United States: Attorneys General Of Both Political Parties Remain Focused On Greenwashing

Key takeaway#1

To reduce risk of litigation and regulatory exposure, companies should review, verify, and substantiate any green claims, especially claims regarding generalized corporate environmental stewardship and net zero commitments.

Last week, New York Attorney General Letitia James filed alawsuit against JBS USA Food Company and JBS USA Food Company Holdings (JBS USA), which together make up the American subsidiary of the world's largest beef product producer, JBS S.A. The suit alleges that JBS USA engaged in "greenwashing," misleading consumers about its environmental impact goals. The suit is one amongst many state attorney general lawsuits related to greenwashing or ESG claims, which have spanned across the aisle and been initiated by both Democratic and Republican attorneys general.

JBS USA claimed it would achieve "net zero" greenhouse gas emissions by 2040, despite alleged contrary documentation related to expansion efforts. JBS USA has made several public statements about its commitment to achieving net zero operations, including a full-page advertisement in the New York Times that highlighted the net zero claim in 2021. And, in September 2023, JBS USA's CEO announced that the company "pledged to be net zero in 2040" at a New York City Climate Week event. As of March 2024, the company's website maintains this claim on its home page. Although statements on the company's website or features in newspapers are more immediately discernable as advertisements, public statements by a corporate official are also considered advertisements that require substantiation.

JBS USA has made several other specific claims about the sustainability of its business operations that Attorney General James alleges are greenwashing, including:

• "Agriculture can be part of the climate solution. Bacon, chicken wings, and steak with net zero emissions. It's possible."
• "We will cut our own emissions by 30% in 2030 and eliminate Amazon deforestation from our supply chain within five years."
• "JBS will achieve net zero greenhouse gas emissions, reducing its direct and indirect emissions and offsetting all residual emissions."

In June 2023, JBS USA received a warning from BBB National Programs' National Advertising Review Board (NARB), the appellate advertising body related to the National Advertising Division (NAD). Both the NAD and NARB function as the advertising industry's self-regulatory bodies. The NARB agreed with a prior NAD decision, determining that JBS USA's evidence did not support its net zero claims and recommended that JBS USA stop making these claims.

New York Attorney General James is seeking injunctive relief that would require JBS USA to cease its "Net Zero by 2040" advertising and submit to a third-party compliance audit, as well as disgorgement and civil penalties of at least $5,000 per violation (the number of violations must be determined at trial).

New York Attorney General James asserts that JBS USA misled consumers with these net zero claims as a means to remain competitive within the food industry, and that in fact, JBS USA had not calculated the company's total greenhouse gas emissions, and thus had no way to assess whether it could successfully reduce its emissions to net zero by 2040. The lawsuit alleges that JBS USA "could not feasibly meet its pledge because there are no proven agricultural practices to reduce its greenhouse gas emissions to net zero at the JBS Group's current scale, and offsetting those emissions would be a costly undertaking of an unprecedented degree." Complaint at ¶ 9.

Accelerating public enforcement of greenwashing through suits based on state unfair trade practices statutes should caution companies to verify and substantiate the claims they wish to make about their environmental impacts before incorporating them in advertising. Not only should companies ensure that all green claims are substantiated, but overstated, generalized, broad, or vague environmental benefit claims should be avoided entirely. And, companies should avoid omitting pertinent information related to any environmental claims. But, customers appreciate and reward commitments to environmental stewardship and sustainability, so companies with proper substantiation should continue to make – and tout – these commitments.

The New York Attorney General's action adds to a growing list of greenwashing enforcement efforts arising across international jurisdictions. These actions reflect broadening efforts by regulators to combat deceptive advertising practices by private businesses attempting to capitalize on consumers' environmental interests. American adults say they are willing to pay more for sustainable products, and recent studies have shown that people are willing to change their habits to switch to more environmentally friendly products.

Regulatory enforcement related to greenwashing claims will remain a top enforcement priority throughout 2024. Although the various attorneys general may have different approaches or underlying goals, the state enforcers will continue to scrutinize corporate green claims, especially those claims that are traditionally viewed as more difficult to substantiate such as net zero claims. Beyond the state attorneys general, the Federal Trade Commission is working to finalize its proposed updates to the Guides for the Use of Environmental Marketing Claims in 2023 (the Green Guides). The updated Green Guides should provide companies with further examples and advice related to green marketing, but will also provide enforcers with additional tools for suits against greenwashing.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.