The fashion industry continues to be a target of activist plaintiffs who allege greenwashing, or in other words, false advertising regarding environmental and/or social aspects of clothing manufacturing and sales. While fashion industry trade groups and marketers continue to pursue improvements in the social and environmental footprints of clothing, some have begun to avoid public mention of these considerations in their marketing, in a phenomenon known as “greenhushing.” Several recent studies have documented an approximate 25 to 40 percent year-over-year drop in references to environmental, social and governance (ESG) terms in communications by corporate executives. The companies who are “greenhushing” might still be trying to improve ESG-related performance, which is thought to improve overall corporate performance, but may simply be talking about it less often.
Nevertheless, ESG-related legal risks remain important to the fashion industry. Below is a sampling of recent litigation in three main subject matter areas: recycling, carbon claims and sustainability claims.
Recycling Litigation: What If It Can Be Recycled, But Isn’t?
Various activist groups have called into question the recyclability of commonly used artificial packaging and materials. Under the existing Federal Trade Commission (FTC) Green Guides, marketers of recyclable packages have three tiers of acceptable claims: unqualified “recyclable” claims, where the marketer can show the item was accepted for recycling in at least 60 percent of the communities where it was sold; partly-qualified claims for items accepted by a significant number, but not more than 60 percent, of communities; and highly-qualified claims, where the item could be recycled but facilities for recycling were not readily available. Recent data purport to show, however, that even items that consumers routinely deposit in blue recycling bins and that local recycling systems accept may not actually be recycled. This phenomenon may have several causes, including the fact that secondary markets for the products of recycling are down, yielding lower prices for virgin materials than for recycled materials.
Predictably, this has led to class action litigation alleging that marketers of products labeled as “recyclable” knew or should have known of the poor recycling rates that are actually achieved in practice.
In Peterson v. Glad Products Company, N.D. Cal. 2023, the plaintiffs have alleged that Glad, a producer of blue plastic bags used to contain recyclable materials, implies that the bags themselves are recyclable though they are generally not, and that the bags are accepted for use in recycling systems wherever they are sold. According to the complaint filed by a resident of San Francisco, the bags are not accepted for recycling use in San Francisco or in many other municipalities. The court denied the defendant’s motion to dismiss in July 2023, and the case now moves forward, along with parallel litigation and Attorney General investigations of other manufacturers in other jurisdictions.
In Swartz v. Coca-Cola et al., N.D. Cal. 2021, plaintiffs alleged that the claim “100 percent recyclable” appearing on a variety of single-use water and soda pop bottles was false or misleading for the same reason – that is, far less than 100 percent of bottles are recycled in practice, and in any event, not all aspects of the bottle (e.g., the cap) can be recycled. The court here took a different view, granting the defendants’ motion to dismiss and holding that for the reasonable consumer, a claim that something is “recyclable” simply means that it can be recycled, not that it invariably is recycled.
The distinction between “can be” recycled and “always is” recycled is a fault line that has emerged in the FTC Green Guides comments. It will be interesting to see how the FTC resolves this issue in the next edition of the Green Guides.
Carbon Copy: Consumers Question Meaning of Offsets
With a record-breaking, hot and stormy summer coming to an end, the issue of climate change is top-of-mind for consumers and marketers. For the last few years, many major companies have been pledging to achieve “net zero” emissions by some future date or, alternatively, to become “carbon neutral” in their operations immediately. Because it is not yet technologically feasible to produce any product without some carbon emissions, most companies have openly or tacitly relied on carbon credits to offset the emissions they generate. In essence, the marketers pay a third party to avoid emitting carbon or remove carbon from the atmosphere in exchange for their own emissions. By netting in this manner, companies can claim they are “carbon neutral.”
The problem with this plan is that activists and others are beginning to question the origins and value of carbon offsets. Not only do they question the math underpinning how much carbon from offsets is actually removed, but they increasingly grumble at how offsets are “made,” particularly in the case of forests that would never have been disturbed in the first place.
Two recent cases raise these issues.
In Dorris v. Danone Waters, SDNY 2022, plaintiffs challenge the label claim that Evian water is “carbon neutral.” They argue that consumers have no concept of what that term means and will wrongly assume that the process of producing and selling Evian emits zero carbon entirely. Moreover, plaintiffs argue that even if consumers understand what an “offset” is, the entire voluntary offset market is fraught and broken. A motion to dismiss briefing is complete, and the matter is under advisement before the court. We’ll be watching it closely.
Another prominent carbon neutrality case was filed this summer. In Berrin v. Delta, C.D. Cal. 2023, plaintiffs challenged the claim by Delta that it is the “world’s first carbon-neutral airline.” Plaintiffs point out that aviation emits a lot of carbon dioxide and that Delta must rely on offsetting to achieve neutrality. Delta has moved to dismiss, primarily on grounds of preemption. The matter is pending.
We think this issue will likely persist and spin out more litigation in the near and longer term. Any fashion company contemplating “carbon neutrality” claims should follow the developments closely.
The Meaning of ‘Sustainability’
Because plaintiffs have sued every company that dared use the word “natural” on a label, many companies have pivoted to the seemingly softer term of “sustainable.” The FTC Green Guides did not define “sustainable” back in 2012. However, the FTC urged marketers who are using the term to qualify it if needed to dispel any broader, unsupportable message regarding general environmental benefits.
More recently, plaintiffs have targeted label claims of “sustainability,” arguing that the term conveys perfect environmental performance as well as the highest level of social or labor standards.
In Rawson v. Aldi, N.D. IL 2021 (with a companion filing in the D.C. Superior Court), plaintiffs took issue with Aldi’s labeling of farmed, sustainability-certified salmon from Chile as “Simple. Sustainable. Seafood.” The plaintiffs alleged that Chilean salmon farming falls short of being “sustainable” because antibiotics are used on the salmon. They also argued that the fish are raised in inhumane net pens in Chilean coastal waters. After losing a motion to dismiss, Aldi is reportedly working to settle the matter.
In Corporate Accountability Lab v. Hershey and Rainforest Alliance, No. 2021-CA-003981-B (D.C. Supreme Court), a corporate activist sought to hold Hershey and Rainforest Alliance liable under the D.C. Consumer Protection Procedures Act (DCPPA), an expansive consumer protection law that gives standing to activist or vicarious avengers. The theory is that Hershey glosses over its purchase of cocoa from African farms that use child labor, contrary to its certification of the Rainforest Alliance seal. While Rainforest Alliance has since been dismissed from the case, Hershey was not so fortunate.
The Implications for Fashion
As the fashion industry increasingly grapples with its environmental and social footprints, there will be unrelenting scrutiny from regulators, consumers and activists. While there are laudable efforts underway to adopt circularity principles, recycling, and reuse of used garments, these efforts are nascent and have yet to take hold. We are aware, for example, of controversies in the footwear industry centered on the ultimate goal of recycling used footwear.
Certain industry groupings have emerged as favorite targets of class actions brought by plaintiffs, who are themselves often inspired by if not directly working with, agenda-driven activists. The targets have been plastic makers, soft drink companies, airlines and other major emitters, such as fossil fuel companies, along with “big food/agriculture.” Given the fashion industry’s prominence and social impact, it is likely to become a major target too.