Trends in ESG Advertising Claims: What Advertisers Should Expect in the U.S. and in Cross-Border Campaigns

March 20, 2024

With the anticipated revisions to the Federal Trade Commission's Green Guides looming, along with their expected impact on the level of substantiation required of advertisers making ESG claims, the focus and scrutiny on environmental and sustainability marketing and advertising has only increased.

In addition, the number of consumer class action lawsuits against marketers for their use of misleading ESG claims has reached an all-time high. This session considers the forthcoming revisions to the Green Guides and their impact on U.S. advertising and cross-border campaigns, trends in consumer class action lawsuits, and the line between aspirational and actionable ESG claims.

Words of Wisdom

"Every green claim absolutely needs to be substantiated. And in many cases independently verified as well."

"The company has to be able to demonstrate that those aspirations are backed up by a reliable vetted plan, efforts already underway to achieve the plan, and that those efforts within the plan actually could lead to the goal with measurable milestones in place, too. The fact, then, [that the] aspirational goal is for the future doesn't necessarily mean that the claim is insulated from review regarding whether it's realistic — and whether an achievable plan actually exists. So, the key, really, with the aspirational claims, is to analyze the overall consumer expectation that's created by the claim."
— Rosie Norwood-Kelly, associate at White & Case LLP

Key Takeaways

FTC Green Guides anticipated revisions should address carbon offsets and climate change-related claims as the current guides do not address these issues.

New E.U. laws on greenwashing include:

General EU consumer law bans unfair practices, with a "blacklist of practices that are always deemed 'unfair," as stated by the speakers, such as greenwashing. Information needs to be substantiated and must not make unsupported claims; once new laws are adopted, member states will have 24 months to comply.

Latest enforcement trends in Europe include:

There are various civil courts in member states, including CLCV v. Nespresso, which focuses on the claims being made, such as the product/company promoting carbon neutrality and using 100 percent recyclable materials. This case is pending appeal.
In 2023, the DUH executive director stated that since "May 2022, the Deutsche Umwelthilfe has opened more than 30 legal proceedings and has not lost a single lawsuit regarding climate neutrality promises in court."
In 2023, DGCCRF (France) released findings of its national investigation on greenwashing, citing that of 1,100 undertakings inspected, 25 percent were found to be in breach, resulting in 141 warnings, 114 injunctions, and 18 criminal or administrative reports.
The UK Advertising Standards Authority codified rulings in June 2023 guidance on green claims.
In 2023, BEUC filed complaints against 17 airlines that claimed "that extra credits can 'offset' emissions."

Latest U.S trends and cases include:

There is an increase in litigation cases. For instance, TINA.org has tracked more than 100 class-action lawsuits "accusing marketers of making misleading environmental claims." According to the White & Case, of the greenwashing class-action lawsuits, 30 percent have misleading information on eco-friendly responsible claims, 18 percent have "alleged false and/or misleading sustainable claims," 14 percent have "alleged false and/or misleading recyclable claims," 11 percent have "alleged false and/or misleading compostable or biodegradable claims," and 5 percent have "alleged false and/or misleading carbon reduction claims."

Case example:

In 2024, Della v. Colgate-Palmolive Co. focuses on recyclability claims; the case was brought under California law arguing that the "recyclability of the toothpaste tubes of its products" is misleading because "only a 'miniscule' number of recycling plants in the U.S. actually accept them for recycling." Ultimately, the Court ruled that a "reasonable consumer might assume that 'recyclable' would mean that it could be sent to a recycling plant by consumers."

NAD guidance summary:

The NAD follows FTC guidance, but "is able to fill in gaps when there is no
specific guidance in an area such as aspirational claims," according to White & Case. In particular, NAD found that "aspirational claims can convey a message to a reasonable consumer of expectations of future environmental benefits, which could be misleading if the company's efforts and plans are not consistent with its stated goals."

As such, goals should be measurable and companies need to provide evidence that these aspirations have a basis and plan.

Federal court guidance summary:

The "reasonable consumer" is a standard to deciding if ads are misleading, aspirational, or accurate.

Action Steps

Key takeaways:

Lawsuits involving ESG claims are increasing, which will likely result in more regulation and law.
Regulation serves as a warning to E.U. and U.S. companies about using misleading and false environmental marketing claims, or greenwashing.
Claims should be measurable and actionable. Plans should be clearly in place.

CLE Materials

Source

"Trends in ESG Advertising Claims: What Advertisers Should Expect in the U.S. and in Cross-Border Campaigns." Anna Naydonov, partner at White & Case LLP; Rosie Norwood-Kelly, associate at White & Case LLP. ANA Advertising Law 1-Day Conference, 3/20/24.

You must be logged in to submit a comment.