The Federal Trade Commission on Wednesday voted unanimously to begin a regulatory review of its “Green Guides,” the bible for determining what is in and out of bounds for businesses that want to tout their environmental friendliness.
The Guides were initiated in 1992 and last updated in 2012.
The past 10 years have seen a significant spike in the number of so-called “greenwashing” lawsuits, in which businesses promoting themselves using any number of terms like “green” or “eco-friendly” or “biodegradable” can be sued if their practices don’t match up with their marketing.
The review comes as a relief to many companies and attorneys who see the guides as wildly outdated, so much so that today’s most in vogue term, “sustainability” doesn’t appear anywhere in its pages.
“I think the Green Guides aren’t getting enough attention. They are due for an update because you don’t have to reinvent the wheel here,” said Hilary Jochmans, attorney and founder of the blog PoliticallyInFashion. “They do not touch [the word] sustainability in the Green Guides. They said in 2012 they don’t have enough information and now it’s used so much. It’s something the FTC needs to take a look at because we do not have a lot of laws on the books dealing with this area. The Guide is the definitive statute we have and if that’s what we’re working with it needs to be up to date, usable and viable.”
William Hubbard is a Cleveland-based attorney whose firm Thompson Hine LLP often represents companies that have been slapped with “greenwashing” suits.
“It’s always easy to claim someone is a hypocrite, and in order to manufacture anything you have to use some amount of energy. To ship product to the store, it has to go on a truck. There is some environmental tradeoff for any product,” Hubbard said. “I think companies have to be aware of their statements and if they’re claiming environmental attributes of the product, they’re in a pretty safe place as long as they’re clear and have data.”
Hubbard said having third-party certification is also key to a successful defense.
“It’s a way for them to say, ‘don’t take our word for it, this third party certifying body — not necessarily inspecting or testing the product but collecting the information — is kind of auditing it,” he said. “But a lot of companies get in trouble with the Green Guides actually by using fake certification. It looks like certification, but there is no third party designation put on the product, whether they’re saying it’s recyclable or biodegradable, or whatever.”
Hubbard believes some greenwashing suits are less about consumer protection from false advertising, and more about making political points.
“I think there’s a lot of environmental advocacy groups doing that, focusing on either some content, whether it’s formaldehyde, or PFAS or BPA or phthalates or other chemicals they’re concerned about and a lot of times they use it hopeful the claim will survive just the filing,” Hubbard said. “Just filing the claim gets news and just them filing the claim is somewhat their goal, not necessarily to be successful.”
Jochmans said that because the Green Guides have not been updated and improved upon in a decade, many have nowhere to go but the courts to seek relief.
“The courts seem to be the only avenues for pursuing some of these issues. If you don’t have enough laws on the books on what the standards are, the courts seem like an obvious place to go,” she said. “There’s not one agreed-upon definition. Everyone has their own interpretation of basically what is deceptive or unfair advertising of a product, but there’s not a five-point test for something to qualify and because of that the area is ripe for litigation.”
Jochmans said that the rise of ESG (Environmental, Social and Governance), a sustainability rating that investors use to weigh a company’s risk and growth potential, has made the desire to make environmental claims—and to shoot down the bad actors—even greater.
“A lot of companies are looking at their ESG practices, environmental stewardship,” Hubbard said. “If companies are making statements about environmental issues or sustainability to meet their ESG goals, they have incentive to make claims.”
A glaring discrepancy in which companies—particularly in fashion—that wind up getting sued for greenwashing are also those that, on some level, are at least trying to be environmentally conscious. Are they not being unfairly targeted? After all, a company trying to appeal to environmentally minded consumers is probably leaving less of a carbon footprint than a company that could care less about appearing “green.”
“For some, it’s a zero-sum game, and other folks say, ‘let’s appreciate the steps companies are taking in the right direction,’” Jochmans said. “Should you acknowledge and reward companies taking initiatives and making changes? Or if it’s not right away, it’s not enough. It’s hard to change business systems with the flip of a switch.”
Hubbard said greenwashing suits typically end with a motion to dismiss.
“Companies are able to get a lot of them dismissed because what the plaintiffs are complaining about isn’t reasonable,” he said. “There’s been a recent case where [plaintiffs] argued to say something is recyclable means all their products have to be recycled. The judge said, no, they just need to be capable of being recycled.”
Hubbard said he considers some of these cases to be nuisance suits.
One is essentially a shakedown where an plaintiff identifies greenwashing claims and sends a letter to the company.
“They’ll say this is greenwashing and we’re preparing to file a complaint unless you’re interested in settling,” Hubbard said. “Companies then have to make a business decision. Do they respond at all? Settle for some nominal nuisance amount? Or, do they defend the product? It goes into how important is that statement to their brand ID? And do they have good defenses to support the claim they are making.”
Hubbard said when a client of his finds out they’re being sued for greenwashing, he begins with a big-picture approach.
“I tell them let’s take a look at what the statements are and if they’re subjective. Generally, what is the public’s understanding of those types of statements? Do you have any backup for your claims? I want to see other products out there similar to yours that have been targeted. Let’s look to the courts, how have some courts interpreted statements like these? Can we say we stand behind our statement, or if there is some concern do we want to engage in a potential resolution?” Hubbard said. “The plaintiffs are a mixed bag. Some firms really are believers that really want companies to say things that are true, want to protect the environment. If this is the way they want to do it, great, and if they make a little money, fine. But some firms, this is kind of their business to go around on the internet, read statements, read questionable things into them and send letters to the Targets and Walmarts.”
Hubbard said courts have been trending somewhat favorably toward plaintiffs in cases, in part because the Green Guides are so outdated, and other regulations few and far between.
“Plaintiffs are having a little more success at early stages getting past motions to dismiss. As the case law gets developed I see it swinging back the other way,” he said. “Manufacturers have had to tighten up statements… once all the really deceptive things are dealt with, plaintiffs have to look for less deceptive statements… Greenwashing is still new enough for plaintiffs to keep bringing cases.”
Jochmans, a Washington D.C.-based government affairs consultant, said companies and activists alike should stay engaged with political leaders at all levels because the FTC’s Green Guides will not always be the be-all, end-all.
“What I always advise folks is, these conversations are happening in the courts, the FTC, state houses, city councils. If you don’t have a seat at the table you are going to miss out. It could even be a city council. Why would you not engage?” Jochmans said. “The [fashion] industry has a history of not wanting to engage, but it’s a very different political landscape right now. Things are happening and legislators need to hear what is workable and what is not.”
For now, the Green Guides are essentially the only regulating tools, and the FTC’s decision to potentially update them is music to the ears of American Apparel and Footwear Association director of sustainability Chelsea Murtha, who spoke at the Wednesday hearing with the FTC board.
“The sustainability landscape has changed significantly since 2012 and we have identified several areas—from concerns around claim substantiation to the use of third-party certifications—where updated and improved guidance would be most welcome,” Murtha said. “Further, while survey data shows that consumers are increasingly interested in purchasing sustainable goods, it also indicates that consumers are becoming more skeptical of companies’ sustainability claims. Accusations of ‘greenwashing’ abound. It would benefit both businesses and consumers to have a new, robust guidance on identifying false or misleading environmental claims.”
Looking into his crystal ball, Hubbard sees the volume of greenwashing suits increasing for a while yet.
“I think in 10 years this will probably have played itself out, but it’s going to have some legs for a while,” he said. “We’re still in the early stages so I see a lot more litigation over the next five to six years and then it will tail off. There will still be egregious comment claims. Greenwashing was one of Webster’s [Dictionary] new words this year, so it may be a new word for a year or two. Then, everybody will know about it and it will start to fade.”