Coca-Cola Wins in Greenwashing Suits Show Hazy Marketing Limits

The food and beverage industry is navigating uncharted waters as their climate claims are picked apart in a flood of lawsuits over what qualifies as “sustainable” and “recyclable” products.

As a result, amid a lack of regulatory guidance, companies are grappling with mixed judicial opinions in various jurisdictions on what they can and can’t say about their climate impact. Coca-Cola won two lawsuits recently—one in California and another in the District of Columbia—where judges found that the beverage giant’s environmental statements weren’t misleading to consumers.

Earth Island Institute, the organization that brought the lawsuit in the Superior Court for the District of Columbia, is appealing the decision. The suit took issue with Coca-Cola’s statements including a tweet that said: “Business and sustainability are not separate stories for The Coca-Cola Company—but different facets of the same story.”

Earth Island wants companies like Coca-Cola to refrain from making assertions like this altogether, said Earth Island’s general counsel, Sumona Majumdar. “Fundamentally we take issue with companies claiming that they’re sustainable when their business practices rely on the extraction and use of plastic,” she said.

The DC judge said Coca-Cola’s statements were goals, and not a specific promise to consumers. “Courts cannot be expected to determine whether a company is actually committed to creating a ‘world without waste’ or ‘to doing business the right way,’” he said, referring to some of the company’s green slogans.

Despite these courtroom wins for Coca-Cola, food and beverage companies are still trying to figure out the exact limits of what they can say about sustainability without running afoul of consumers or raising the eyebrows of activists and regulators, said Bao Vu, a partner at Stoel Rives. Vu said his corporate clients often speak about inconsistencies between how courts interpret greenwashing claims for different companies.

“One may get called out and another might not for similar types of statements,” he said, referencing “a patchwork of inconsistent visions” on what could be deemed misleading.

The industry is anticipating updated guardrails from the Federal Trade Commission’s green guides, rules aimed at rooting out false environmental claims, that haven’t been updated in a decade.

Many are keen for a new rubric to turn to, said Joseph Aquilina, senior director and associate general counsel of the Consumer Brands Association.

“We’re hoping this process will bring forth some much need clarity and consistency,” he said.

The Coke Cases

Lawsuits about companies’ environmental claims are dredging up questions about if their climate-related statements are merely lofty intentions or a direct promise to consumers.

In the DC Superior Court case, the judge said in early November that Coca-Cola’s statements were general and aspirational goals. Earth Island’s general counsel, however, said the organization believes the judge’s decision on the Coca-Cola statements “is not sufficiently protective of consumers.”

Earth Island said Coca-Cola’s claims were deceptive marketing that violated DC’s Consumer Protection Procedures Act. But the judge said nothing in that law “prohibits an entity from cultivating an image.”

Later that same month, Coca-Cola won another lawsuit brought by the Sierra Club, an environmental organization, when a federal judge dismissed a proposed class suit against the company and others including Blue Triton Brand Inc. for allegedly deceptive marketing on water bottles.

The lawsuit took issue with claims on the bottles that the product is “100% recyclable” when most bottles end up in landfills or incinerators because of limited recycling capacity. The Sierra Club said the labels are fraudulent misrepresentations and violate California’s Consumer Legal Remedies Act, False Advertising Law and Unfair Competition Law.

A federal judge in the US District Court for the Northern District of California—known sometimes as ‘the food court’ because it handles a lot of food and beverage suits—said a reasonable consumer would understand that saying a product is “recyclable” doesn’t guarantee that it will actually be recycled.

Earth Island also brought a similar case against Blue Triton—maker of Poland Spring and Deer Park bottled water brands— in the DC Superior Court. The organization argues that Blue Triton deceptively portrays its business practices as environmentally friendly. The judge rejected Blue Triton’s motion to dismiss in July, stating that the lawsuit can proceed because DC’s Consumer Protection Procedures Act provides that a company’s statement only has to “have a tendency to mislead” regardless of whether a consumer is actually misled.

Such lawsuits are ramping up, said Emily Lyons, a partner at Husch Blackwell who advises food and beverage companies.

Lyons noted that the outcome of the Coca-Cola decisions could change on appeal. Even so, a decision in one state doesn’t guarantee blanket approval of the beverage maker’s marketing claims across the US.

Companies can’t “look at every single state law and say ‘Yes, I have no risk’—that’s never going to happen,” she said.

Judge’s haven’t been as sympathetic to some of Coke’s industry peers. A judge in the US District Court for the Southern District of California in March rejected Nestle’s motion to dismiss a case about allegedly misleading marketing. The plaintiff, a consumer, said she bought Nestle’s products including its hot cocoa because of allegedly deceptive social and environmental benefits that were featured on the packaging.

The case has yet to be resolved, but Nestle said the allegations are false and that no reasonable consumer would be misled by its label statements.

McDonald’s was also sued by a consumer in March in the Southern District of Illinois over the company’s “farm to fork” claims. The suit alleges such marketing is misleading when its packaging contains chemicals that are dangerous to customers’ health and harmful to the environment.

McDonald’s has filed a motion to dismiss, arguing that the suit is “a baseless accusation.”

Green Guides

Some judges have turned to the FTC’s green guides in their decisions. First issued in 1992, the guides help companies avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act or other laws.

In the Sierra Club California case against Coca-Cola, the judge said the company’s representation didn’t run afoul of the current version of the guides, last updated in 2012. The guides permit marketing a product as “recylable” if it’s made of materials that have the potential to be recycled, the judge said.

The FTC can bring enforcement actions if a company’s environmental marketing doesn’t fit within the guides. The commission allegedthat Walmart and Kohl’s falsely marketed sheets, towels and other textile products as being made of eco-friendly bamboo when they were actually made of rayon. Kohl’s agreed to a $2.5 million civil penalty and Walmart paid a $3 million civil penalty.

At an open meeting on Dec. 14, FTC Chair Lina Khan said that the green guide update needs to keep pace with scientific developments as well as consumer protection and consumer perception.

Aquilina of the Consumer Brands Association said the FTC will have a long list of potential updates to consider as it tries to keep pace with the breadth of changes to environmental marketing over the past ten years. “They have their work cut out for them,” he said.

The current green guides don’t address the use of the word “sustainable,” a term that is “so common in our everyday lexicon,” Aquilina said. The FTC is seeking comment on how to prevent deceptive environmental claims, calling attention to widely used marketing and labeling terms including “sustainable,” “compostable,” and “recyclable.”

“Consumers are increasingly wanting more information and transparency” around companies’ environmental impact commitments, Aquilina said, speaking about the mounting public pressure for more clarity on climate issues.

At the FTC’s open meeting, several members of the public aired their environmental concerns. Hilary Jochmans, the founder of advocacy group Politically in Fashion, said that terms including “sustainable” could “become meaningless or even detrimental to efforts to promote healthy environmental practices” without strict standards.

Khan recognized that consumers have almost no way of knowing if they’re being fed misleading climate assertions. For the average consumer, “it’s really impossible to be verifying these claims,” Khan said.