Greenwashing, law and litigation

Green claims are not just under scrutiny, but the stuff of class-action lawsuits and litigation. So, Jim McClelland asks: Is a greenwash case coming to a courtroom near you, soon?

Greenwash is not new. Next year marks the 10th anniversary of ‘Dieselgate’ — a scandal that saw leading automakers named and shamed, claimed against and fined for falsifying emissions figures.

They were found guilty of misleading both regulators and consumers.

Greenwash has moved on, though; and around. Now everybody sees it everywhere, as confirmed by 94% of respondents in this year’s National Environmental Services Survey.

But, anti-greenwash laws have advanced too. Legislation is established in the UK, active across the EU, emerging in Australia and the US, plus in the pipeline in India.

Today, therefore, prosecutors cast their anti-greenwash net much wider in terms of sectors and companies, not just geographies — catching everything from airplanes to apparel.

So, exactly how has this rise in greenwash become a goldrush for litigation?

Claims and directives, labels and disclosure

Well, as part of a broad bid to tackle greenwashing, the EU is currently putting the finishing touches to its impending Green Claims Directive (GCD), approved earlier this year. It is also looking at minimum standards for Ecodesign, as well as Right to Repair guarantees.

In this particular policy area, however, the UK is actually a bit ahead of the game.

It was back in 2021 that the Competition & Markets Authority (CMA) first published its guidance on environmental claims. Commonly known as the Green Claims Code, this was backed by strong government support, complete with a campaign video and even a quiz.

Then in May this year, the UK Financial Conduct Authority (FCA) took sector-wide steps to address customer concerns by introducing its own anti-greenwashing rule. Proposals are also on the table to extend labelling and Sustainability Disclosure Requirements (SDR) to portfolio managers, in a move that mirrors the regime already in place for asset managers.

World awash with green guidelines

Worldwide, greenwash is not only increasingly on the radar, but also effectively on the risk register. It is fast becoming a hot topic for policymakers and a hot prospect for lawyers.

Last year, the Australian Competition & Consumer Commission took a lead in the southern hemisphere with its Greenwashing Guidelines, backed by the Law Council of Australia.

More recently, the State of California flew the first flag for the US when it officially passed the Voluntary Carbon Market Disclosures Act, which went live on New Year’s Day 2024.

Sending a powerful and positive signal to emerging markets and fast-growing economies, the Central Consumer Protection Authority in India has guidelines in draft form there, too.

So, greenwash law is truly going global, leaving laggards with fewer places to hide.

Enforcement: No police, no point

However, any law or policy is only as good as its enforcement. Only when the first public prosecution happens will business really wake up to its responsibilities and liabilities.

In short, if there’s no police, there’s no point.

So, it was hugely significant for the UK that in March this year the CMA showed real teeth, announcing it had secured legally binding commitments from three fashion retail brands — ASOS, Boohoo, and George at Asda — to use only “accurate and clear green claims”.

Accompanied by an open letter, enforcement action followed investigation into the use of environmental claims made by the brands, sparked by concerns about products marketed as eco-friendly. With sales running into billions of pounds, these are big names in the dock.

The European Commission also opened an action against market leaders in aviation in April, sending letters to 20 airlines identifying types of potentially misleading green claims.

In Australia, pension fund Mercer just got fined an eye-watering A$11.3M for greenwash. In California, the Attorney General is gunning for Big Oil with an Amended Complaint filed, seeking redress from the likes of ExxonMobil, Shell and BP for “illegally obtained profits”.

Also, in the US, athletiwear giant Lululemon currently faces a class-action lawsuit in Florida, which comes just a matter of weeks after it was hit with a complaint in France.

Illegal, not just unethical

All in all, as the laws take shape, so the lawyers turn to litigation. And this a good thing, not just for profits in the legal profession, but for best and better practice in sustainability.

There will be missteps yet, for sure — with the prospect of failed prosecutions and lenient sentences perhaps especially likely early doors, given a lack of precedents and expertise.

Make no mistake, though, the writing is increasingly on the courtroom wall:

Greenwash is not just unethical, it is illegal now in many countries and territories.

You have been warned!

Jim McClelland is a sustainable futurist, editor, journalist and speaker