in domestic compost piles.[10] For these products to properly break down, they must be disposed of at industrial compost facilities—not the backyard heaps that many environmentalists maintain.[11] This misleading greenwashing tactic also extends to claims that products are recyclable. For example, in June, the Connecticut Attorney General filed suit against Reynold Consumer Products, owner of Hefty, for false environmental claims involving Hefty recycling bags that are not only unrecyclable but also contaminate otherwise recyclable waste.[12] To combat these misleading claims, the EU hopes to require companies to disclose the exact ratio of bio-based plastic in their products so that consumers can make mathematically informed decisions while shopping.[13]
Additionally, many companies boast that they are “greener” or “more sustainable” than their competitors without proving any material distinctions in their products or production methods.[14] For example, Nest thermostats came under fire in 2013 when the Better Business Bureau’s (BBB) National Advertising Division (NAD) found that there was insufficient evidence to back up the company’s claims that its thermostats wasted less energy than similar products.[15] Even more, some companies are litigating suits for claims that consumers argue are completely false.[16] One of the most famous instances of hyper-fabricated greenwashing occurred when Volkswagon paid over ten billion dollars to mitigate pollution after cheating on emissions tests.[17] More recently, the NAD agreed with consumers that filed a class-action lawsuit against Proctor & Gamble, producer of Tide, for claiming that its detergent was plant-based when it contains petroleum-derived ingredients.[18]
The EU also cautions shoppers to be wary of “carbon neutral” and “climate neutral” claims.[19] These terms indicate that, instead of changing their environmentally damaging business practices, companies use their revenues to invest in green projects that “offset” their carbon footprints.[20] One of the most common forms of carbon offsetting is planting trees to “counteract” damage to the environment; however, planting trees notoriously does not work, and “trees will never be a substitute for decreasing fossil fuel emissions.”[21] Canada became guilty of this greenwashing strategy when its Prime Minister, Justin Tureaud, promised its citizens to plant two billion trees to combat climate change, yet the source of the carbon offset funding came from an oil pipeline project, the effects of which will undermine the benefits of any trees that could be planted.[22]
Until there can be some semblance of formal accountability for greenwashing, consumers should be wary of companies using vague or misleading claims to falsely tout their “green” practices.
WHAT IS THE GOVERNMENT DOING ABOUT GREENWASHING?
Companies have successfully greenwashed to raise their profit margins for many years. However, the public’s growing concern about climate change has led to increased advertising regulation in both Europe and America.[23]
To combat greenwashing, the EU recently drafted a proposal that may require member countries to ensure that companies’ positive environmental assertions are both backed by scientific evidence and coupled with disclosures of any detrimental effects.[24] Recent research found that over half of the “green claims” the EU studied were ambiguous, misleading, or unfounded and that consumers—rightfully so—had little confidence that businesses tell them the truth.[25]
In the United States, the Securities and Exchange Commission (SEC) recently formed a climate and environmental, social, and governance (ESG) enforcement task force to develop strategies that “proactively identify ESG-related misconduct.”[26] The task force will work to both identify material gaps and misstatements and analyze disclosure and compliance issues.[27]
While these governmental initiatives are a much-needed step in the right direction, world leaders have a long way to go before their regulatory oversight plans will effectively curb greenwashing.
HOW TO GET INVOLVED AND WHERE TO LEARN MORE
Until governmental oversight agencies catch up to environmentalism and the corporate greenwash movement, consumers must be increasingly vigilant about what products they buy.
A few governmental and independent organizations allow the public to report greenwashing. The SEC maintains a form for concerned citizens to relay ESG related information, referrals, and whistleblower complaints. The Federal Trade Commission (FTC) recently announced that it is currently seeking comments from the public on potential updates to its “Green Guides” for environmental marketing claims.[28] These Green Guides, although not enforceable or adjudicative, help marketers avoid making unfair or deceptive environmental claims under Section 5 of the FTC Act.[29]
Additionally, the BBB provides case summaries of all decisions from the NAD, and individuals can subscribe to receive a weekly wrap-up of published case decisions in their email inboxes. Another independent organization, Truth in Advertising, tracks regulatory and congressional decisions, pending class-actions, FDA/FTC warning letters, and any general customers dissatisfaction with marketing tactics.
The rapid increase in corporate climate pledges and the general lack of regulatory oversight means that it is “more difficult than ever to distinguish between real climate leadership and unsubstantiated greenwashing.”[30] Eco-conscious consumers should be sure to educate themselves on which companies are truly dedicated to environmentalism so that their dollars can work to uplift sustainable consumerism, rather than benefit companies that deceive shoppers.
[1] E.g., Truth in Advert., Companies Accused of Greenwashing (Oct. 26, 2022), https://truthinadvertising.org/articles/six-companies-accused-greenwashing/
[2] Greg Petro, Consumers Demand Sustainable Products and Shopping Formats, Forbes (March 11, 2022), https://www.forbes.com/sites/gregpetro/2022/03/11/consumers-demand-sustainable-products-and-shopping-formats/?sh=f2f0bbd6a062
[3] See Magali A. Delmas & Vanessa Cuerel Burbano, The Drivers of Greenwashing, 54 Cal. Mgmt. Rev. 1 (2011), https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfiles/14016/cmr5401_04_printversion_delmasburbano.pdf
[4] United States v. Daimler AG, No. 20-2564 (D.D.C. Mar. 9, 2021) (ordering settlement over emissions cheating in Mercedes-Benz diesel vehicles); United States v. Walmart, No. 1:22-CV-00965 (D.D.C. Apr. 8, 2022) (stipulated order and judgment for civil penalties, permanent injunction, and other relief).
[5] Samuel Brown, Greenwashing, 36 Nat. Res. & Env’t 64 (Spring 2022), https://1.next.westlaw.com/Document/I9845d086c5d911ec9f24ec7b211d8087/View/FullText.html?listSource=Foldering&originationContext=clientid&transitionType=MyResearchHistoryItem&contextData=%28oc.Search%29&VR=3.0&RS=cblt1.0.
[6] Eric L. Lane, Greenwashing 2.0, 38 Colum. J. Envtl. L. 279, 280 (2013).
[7] See Olivia Rudgard, Four Examples of Greenwashing, According to the EU, BL News (Jan. 18, 2023, 4:00 AM), https://www.bloomberglaw.com/product/blaw/bloomberglawnews/environment-and-energy/X32C3DH8000000?bc=W1siU2VhcmNoICYgQnJvd3NlIiwiaHR0cHM6Ly93d3cuYmxvb21iZXJnbGF3LmNvbS9wcm9kdWN0L2JsYXcvc2VhcmNoL3Jlc3VsdHMvZjYzYWQxYTM5YzM0OTlhNGY1ZDc4MDgxZjY2MWMyYTciXV0–42a76b0e8e0326612f9dd1a55d25928f334257b8&bna_news_filter=environment-and-energy&criteria_id=f63ad1a39c3499a4f5d78081f661c2a7&search32=D40eYJ5pKnCAAhFu8VPWKQ%3D%3DbyFWIAPHKEYYntlJgzdJ_D9zTq119LcBJTTuXSK3hlDKP9_t3whjD5H_BD6YJ_PDaAQxX0jQyGGQSTr_pDRE5JkNhZDcqugzEt56NwogSq1tAtGxySPEmQRpKij_BFeS (last visited Jan. 31, 2022)
[8] Id.
[9] Id.
[10] Id. (citing Ayse Lisa Allison et al., The Big Compost Experiment: Using citizen science to assess the impact and effectiveness of biodegradable and compostable plastics in UK home composting, in The Sustainability Series: The Plastics Problem—Investigating Socio-economic Dimensions of Plastic Pollution (Takuro Uehara ed., 2022), https://www.frontiersin.org/articles/10.3389/frsus.2022.942724/full).
[11] Rudgard, supra.
[12] Attorney General Tong Sues Reynolds Over Non-Recyclable Hefty “Recycling” Trash Bags, Conn. St. Website (Jun. 14, 2022), https://portal.ct.gov/AG/Press-Releases/2022-Press-Releases/AG-Tong-Sues-Reynolds-Over-Hefty-Recycling-Bags.
[13] See Rudgard, supra.
[14] Rudgard, supra.
[15] NAD Recommends Nest Labs Modify, Discontinue Certain Advertising Claims for Nest Programmable Thermostats; Claims Challenged by Honeywell, BBB Nat’l Programs Archive (Jun. 20, 2013), https://bbbprograms.org/archive/nad-recommends-nest-labs-modify-discontinue-certain-advertising-claims-for-nest-programmable-thermostats-claims-challenged-by-honeywell.
[16] Truth in Advert., supra.
[17] U.S. Dept. of Just., Volkswagen to Spend Up to $14.7 Billion to Settle Allegations of Cheating Emissions Tests and Deceiving Customers on 2.0 Liter Diesel Vehicles (Jun. 28, 2016), https://www.justice.gov/opa/pr/volkswagen-spend-147-billion-settle-allegations-cheating-emissions-tests-and-deceiving
[18] Cole v. Procter & Gamble, No. 20-cv-6680 (S.D.N.Y. 2020); see NAD Finds Tide purclean’s Website “Plant-Based” Claims Supported But Label Claims Should be Modified; P&G to Appeal “4x Cleaning Power,” BBB Nat’l Programs (Aug. 13, 2020), https://bbbprograms.org/media-center/dd/nad-finds-tide-purclean-s-website-plant-based-claims-supported-but-label-claims-should-be-modified-p-g-to-appeal-4x-cleaning-power-finding.
[19] Rudgard, supra.
[20] See id.
[21] See Angelo Gurgel, Carbon Offsets, MIT Climate Portal, https://climate.mit.edu/explainers/carbon-offsets#:~:text=Carbon%20offsets%20fund%20specific%20projects,and%20waste%20and%20landfill%20management (last visited Jan. 31, 2022) (citing Jerry Melillo, Forests and Climate Change, MIT Climate Portal, https://climate.mit.edu/explainers/forests-and-climate-change); Alan Buis, Examining the Viability of Planting Trees to Help Mitigate Climate Change, NASA Glob. Climate Change (Nov. 7, 2019), https://climate.nasa.gov/news/2927/examining-the-viability-of-planting-trees-to-help-mitigate-climate-change/.
[22] Jennifer Skene, Planting Trees Isn’t a Climate Plan—It’s a Distraction, Nat’l Res. Def. Council (Feb. 13, 2020), https://www.nrdc.org/experts/jennifer-skene/planting-trees-isnt-climate-plan-its-distraction (citing Joshua Axelrod, The Trans Mountain Migraine: Canada Chooses Oil Over Climate, Nat’l Res. Def. Council (Jun. 19, 2019), https://www.nrdc.org/experts/josh-axelrod/trans-mountain-migraine-canada-chooses-oil-over-climate).
[23] See Delmas & Burbano; Brown, supra.; Rudgard, supra. (citing John Ainger & Alberto Nardelli, EU to Fight Rogue Climate Claims in Greenwashing Push, BL News (Jan. 12, 2023, 12:26 PM), https://www.bloomberglaw.com/product/blaw/document/RODQH7T0AFB4).
[24] Rudgard, supra.
[25] Id.
[26] U.S. Sec. and Exch. Comm’n, SEC Announces Enforcement Task Force Focused on Climate and ESG Issues (Mar. 4, 2021), https://www.sec.gov/news/press-release/2021-42.
[27] Id.
[28] U.S. Fed. Trade Comm’n, FTC Seeks Public Comment on Potential Updates to its ‘Green Guides’ for the Use of Environmental Marketing Claims (Dec. 14, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/12/ftc-seeks-public-comment-potential-updates-its-green-guides-use-environmental-marketing-claims
[29] Id.; FTC Guides for the Use of Environmental Marketing Claims, 16 C.F.R. pt. 260, https://www.ftc.gov/system/files/ftc_gov/pdf/GreenGuides-FRN-11-5-22.pdf; 15 U.S.C. § 45.
[30] Brown, supra.
