Greenwashing Claims: How to Avoid Becoming an Eco-Fraud Target

Greenwashing claims: how to avoid becoming an eco-fraud target Victoria Davis Lockard and Josh Becker ALSTON & BIRD LLP Green is the new black in consumer product market- attention, and the plaintiffs’ bar, on eco-fraud is The “Six ing. Gone are the days when the local co-op was the only Sins of Greenwashing™” — A Study of Environmental business pushing products labelled as environmentally Claims in North American Consumer Markets, which friendly. Even large, mainstream retailers and manufac- was published by the environmental marketing firm turers have joined the green revolution and are reaping TerraChoice in November 2007.2 The study, intended to the benefits to be had from green marketing. Environ- describe and quantify the pervasiveness of greenwash- mentally friendly products are in greater demand, and ing, conducted a survey of six category-leading big box companies are repackaging their products as “clean and stores in which more than one-thousand so-called green green” in order to stay competitive. Unfortunately, the consumer products were examined. A host of consumer more aggressive a company is with its environmental products, such as shampoo, paper towels, televisions, claims, the more likely it is to become a target in an light bulbs, copy paper, laundry detergent and lumber, “eco-fraud” or “greenwashing” action brought on behalf were tested for compliance with current best practices in of consumers, competitors or the government. environmental marketing as found in sources such as the International Organisation for Standardisation (ISO), the What is “greenwashing” or “eco-fraud”? US Federal Trade Commission (FTC), the US Environ- The term “greenwashing,” a derivative of “white- mental Protection Agency (EPA), Consumers Union, wash,” has recently come into vogue to describe the and the Canadian Consumer Affairs Branch. All but one promotion of environmental benefits through consumer of the products made environmental claims that were advertising and labelling practices that are perceived to judged to be “demonstrably false” or misleading. be false, deceptive, misleading or vague. The term The study identified the following six patterns, or “greenwashing” is widely attributed to a 1986 essay “sins,” of greenwashing: (1) sin of the hidden trade-off, penned by suburban New York environmentalist Jay (2) sin of no proof, (3) sin of vagueness, (4) sin of Westerveld criticising the hotel industry’s use of plac- irrelevance, (5) sin of lesser of two evils and (6) sin of ards suggesting guests could help “save the environ- fibbing. ment” by reusing their towels.1 Westerveld maintained 1 The sin of hidden trade-offs is described as adver- that the hotels were more motivated by profit than by tising a product as “green” based on one attribute, any real environmental agenda. without considering other important environmen- Legal actions arising from alleged greenwashing can tal issues related to the product. This first sin is best be described as “eco-fraud” litigation. Such claims, demonstrated with reference to household insula- which may be brought by a purported class of consum- tion products that promote indoor air quality ers, competitors, state attorneys general or government without paying attention to other environmental agencies, seek recovery and/or injunctive relief based on aspects of the insulation, such as manufacturing allegedly deceptive trade practices and fraudulent adver- impact or recycled content. tising of environmental benefits. These actions essentially challenge labels such as “Environmentally Friendly,” 2 The sin of no proof arises when a claim cannot be “Eco-conscious,” “Carbon Neutral,” “Energy Efficient,” substantiated by easily accessible information, “Sustainable,” “Renewable,” “Organic,” “Non-toxic,” such as household lamps and lights that promote “Chemical free,” “All Natural,” “Recycled,” and “Bio- energy efficiency or facial tissues and paper towels degradable.” that claim post-consumer recycled content without Part of the recent interest in eco-fraud litigation has providing evidence. been triggered by aggressive publicity and publications 3 The sin of vagueness occurs when a claim is so by eco-activists and advocacy groups, such as Greenpeace, poorly defined or overly broad that an intended decrying the environmental practices of corporateAmerica. consumer is likely to misunderstand it. Examples One oft-cited study responsible for focusing public of such claims include insecticides promoted as australian product liability reporter May 2009 7 “chemical-free,” “natural” hair mousse, and wax defendant either failed to disclose the product’s alleged paper that claims “recycled” content, but fails to health risks (eg, failure to disclose alleged harms from quantify that content. Teflon® coated cookware) or deceptively advertised the 4 The sin of irrelevance is committed when an product to possess some health benefit or premium environmental claim is made that may be truthful, attribute that cannot be substantiated (eg, “probiotic” but is unimportant or unhelpful to the environmen- yogurt or tools “made in the USA”). The goal in tally conscious consumer. The most common example bringing such claims is clear: attain certification and of this “sin” is the allegedly irrelevant claim that a extort a settlement. product is free of chlorofluorocarbons (CFCs), The consumer class action is an alluring avenue for a which the study notes have been banned for number of reasons. First, the bar for class certification is almost thirty years. far lower in these types of cases than in personal injury 5 The sin of lesser of two evils is made when a claim or medical monitoring actions, where individualised may be true, but it risks distracting the consumer injuries often defeat the class certification requirements from the greater adverse environmental impacts of of commonality and typicality. Second, these actions the product’s entire category, with cited examples usually dispense with the hurdle of proving scientific or including organic cigarettes and “green” insecti- medical causation and the associated expense of hiring a cides and herbicides. cadre of scientific experts. Third, these actions give rise to large classes with high monetary payoffs due to the 6 The final sin, the sin of fibbing, occurs when a many consumers who purchase the types of everyday claim is false. The study cites as examples of this products being targeted. sin several shampoos that claimed to be “certified Historically, the class model could be avoided in organic,” but for which no confirmation of that product liability actions alleging personal injury because claim could be found. in such cases the differences among individual plaintiffs The conclusions of the TerraChoice study are difficult on issues of liability, comparative fault, causation, and to verify, because the study does not mention any the nature and degree of injuries tend to overshadow the specific brands, stores or companies by name, and the commonality of the class.3 By eliminating the personal methodology has been questioned. One thing that is not injury element in consumer fraud class actions, however, questionable, however, is the interest in it by the media. plaintiffs can avoid the biggest hurdle to class certifica- The study has been covered on CNN, MSNBC, The tion. Today Show, The New York Times, and a host of other An important and current debate relevant to the national publicity outlets. Not only has the study, and defense of consumer class actions concerns the issue of publications like it, brought greenwashing into the individual reliance, the traditional causal element of a American consciousness, but it essentially provides a common law misrepresentation claim. It is believed that road map for plaintiffs’ attorneys looking for the next big the courts’ relaxation of the reliance requirement — a consumer fraud case. showing that the misrepresentation induced the consumer to purchase the product — is a significant factor Eco-fraud: today’s flavour of consumer class in the rise of these consumer product class actions.4 In litigation recent years many have described a national trend The rise of no-injury consumer product class actions dispensing with the need for plaintiffs to prove reliance has been chronicled on the legal blogs and the seminar under consumer protection claims.5 Most recently, how- circuit for the past several years. The term “consumer ever, it seems there is a reversal of this trend and more product class action” is a catch-all phrase used to courts are finding that the “as a result of” language in describe “no-injury” class actions involving a consumer most consumer protection statutes requires actual cau- product claim typically based on a hybrid collection of sation in the form of reliance.6 state and federal consumer protection statutes and tradi- In the light cigarette case of McLaughlin, the Second tional theories of recovery. The common paradigm in Circuit held that “proof of misrepresentation — even these cases involves a statewide or sometimes nation- widespread and uniform misrepresentation — only sat- wide class action targeting a single product or a discrete isfies half of the equation; the other half, reliance on the class of products by plaintiffs seeking recovery for an misrepresentation, cannot be the subject of general alleged economic injury. A familiar charge is that the proof.”7 The court stated that individualised proof of product failed to deliver the “benefit of the bargain” reliance on the misrepresentation is needed to overcome

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