Theodora McCormick, Member of the Firm in the Litigation and Health Care & Life Sciences practices, in the firm’s Princeton and Newark offices, co-authored an article in Natural Products Insider, titled “The Legal and Reputational Risks Associated with Greenwashing.”
Following is an excerpt:
Sustainability is no longer just a nice-to-have feature of a product, particularly with younger consumers. According to McKinsey & Co., “When consumers are asked if they care about buying environmentally and ethically sustainable products, they overwhelmingly answer yes.” In fact, “More than 60% of respondents said they’d pay more for a product with sustainable packaging. See 2020 McKinsey U.S. consumer sentiment survey.
People are drawn to “eco-friendly” products that deem their purchase validated. Highlighting the efforts undertaken to make more sustainable choices and sell products that are environmentally friendly can help differentiate a company from the competition. However, if a firm makes false or misleading sustainability or environmentally friendly claims, the consequences can be significant — both in terms of legal exposure and reputational damage.
The term “greenwashing” refers to the phenomenon of companies advertising products as either sustainable or good for the environment when there is little to no evidence that the product actually has any environmental benefit. It doesn’t refer to one sustainability trend in particular but can affect all trends.
The Federal Trade Commission first offered guidance to industry on permissible sustainable claims with its “Guides for the Use of Environmental Marketing Claims” in 1992. The Green Guides — as they’re more commonly called — were designed to help companies avoid making deceptive environmental marketing claims under Section 5 of the FTC Act or other laws.
In addition to clarifying what can be advertised as “organic” or “recyclable,” the Green Guides influence state consumer protection laws. Maine, Minnesota, New York and Rhode Island have adopted the Green Guides to help define their own laws against fraudulent consumer marketing, and California has incorporated compliance with them as a valid defense for companies sued over their marketing.
The Green Guides are an important tool that can assist companies with establishing an honest and transparent sustainability marketing strategy. But they were last updated in 2012, and the past decade has seen substantial changes in sustainability and climate marketing.
FTC has initiated a review of the Green Guides and is expected to publish updates sometime later this year. These updates should address some of the thornier environmental marketing claims that the agency has not yet weighed in on, including claims regarding climate change, sustainability and what makes a product “eco-friendly.”
