Blog By: Grace McDonald
When shopping for laundry detergent at the store, the shelves display a variety of bottles that can be typically be narrowed down into two categories from their starkly contrasted color palettes: (1) the bright oranges, yellows, and blues of the “regular” or “original” detergents, and (2) the soft whites, greens, or even clear bottles of the “natural” or “environment friendly” detergents. However, though the packaging may suggest an extreme discrepancy in product production, the composition of the products—and how they were derived—are actually almost identical. Yet because of the earthy-tones, images of leaves and plants, and more natural looking packaging, many consumers choose the “eco-friendly” bottles to match their own personal efforts to protect the environment.
This is a practice known as “greenwashing.” Specifically, greenwashing is when a company or corporation “spends more time and money” to make their products sound more sustainable than “actually minimizing their environmental impact.”[i] This is a form of deceptive advertising to gain favor “with consumers who choose to support businesses” that care about protecting the environment.[ii] In reality, they are taking attention away from real environmental issues.[iii] Companies commonly cherry-pick information on its production and consumption habits in order to sound more sustainable, while leaving out crucial context that tend to contradict these claims.[iv]
Companies engage in greenwashing because of the simple notion that “being seen as ethical drives profitability.”[v] The rise of global concern over the impacts of climate change has led to a significant increase in consumer interest in supporting businesses that make efforts to be environmentally friendly.[vi] A Nielson’s Global Corporate Sustainability Report found that 66% of Gen Z consumers and 73% of millennial consumers will “spend more on a product if it comes from a sustainable brand.”[vii] Thus, companies have a huge financial incentive to at least appear to be more socially conscious.[viii]
How have companies gotten away with this? The rise of public concern for the environment, leading to the rise of companies making unsubstantiated environmental marketing claims, has also led to a rise in greenwashing litigation.[ix] Plaintiffs have historically targeted businesses that claim their products are environmentally friendly— focusing on buzzwords like “eco-friendly” or “recyclable.”[x]Recent trends show an increase in class action claims challenging businesses that make “broader sustainability representations and long-term sustainability goals.”[xi] Cleaning brands are not the only ones guilty of this deceitful advertising practice. Coca-Cola, BP, Starbucks, Walmart, Volkswagon, and Ikea are just a few of the major corporations who have been called out for greenwashing in its misleading packages and/or customs.[xii]
Greenwashing is technically illegal in the United States because federal law “prohibits marketers from engaging in marketing tactics that are likely to mislead a consumer acting reasonably under the circumstances to the consumer’s detriment.”[xiii] However, more federal action has been taken as companies continue to project “overzealous environmental statements in consumer marketing and ESG/ sustainability reports.”[xiv] The Federal Trade Commission (“FTC”) has created Guides for the Use of Environmental Marketing Claims (“Green Guides”) that “provide guidance on general environmental marketing principles, how consumers may interpret claims, and how marketers can avoid deceiving consumers or otherwise substantiating these claims.”[xv] In 2022, the U.S. Commodity Futures Trading Commission (“CFTC”) “formed the Environmental Fraud Task Force that is focused on greenwashing, specifically fraud and manipulation in carbon credit markets and misrepresentations about environmental, social, and governmental (‘ESG’) investment strategies.”[xvi] Additionally, in March 2024, the Securities and Exchange Commission (“SEC”) adopted the Climate Disclosure Rule which will force public companies to disclose their environmental impact.[xvii]
Despite these federal regulations against greenwashing, class actions targeting greenwashing claims are still on the rise.[xviii] This is because much of the U.S. greenwashing regulations and guidance have often been found to be ambiguous, leaving room for interpretations that lead businesses astray.[xix] Inconsistent definitions have made it difficult for organizations to determine whether they are “greenwashing.”[xx] To make matters worse, what is considered to be a “greenwashed” claim will vary between regulators in different jurisdictions, “further adding to the complexity for organizations attempting to publicly state their environmental credentials.”[xxi] This ambiguity and inconsistency show that the United States needs to enact stricter and more cohesive regulations against greenwashing.
Greenwashing is not local to the United States. Governments across the world have enacted regulations to crack down on misleading sustainability claims by businesses.[xxii] Most notably, in January 2024, the European Parliament formally endorsed the Directive Empowering Consumers for the Green Transition through Better Protection against Unfair Practices and Better Information (“Greenwashing Directive”).[xxiii] The Greenwashing Directive “intends to create a harmonized set of rules on sustainability claims applicable to all companies operating in the EU/EEA by amending certain key provisions of the Unfair Commercial Practices Directive.”[xxiv] Its scope covers all sustainability claims, and it goes into detail on what is considered misleading advertising and which practices are prohibited.[xxv] While the Greenwashing Directive is specifically targeted towards marketing to consumers, the legislation also “highlights a broader crackdown on greenwashing in all outward facing activities of a business.”[xxvi] The Greenwashing Directive is the latest of complex regulatory schemes that the EU has enacted to in order to control greenwashing claims made by businesses.[xxvii]
The United States needs to follow the lead of the EU by enacting federal law that emulates the attentive and deliberate regulations against greenwashing like the Greenwashing Directive. Adopting a similar federal regulation will be more effective at banning exaggerated and unfounded claims relating to a company’s environmentally friendly actions than the futile regulations the United States currently has in place. Stricter greenwashing regulations will ensure that consumers can trust the label of their laundry detergent by choosing the product that is genuinely better for the environment.
[i] Deena Robinson, Explainer: What Is Greenwashing and How to Avoid It?, Earth.org (Nov. 13, 2022), https://earth.org/what-is-greenwashing/ [https://perma.cc/VZT9-4PEC].
[ii] Id.
[iii] Id.
[iv] Alex Clark, Greenwashing: Eco-friendly products aren’t as friendly as they seem, DropsofInk (Jan. 13, 2023), https://www.lhsdoi.com/25756/showcase/greenwashing-eco-friendly-products-arent-as-friendly-as-they-seem/ [https://perma.cc/USG4-EHNY].
[v] Robinson, supra note i.
[vi] Jon McGowan, EU Greenwashing Law Is Warning To US Companies To Be Diligent in Environmental Claims, Forbes (Mar. 29, 2024), https://www.forbes.com/sites/jonmcgowan/2024/01/23/eu-greenwashing-law-is-warning-to-us-companies-to-be-diligent-in-environmental-claims/ [https://perma.cc/D3MY-DNWD].
[vii] Robinson, supra note i.
[viii] Robinson, supra note i.
[ix] David Baay, Matthew Rawlinson, and Kelsey Machado, United States: Navigating the new rise of greenwashing litigation, Glob. Litig. News (July 31, 2024), https://globallitigationnews.bakermckenzie.com/2024/07/31/united-states-navigating-the-new-rise-of-greenwashing-litigation/ [https://perma.cc/T93B-PH8N].
[x] Id.
[xi] Id.
[xii] Robinson, supra note i.; Deena Robinson, 10 Companies Called Out For Greenwashing, Earth.org (July 17, 2022), https://earth.org/greenwashing-companies-corporations/ [https://perma.cc/KJL5-FYRV].
[xiii] Greenwashing, Maryland.gov, https://opc.maryland.gov/Consumer-Learning/Renewable-Energy/Greenwashing [https://perma.cc/K644-MQVL] (last viewed Oct. 5, 2024).
[xiv] McGowan, supra note vi.
[xv] Brook Detterman, Mitigating “Greenwashing” Litigation Risk in the U.S. and Beyond, Beveridge & Diamond (Apr. 18, 2024), https://www.bdlaw.com/publications/mitigating-greenwashing-litigation-risk-in-the-u-s-and-beyond/ [https://perma.cc/X4PT-39JS].
[xvi] Lead Article: California Takes Steps To Curb Greenwashing, Quinn Emanuel Trial Lawyers (Mar. 14, 2024), https://www.quinnemanuel.com/the-firm/publications/lead-article-california-takes-steps-to-curb-greenwashing/#:~:text=Primarily%2C%20the%20bill%20mandates%20that,2023 [https://perma.cc/CQ8M-KYLV].
[xvii] SEC Adopts Rules to Enhance and Standardize Climate-Related Disclosures for Investors, U.S. Sec.and Exch. Comm’n (Mar. 6, 2024), https://www.sec.gov/newsroom/press-releases/2024-31 [https://perma.cc/2HX5-ZAWX].
[xviii] Baay, supra note ix.
[xix] Curtis File, Global Greenwashing Regulations: How the World Is Cracking Down on Misleading Sustainability Claims, Sustainanalytics (Nov. 14, 2023), https://www.sustainalytics.com/esg-research/resource/investors-esg-blog/global-greenwashing-regulations--how-the-world-is-cracking-down-on-misleading-sustainability-claims#:~:text=Sustainable%20Finance%20Disclosure%20Regulation%20(SFDR,have%20the%20most%20stringent%20requirements [https://perma.cc/H6CJ-FDJY].
[xx] Peter Pairs, Tim Baines, and Oliver Williams, Greenwashing: Navigating the Risk, Harvard L. Sch. F. on Corp. Governance (July 24, 2023), https://corpgov.law.harvard.edu/2023/07/24/greenwashing-navigating-the-risk/ [https://perma.cc/A2XA-BYYB].
[xxi] Id.
[xxii] File, supra note xix.
[xxiii] Bart Van Vooren et al., EU Adopts New Rules on Greenwashing and Social Impact Claims, Covington (Jan. 31, 2024), https://www.insideeulifesciences.com/2024/01/31/eu-adopts-new-rules-on-greenwashing-and-social-impact-claims/ [https://perma.cc/ZBM5-RK54].
[xxiv] Id.
[xxv] Id.
[xxvi] McGowan, supra note vi.
[xxvii] Id.