Ep. 14: Avoiding the legal landmines of greenwashing

Greenwashing law is still in its nascency, but recent regulations in Europe and case law in the U.S. is beginning to shape its future. In Europe, companies must prove that they aren’t greenwashing, while in the U.S. the burden is on the consumer to prove that a company is making false claims. As companies navigate this new legal landscape, they must tread carefully with their sustainability communication efforts. In this episode, Mike connects with legal and ESG expert Christine Uri to better understand this emerging legalese, and how sustainability communicators should proceed.

You can also listen to this episode on Spotify, Apple Podcasts, Amazon Music and YouTube.

TRANSCRIPT

Mike Hower: While greenwashing laws are in their nascency around the world, recent regulations in Europe and case law in the U. S. are beginning to shape their future. In Europe, the burden is on the companies to prove that they aren't greenwashing, while in the U.S. the burden seems to be on the consumer to prove that the company is the one making false claims.

And as companies navigate this new legal landscape, they're going to need to tread carefully with their sustainability communication efforts. So today I’m bringing on somebody who is both a legal and ESG expert. A rare combination but something that’s increasingly important today. 

I’d like to welcome my friend, Christine Uri, who is the founder of ESG for In-house Counsel. Thanks for being here today, Christine. 

Christine Uri:  It's my pleasure. I love being able to talk at this intersection of sustainability, ESG, sustainability communications. There's a lot going on.

Mike: So the first question I want to ask is just kind of getting to the basics of what are the legal definitions of greenwashing? 

Christine: So Mike, I have a really legal answer for you. There is no definition that would put it in a “it depends” type category. The definition of greenwashing really changes from jurisdiction to jurisdiction and depending on the kind of products and services that you offer. The overall theme — or what is considered greenwashing —  is a statement that is misleading or false or fraudulent with respect to environmental performance of a company.

Mike: Companies have been greenwashing for decades. So why is this happening now? Why is this only now drawing the attention of lawyers and regulators? 

Christine: Yeah. I’m not sure I'd agree that companies have been greenwashing for decades, but they have been communicating about sustainability for decades, or at least a couple decades, and it is getting more attention now. There are a few drivers. First, people just care more about climate and sustainability now, so your public is spending more attention watching what companies are doing, watching what statements are made. Second, there's a lot more statements being made. So, because consumers and the public care about sustainability, companies want to look like they are acting responsibly. As a result, companies are putting out statements, and then those statements are available for the public to potentially criticize. And then finally, the increase in statements makes regulators want to act as well, want to make sure that companies are using sustainability communications correctly and effectively, and the regulators then draw out more communications and potentially more criticism.

Mike: I work with a lot of companies that operate both in the U.S. and Europe and right now a lot of them are trying to figure out, “How do I communicate sustainability in an authentic way that doesn't get me in trouble?” In Europe, it might be violating some of the new regulations that are out there against screenwashing. And then in the U.S., it might be how to avoid expensive litigation.  

Can you talk a little bit about the differences between the European and the U.S. environment when it comes to talking about sustainability and greenwashing and the legalese that's happening around there?

Christine: The legal systems in the U.S. and Europe are fundamentally different. In the US, we don't have a lot of regulations around what you say about sustainability. We do have a very active litigation system and so what you're seeing in the U. S. is a lot of consumer complaints based on false advertising or potentially fraud. These consumer complaints are coming up through the courts and, in, when a consumer complaint comes into a court, the consumer has the initial burden to show that a statement is misleading or fraudulent. In Europe, it's a much more regulatory-based system. Regulators put specific definitions around what companies can say, and also what they must prove in order to back up those statements.

And the regulations enable the regulators to hold the companies accountable, and often they'll provide a mechanism for consumers to also hold companies accountable if they violate the regulations. 

Mike: So, there's been a couple of recent cases in the U.S. in particular around greenwashing.  Most recently I was reading about how, uh, there was a court that ruled that Nike is off the hook for a potential class action lawsuit around greenwashing — saying that the plaintiff didn't have enough proof. Can you talk a little bit about this case?  

We don't have to go into huge detail, but just any high-level takeaways and how this might kind of guide future cases around greenwashing in the U.S. 

Christine: I did take a look at the Nike case and in the complaint, the consumer made accusations that Nike's sustainability claims about its products were untrue, but the consumer didn't have any kind of scientific proof or, hadn't, didn't appear to have really dug in to see, you know, beyond that particular consumer's opinion, whether the statements were untrue.

So, I think with [it] the case will be more impactful for plaintiffs than for companies going forward. It provides guidance to plaintiff’s counsel on what kinds of information they're going to have to be able to back up claims [for] against companies for greenwashing. And this is kind of a, it's a common method where plaintiffs counsel over time learn what courts are going to expect and then modify their approaches to fit within those parameters.

Mike: So would you say that it, is it easier for a company to greenwash in the U.S. than in Europe?

Christine: No, I mean, I think that the European regulations put a much higher burden on companies. In Europe, those regulations, they'll apply to all companies. All companies will have to submit a certain amount of information and be held to a higher standard. The U.S. is different because what happens with the litigation is plaintiffs will pick a few high-profile examples.

So, you saw Nike, there's a big case against Delta for its carbon neutral claims, we just saw a case against Sephora. These plaintiffs choose larger companies as example companies and go after, you know, the huge amount of damages that's available in the U.S. 

I think, for your average company, you'll be held to a higher standard in Europe, and then your large companies in the U.S. will be more at risk of this kind of litigation. 

Mike: So, in these cases, especially in the U. S. where the plaintiffs are claiming damages for greenwashing, what are the damages specifically? Generally, what are they talking about?

Christine: In, for example,  I think all of the cases — the Delta, the Nike, and the Sephora, all three examples — the plaintiffs claim that they paid a premium because they believed the sustainability claim. And the cases are class action cases. This means that there's a lot of plaintiffs that are gathered together. Each plaintiff's claim may be relatively small, but if you aggregate them up, those claims get much larger. Then also available in class action cases, uh, is what's called “punitive damages.” Punitive damages are intended to punish bad actors by having the case or the results cost more than the actual damages, which may not be enough to influence behavior. 

Mike: That's really interesting. Moving on to the specific regulations in Europe that are governing greenwashing in particular, I know that the Green Claims Directive has recently come out and a lot of us sustainability communicators are still trying to wrap our heads around this.

Can you talk a little bit more just from a high level? What is the Green Claims Directive and what does it mean practically for companies as they communicate sustainability? 

Christine: The Green Claims Directive was proposed in 2023 and I checked this morning; it hasn't actually been finalized within Europe although it's certainly being watched.

Keep in mind that the European legal process is very long and from the U.S. perspective, convoluted in terms of making these regulations. If the Green Claims Directive does go into effect, it will require that companies have a certain amount of proof to back up statements that they make with respect to environmental performance. This could include net zero. It could include carbon neutral, although Europe is phasing out carbon neutral in general, or more general claims that a product is sustainable or green.

Mike: I, I interviewed you a couple months ago for my YouTube channel, asking about this but, just to kind of reiterate, as a sustainability communicator, I don't have a legal degree although I did think about going to law school way back when — I'm not going to do that anymore (smiles). 

How can nonlegal sustainability marketers or communicators advise clients or, if they're working within a company, do their jobs without having all this legal knowledge? How can they tell stories that are interesting but also compliant at the same time.

It sounds like sometimes they're, those are at odds.  How would you recommend sustainability communicators kind of move forward in this new era of legalese and regulation?

Christine: Yeah, it's definitely a changing environment. I mean, for a long time, these kinds of sustainability communications lived within marketing and really didn't get much focus or review. It was it was more of a feel-good story. And today, you know, those processes of communicating an environmental performance has to go outside of that marketing context and really, it needs a legal review to look at these greenwashing issues, but even a broader review than that. 

What consumers are asking for and what regulators are asking for is that if companies make a statement that a product meets a certain environmental standard that the company has done its due diligence, has really done the work, both to make sure the product hits that standard and to be able to document it. And so, what needs to happen from a sustainability communications perspective, is go ahead and write the communication and then, um, have a group that you start circulating it out to try to figure out, “Okay, what, what in here could be a flashpoint that we need to make sure we have? Some kind of verifiable evidence of.”  

And keep in mind, you know, a lot of the push will be around specific terms. So, if you want to tell a story about how you're reducing your carbon footprint — I think as long as the story is true and accurate — I think the storytelling portion should be relatively safe, although you should still have it reviewed. But when you start attaching a label to what you're doing — this product is green, this product is clean, this product, it only used, you know, however much carbon — then you have to have some kind of backup to that statement.

Mike: Yeah, it definitely makes a lot of sense and I've been interviewing a lot of folks across different functions over the past months and I think what's interesting is that traditionally, I think lawyers were seen as kind of the party poopers of sustainability communication. We would want to say something interesting and they would say, “No, we can't say that.” 

So there's always this kind of tension between aspirational language, “We're going to do this. we're going to get there,” versus, “We don't want to greenwash.” So I think your advice is really smart where, you know, as long as you bring the lawyers into the conversation, and I think lawyers also kind of understand now that sustainability needs to be communicated. It can't, you can't just greenhush and just kind of having that collaborative effort can really allow you to say things that are both compelling and compliant as I like to say these days.

Christine: Absolutely. And remember, I, my background is as both the chief legal officer and a chief sustainability officer. So, I try to give the message within the legal community that we, you can't just say no to communicating on anything related to sustainability. Consumers, clients, regulators all expect transparency as a starting point. And companies need to be able to talk about the good things that they're doing. That's, that's just a natural part of what companies do. 

There is some more focus on making sure that you find the right words to ensure that your communications are accurate. But I think overall that's a good thing, a good thing for companies, a good thing — I know the sustainability marketing and communicators are, they want to make sure the claims are accurate. It's not like, you know, you want to make sure you want to go out and make a bunch of false claims. So, just a little bit more scrutiny while not being too afraid to say something. 

Mike: It's interesting since you've worn both the CSO hat and the lawyer hat. Some of our listeners, they're either in-house sustainability folks or they’re consultants or they’re communicators. 

What advice would you give both a sustainability practitioner or communications practitioner as they're trying to engage with their internal legal team on these issues?

Let's say you have an in-house council that's not as familiar with ESG or maybe it's a little bit more on the conservative side around it. What are some tips on kind of engaging the legal teams on these issues?

Christine: Bring them in early. Ask your general counsel or whoever your legal leader is to appoint somebody specific to work with the sustainability team so that person can kind of learn the lay of the land over time and is responsible for developing that expertise. 

And then, I was saying, bring them in early. The worst thing you can do is spend a year writing a beautiful sustainability report and then throw it over to legal two days before you're going to publish it with a, “Hey, could you take a quick look?” Nobody will end up happy in that situation.

If you can create just a little sounding board group where you're circulating drafts through [it] gives the opportunity for the legal counsel to have responses and then work through those responses, uh, gives your legal counsel opportunity, if they don't know what a particular term is, to go get educated or for you to educate them on what that term is. 

And having someone just constantly engaged instead of, you know, just at that last-minute Hail Mary, makes a huge difference. 

Mike: Great! Well, that's all the time we have for today. Again everybody, Christine Uri. She's the ESG guru for In-house Counsel and she works with companies of all sizes on basically the intersection of anything ESG and legal and sustainability-related.

She's got a lot of great content on LinkedIn so definitely give her a follow. We'll include those in the show notes and thank you, Christine! 

Christine: Thanks for having me on the show.