Nearly 80% of millennials and over 60% of Gen Z and Gen X are willing to pay more for sustainable products, according to the Business of Sustainability Index. However, fraudulent sustainable product claims have increased steadily over the last five years, signaling that consumers are questioning whether these products are actually environmentally friendly.
This raises the question: If the upward trend in fraudulent sustainability product claims continues, will consumers’ appetite for these products lessen and the number of lawsuits increase?
One development may encourage companies to live up to the sustainability claims on their products, thus possibly retaining their customer base and deterring additional lawsuits: the Federal Trade Commission’s pending updates to its Green Guides. The Green Guides provide clarification on how consumers are likely to interpret environmental marketing claims and how marketers can substantiate and qualify these claims to avoid deceiving consumers.
Sustainability Claims Challenged in Federal Court
To figure out how many products’ sustainability claims are facing legal challenges, I conducted a Bloomberg Law dockets keyword search of federal fraud complaints (nature of suit code 370) for allegations that products made false or misleading sustainability claims in advertising, labeling, or marketing. I then sorted my results into the following three discrete categories:
- Environmental Impact Claims: Claims about a product’s environmental impacts are false or misleading.
- Responsible Disposal Claims: The labeling, advertising, or marketing of a product as being biodegradable, compostable, or recyclable is false or misleading.
- Climate & Carbon Impact Claims: The labeling, advertising, or marketing of a product as having low climate or carbon impacts is false or misleading.
While some lawsuits include of two or more of these categories, many of these lawsuits are unique.
Environmental Impact Claims
The FTC has long warned companies against making general environmental impact claims, such as Kohls and Walmart marketing rayon as eco-friendly bamboo. Based on my keyword search, however, product-related fraud complaints alleging false or misleading environmental claims have increased 280% from 2017 to 2022—with a total of 38 in 2022 alone.
For example, a recent complaint filed against H&M alleges that the green “Conscious Choice” tags on products mislead consumers to believe that the products are made from environmentally friendly or sustainable materials when they are actually made in part from recycled polyester which is a “one-way street to the landfill or incineration.” Should these types of product claims lack additional regulation or guidance, they may stop carrying the same weight to consumers.
If the FTC updates the Green Guides, the agency is likely to home in on two issues raised in the H&M complaint: general environmental claims and the definition of “sustainable.”
Responsible Disposal Claims
In 2022, complaints that alleged that products didn’t meet their recyclable, biodegradable, or compostable claims accounted for nine of the sustainable product lawsuits.
A recent complaint against Glad Products Company alleged that the word “recycling” displayed prominently and in all caps on the front of the packaging for bags used to hold recyclable materials misleads the reasonable consumer to believe that the bag itself can be recycled. And while the FTC’s Green Guides already cover biodegradable, recyclable, and compostable product claims, more products geared toward sustainability and sustainable processes have come on the market since the Guide’s last update over a decade ago. Based on companies’ current product marketing practices, this too is likely to be an area of focus for the FTC.
Until the FTC addresses these developments, consumers may become more distrustful of responsible disposal claims on products.
Climate, Carbon Impact Claims
Climate and carbon claims on products are relatively new. The two that appeared in this search were an October 2022 fraud complaint alleging that Danone Waters of America’s “carbon neutral” label on its Evian water product was false and misleading, and a June 2021 complaint alleging that Allbirds’ marketing of its shoes as having a low carbon footprint was false or misleading. We should expect similar product claims to encounter legal challenges in 2023.
If companies continue to promote allegedly misleading sustainability claims regarding their products, as the increase in such lawsuits suggests is happening, will consumers buy less of these products? It’s too soon to tell, but the FTC’s updated guidance—and the weight of its enforcement power—will be a major determinant in consumer behavior.
Bloomberg Law subscribers can find related content on our ESG Practice page, as well as our Practical Guidance: ESG Risk Management page.
If you’re reading this on the Bloomberg Terminal, please run BLAW OUT <GO> in order to access the hyperlinked content or click here to view the web version of this article.
To read more articles log in.
Learn more about a Bloomberg Law subscription.