Mitigating Greenwashing Litigation Risks with Ramya Ravishankar
Jun 12, 2024Season 1Episode 87
Tom Hagy
Companies are grappling with how to market the eco-friendly, people friendly, and animal friendly characteristics of their products and services, while also not getting in trouble with the law. Some have learned this the hard way. Some have wisely consulted experts. (That's foreshadowing.)
ESG – or Environmental, Social and Governance – reporting and so-called greenwashing litigation have implications for a wide range of stakeholders. Companies face significant financial and reputational risks, while investors, regulators, advocacy groups, and consumers all have an interest in ensuring the accuracy and transparency of ESG information.
Last year the SEC adopted amendments to the Investment Company Act with the “Names Rule,” which addresses fund names that are likely to mislead investors about a fund’s investments and risks.
On the consumer side, the FTC has been on the case as it stalks misleading advertising claims. Violations have real consequences. In 2022 the FTC reached multimillion dollar settlements with store chains Kohl’s and Walmart over claims that certain products were eco-friendly and made from bamboo, when they were really made from rayon.
More recently, a class action was filed in federal court in New York over the "carbon neutral" branding on bottled water. But there are some important court decisions our guest wants to know about, involving shoemaker AllBirds and beauty products company Sephora.
She is Ramya Ravishankar, General Counsel & Corporate Secretary of the HowGood company, an independent research firm that helps the world’s largest food brands meet their sustainability commitments. Ramya is a former environmental biologist turned attorney who is – as you will soon hear -- passionate about the intersection of food and sustainability. Previously, Ramya was Associate General Counsel at Bowery Farming – producer of pesticide free lettuce, other leafy foods and herbs. Before that she was a regulatory enforcement associate at Skadden Arps. Ramya earned her J.D. from Columbia Law School in New York and a B.S. from Queen’s University in Ontario, Canada.
Companies are grappling with how to market the eco-friendly, people friendly, and animal friendly characteristics of their products and services, while also not getting in trouble with the law. Some have learned this the hard way. Some have wisely consulted experts. (That's foreshadowing.)
ESG – or Environmental, Social and Governance – reporting and so-called greenwashing litigation have implications for a wide range of stakeholders. Companies face significant financial and reputational risks, while investors, regulators, advocacy groups, and consumers all have an interest in ensuring the accuracy and transparency of ESG information.
Last year the SEC adopted amendments to the Investment Company Act with the “Names Rule,” which addresses fund names that are likely to mislead investors about a fund’s investments and risks.
On the consumer side, the FTC has been on the case as it stalks misleading advertising claims. Violations have real consequences. In 2022 the FTC reached multimillion dollar settlements with store chains Kohl’s and Walmart over claims that certain products were eco-friendly and made from bamboo, when they were really made from rayon.
More recently, a class action was filed in federal court in New York over the "carbon neutral" branding on bottled water. But there are some important court decisions our guest wants to know about, involving shoemaker AllBirds and beauty products company Sephora.
She is Ramya Ravishankar, General Counsel & Corporate Secretary of the HowGood company, an independent research firm that helps the world’s largest food brands meet their sustainability commitments. Ramya is a former environmental biologist turned attorney who is – as you will soon hear -- passionate about the intersection of food and sustainability. Previously, Ramya was Associate General Counsel at Bowery Farming – producer of pesticide free lettuce, other leafy foods and herbs. Before that she was a regulatory enforcement associate at Skadden Arps. Ramya earned her J.D. from Columbia Law School in New York and a B.S. from Queen’s University in Ontario, Canada.
Tom Hagy Litigation Enthusiast and Host of the Emerging Litigation Podcast Home Page Follow us on LinkedIn Subscribe on your favorite platform.
Tom Hagy:
Welcome to the Emerging Litigation Podcast. This is a group project driven by HB Litigation, now part of Critical Legal Content and VLEX Company's Fast Case and Law Street Media. I'm your host, tom Hagee, longtime litigation news editor and publisher and current litigation enthusiast. If you wish to reach me, please check the appropriate links in the show notes. This podcast is also a companion to the Journal of Emerging Issues and Litigation, for which I serve as editor-in-chief, published by Fastcase Full Court Press. And now here's today's episode. If you like what you hear, please give us a rating.
Tom Hagy:
Esg or Environmental, social and governance. The reporting of your ESG commitments and so-called greenwashing litigation have implications for a wide range of stakeholders. Maybe you Companies face significant financial and reputational risks, while investors, regulators, advocacy groups and consumers all have an interest in ensuring the accuracy and transparency of ESG claims and information. On the investor side, last year, the Securities and Exchange Commission you know the SEC adopted amendments to the Investment Company Act with the Names Rule, and this is intended to address fund names that are likely to mislead investors about a fund's investments and risks. One way some companies can mislead investors is by saying they're doing good things for the planet or for your health, when the reality is, they are either exercising wordplay or just not telling the truth. Can you imagine?
Tom Hagy:
Certain terms that reference a thematic investment focus, such as the incorporation of one or more ESG factors, are being scrutinized, but on the consumer side, the Federal Trade Commission has been on the case, because the agency stalks misleading advertising claims. Such violations have real consequences. In 2022, the FTC reached multi-million dollar settlements with store chains Kohl's and Walmart over claims that certain products were eco-friendly and made from bamboo. Who doesn't love bamboo? I know I do, but as it turns out, the FTC said some items advertised as bamboo were actually made of rayon. And who doesn't love rayon?
Tom Hagy:
I don't know if anyone loves rayon.
Tom Hagy:
Side note, did you know that rayon is marketed in some countries as cactus silk? That's a fun fact. I'm no expert, but I'm certain the FTC would be all over that. Back to bamboo. The agency said the eco-friendly bamboo claims from the store chains were misleading representations that violated the FTC Act and the Textile Act. In addition, the FTC says Kohl's and Walmart engaged in greenwashing by making deceptive eco-friendly claims for those products. Each company paid a couple million dollars for their violations and the FTC has resources for those looking to stay on the eco-friendly straight and narrow, like its green guides.
Tom Hagy:
This is welcome news for consumers. According to McKinsey Company, more than half of US consumers are highly concerned about the environmental impact of packaging. In general, consumers are willing to pay more for more green. So companies are accommodating, mostly on the up and up, developing and marketing more products than ever that are in addition to eco-friendly things like sulfate-free, all-vegan plant-based, like sulfate-free, all-vegan plant-based, non-toxic, earth-friendly, environmentally friendly or carbon neutral to remain competitive. That last one, carbon neutrality, is the subject of a class action in federal court in New York over the branding on bottled water.
Tom Hagy:
But there are other noteworthy cases and my guest is here to talk about them. She is Ramya Ravi Shankar, general Counsel and Corporate Secretary of the HowGood Company. Howgood is an independent research firm that helps the world's largest food brands meet their sustainability commitments, so she's helping them stay on the straight and narrow Well, she and her team. Ramya is a former environmental biologist turned attorney who is, as you will soon hear, passionate about the intersection of food and sustainability. It's great to love your job, and so can you. Previously, ramya was associate general counsel at Bowery Farming, a producer of pesticide-free lettuce and other leafy foods and herbs. Before that, she was a regulatory enforcement associate at Skadden Arps. You've heard of them. Ramya earned her JD from Columbia Law School in New York and her Bachelor of Science degree from Queen's University in Ontario, canada. And now here is my interview with Ramya Ravishankar of how Good speaking to me from her tidy in what I can only assume is a plant-based, non-toxic apartment in New York. I hope you enjoy it, ramya. Thank you very much for speaking with me today.
Ramya Ravishankar:
I'm excited to be here.
Tom Hagy:
Are you?
Ramya Ravishankar:
I am. This is actually my favorite part of my job. It really is.
Tom Hagy:
Well, yeah, they say, if you love your job, you never work a day in your life, right? Somebody said that. I learned it from a sitcom. We're going to talk about greenwashing and greenwashing litigation, so if you could help set the stage for this. What is greenwashing for those who don't know, and why is it such a hot topic?
Ramya Ravishankar:
Yeah, greenwashing has become certainly a more prevalent practice and has been making mainstream news beyond just the sort of niche circles. Maybe it once took up in the past. But it describes a deceptive marketing practice where companies make exaggerated or otherwise unsupported claims about the positive impacts that they and their products or services have on the environment. And it can really run the gamut. You know it could be exaggerating that a product has a particular environmental benefit, or it could be, you know, actively making a false or misleading claim about a particular sustainability investment, or it could even be a statement or message that diverts attention away from a company's you know overall negative environmental impact. And you know, at the end of the day, the through line across all of these types of examples is with greenwashing. Anything that's types of examples is with greenwashing. Anything that's untruthful, inaccurate, exaggerated or even ambiguous could fall under the umbrella and could be a cause for concern and cause for risk for businesses.
Tom Hagy:
Okay, let's get into some of the litigation. So I've read about greenwashing lawsuits. I just wanted to get your idea of sense of how prevalent they are and who typically files them.
Ramya Ravishankar:
They're quite prevalent, and increasingly so.
Ramya Ravishankar:
I think in the last couple of years you know some statistics show it's gone from like a couple hundred to like high hundreds to even over thousands of claims in the US being brought under the banner of greenwashing. And the reason they're becoming more prevalent is because consumers on the whole are becoming more concerned about corporate sustainability and about putting their money in investments or in purchases that they really believe in. So not only is there an increased attention from consumers and investors around sustainability and claims around sustainability, businesses are trying to meet the moment by touting their sustainability bona fides and making more sustainability focused claims about why people should be investing and buying from them have the directional increase of risk and ambiguity and even exaggeration that can then lead to these lawsuits. So you know, some folks might actively, you know, be taking creative liberties in communicating how sustainable they really are, whereas others might not be doing it in such an egregious manner but just not doing it properly. But in any case, these are some of the kind of push factors into why we're seeing so many suits.
Tom Hagy:
Yeah, seems like a lot of marketing claims are like that. They'll push an envelope. I remember when my kids were little they'd say look dad, free cell phones. Yeah, they're free if you buy them. So I'm sure that was completely legal, but not to somebody who was like eight years old. Who's typically filing these cases? Are there specific groups or individuals or firms leading it?
Ramya Ravishankar:
that is engaged in bringing these cases and, as I said, with more sophisticated consumers who want more details around the sustainability marketing that they are relying on. There are plenty of plaintiffs who want to be the named plaintiff in these cases. But apart from class actions, you're also seeing an increase in state regulators and federal regulators bringing cause of action from a consumer protection perspective. So you know, the Federal Trade Commission is a really good example of that. You know they are responsible for false advertising risk and protecting consumers from that. So from that angle, we've gotten a lot of inquiries and a lot of cause of action being brought, of inquiries and a lot of cause of action being brought. And the National Advertising Division, which is an arm of the Better Business Bureau, also brings inquiries and actions against companies.
Ramya Ravishankar:
So you're seeing across all these different platforms in the US just a rising tide lifts all boats. Everybody is getting in on the greenwashing litigation train. That's what's most prevalent. But layer onto that, you know, securities regulators are also interested in bringing greenwashing cases. You see the SEC's released some rules around climate disclosure, reporting and I think from their perspective, when a company touts its environmental bona fides and doesn't actually have the substantiation to back it up. That inflates its value to investors and therefore could be disrupting the financial system and not providing accurate disclosures to investors. So everybody wants to target and attack this from different angles.
Tom Hagy:
Right. Are there any cases, recent ones, that you find particularly interesting?
Ramya Ravishankar:
Yeah, the seminal case for me from the last few years is one that was brought against the footwear company Allbirds. So in 2022, a case in New York federal court was brought against the brand, which had advertised that they were reducing their carbon footprint and in doing that, they had shared a carbon score and they had showed the life cycle assessment tool that they had used to calculate that score. Plaintiffs in this class action claimed that that methodology and that lifecycle assessment was not robust enough and was not including enough aspects of Allbirds manufacturing in order to accurately share what its true carbon impact was and therefore was affecting their purchasing decisions. The court actually ruled in Allbirds favor because the underlying claim was not actually that the brand was misleading consumers. It was simply that the methodology they were using was not up to the plaintiff's standard for what it should be.
Ramya Ravishankar:
Simple criticism around the methodology was not enough under the consumer protection statute that the claim was brought under to be sufficient for the court to rule in the plaintiff's favor. You can see, though, how it hinged entirely on how clearly and overtly the brand disclaimed or caveated its incremental benefit claims. It had cited to a particular methodology, it had cited to a particular score and had made that, you know, reasonably available to consumers. But if it hadn't, if it had just stopped at our shoes are great for the earth or our shoes have a carbon impact of X Y, z, without any underlying support documents, the court could have easily ruled in favor of the plaintiffs instead of dismissing the case. So it's a really good example of how companies can avoid a unfavorable ruling down the road.
Tom Hagy:
The only thing I'd like to say about Allbirds is, first of all, I'm wearing them right now, and what I'd like to say, what my problem with them is, is they've convinced us that it's okay to wear slippers outside.
Ramya Ravishankar:
I think there are a lot of people who would agree with you that fashion trends have moved almost too far in the direction of informal and that we might want to rein it in a little bit.
Tom Hagy:
Yeah, I see people walking around Aren't those pajamas. I can't tell what that person's wearing.
Ramya Ravishankar:
Yeah, or like workwear that is wrinkle-free and so easy to get into, but you're basically wearing a sweatsuit, yeah.
Tom Hagy:
That's America. We're a casual country. You said there were two cases. What was the other case?
Ramya Ravishankar:
Yeah, the other case that I wanted to bring to your audience's attention is a little bit more recent. It was actually just decided in March of this year and it involves the cosmetics company Sephora. And full disclaimer up front. I am a Sephora consumer so I understand and appreciate the depth of offerings that this company has. The underlying claims were related to Sephora's Clean at Sephora program, which is a designation that they attribute to various personal care and cosmetics products that meet certain criteria that they have determined are clean Sephora criteria that they have determined are clean.
Ramya Ravishankar:
Sephora, in its website and in its marketing materials, makes it very apparent what those criteria are, including the fact that the products have to be made without certain chemicals like parabens or sulfates, mineral oil, formaldehyde, so on and so forth, and it articulates all of this.
Ramya Ravishankar:
But the plaintiffs in this case suggested that the phrase and the label clean at Sephora made them reasonably think that the products were free of synthetic materials altogether or all harmful materials altogether. Here again the court actually ruled in favor of the brand and dismissed the action because the way the definition and criteria for the clean at Sephora program was set out, no reasonable consumer could assume the more expansive definition that the plaintiffs were putting forward. Clean at Sephora means X, y and Z, and this is where we've listed it and this is why it's not misleading was the company's argument and it held up in court. Again, it hinged on the fact that the company had made very clear and very easily accessible information for consumers so that whatever green claim was being assessed, the consumer would have a robust set of facts to assess that, instead of jumping in and filling the gaps themselves with more ambiguous or, more you know, incorrect details.
Tom Hagy:
So in both cases both companies were transparent about the yardstick they were using, but the plaintiffs didn't like the yardstick. Does it kind of come down to that?
Ramya Ravishankar:
That's right. The reason I think we are in the US seeing a lot of these cases that could go either way, where the definitions might shift of what a reasonable consumer relies on in the advertising, is because green claims at the moment in the United States are covered by the FTC's green guides, which are a non-binding set of recommendations or guidance from the Federal Trade Commission around how to structure green claims. It was last updated over 10 years ago and it hasn't moved forward. And along with the greater innovation in sustainability, the greater innovation in sustainability, marketing and things that might have been fringe or outlier type claims in the past are becoming more aggressively used, for example, net zero. That was not something that we were really talking about back when the green guides were last updated. So getting more guardrails in place from these regulators around what can and can't be done is really important and because we don't yet have that update, we're seeing more pushing of the boundaries from companies and then a reaction to that and greater litigation from plaintiffs and other regulators.
Tom Hagy:
In terms of the kinds of claims we might be seeing. What do you anticipate out there based on what you're seeing in the US or the EU?
Ramya Ravishankar:
The EU is actually at the forefront of regulating green claims and are doing a more active and fulsome job of that. Just this year, the European Parliament passed something called the Green Claims Directive, which requires large companies operating in the EU to provide specific scientific validation before they can even say something is eco-friendly or biodegradable or sustainable. They have gone outright and banned certain types of claims that otherwise would have been permitted before. The UK now has a new anti-greenwashing rule that's going into effect and the regulating authority there is the Financial Conduct Authority. So it's giving them more tools to combat claims that companies are making around greenwashing and to address noncompliance. So, whether you see it in the US through the FTC or other regulators here or not, if you're a large operator, you're going to be paying attention to greenwashing regulation abroad, and it's coming fast and furious. Washing regulation abroad and it's coming fast and furious. There's going to be a lot more that marketing teams and legal teams are going to have to do to stay abreast of these updates?
Tom Hagy:
What advice, practical guidance, would you give to companies to avoid greenwashing claims?
Ramya Ravishankar:
So at a high level to minimize risk.
Ramya Ravishankar:
I think the common denominator across jurisdictions is to have any statements that a company is putting forward externally be accompanied by strong substantiation data and transparency around that substantiation and data.
Ramya Ravishankar:
And then you also want to augment that system of transparency with strong underlying policies around risk management and having credible standards by which you are determining that a particular product or a particular service is what you're claiming it is. With respect to environmental impacts, you want to be really clear and concise around what the purported environmental benefit is and you want to make sure you're not overstating or even omitting certain things that would be material to your consumers. And if I were to drill down more tactically for companies, I would say you want to have strong data provider partners who can support some of these claims that you're making. If it is 50% more recyclable than your average brand or whatever the claim is, you want to make sure that the data that's powering that 50% claim can be substantiated with credible scientific evidence. It complies with leading sustainability standards and frameworks. You want to make sure that the data and the methodology used to calculate that data are regularly reviewed and updated so that you're not relying on standards that are already too old from a few years back.
Tom Hagy:
Your company, howgood, serves companies in the food industry, so do you have anything to say relating to those companies that may be different from other companies?
Ramya Ravishankar:
yeah. So I think food is special in two ways and I and I genuinely I believe this uh, not, not because I work at a company that services the food industry, but food is special because everybody eats and can relate to food and can understand the impact of their purchasing decisions with respect to food. And the other reason is agriculture truly has an outsized impact on climate and environmental issues. Individuals can tie more closely what they're eating with the impact that choice is making on sustainability and on the environment. For companies in this space, when they are trying to share their sustainability investments and make green claims, I would emphasize, in their partnering with data providers, that they focus on data providers that have a specialty in agricultural production, that can provide data that is not just ingredient specific but location and crop specific and can incorporate different levels of granularity and complexity across their supply chain. So if they have data on a particular supplier that grows a crop in a particular region, your data provider can incorporate that supplier data and be able to provide more detailed insights.
Tom Hagy:
Could you say a few words about green hushing? Frankly, not until I talked to you the first time that I hear that term, Of course. Now I see it all over the place. But what's going on with green hushing? What is that?
Ramya Ravishankar:
is actually under-reporting or altogether omitting their sustainability credentials in fear of lawsuits and regulator scrutiny. So what I can say is, as sustainability becomes an increasing factor in individuals' purchasing decisions, it becomes a factor in regulators policy priorities. You are also going to see companies being more activist and embracing that, but you're also going to see companies afraid of embracing that and trying to distance themselves from it, and that's what green hushing refers to. But in this context, I want to put your audience, put a few other points on your audience's radar. One is this other practice of green rinsing.
Ramya Ravishankar:
So when a company sets a target around its sustainability goals and then, before they're achieved, moves the goalposts and changes the target because it was not able to meet what it had set itself out to do. In fact, several large, well-known brands have recently been under fire for doing exactly that. They had set aggressive goals for 2030 a couple of years ago and, as 2030 approaches, are either decreasing the impact that they are hoping to achieve by then or changing the timeline to beyond 2030, to a longer timescale by when they expect this impact to be realized. And then the last concept is green lighting. So, like gaslighting, green lighting, oh my gosh Last concept is green lighting.
Ramya Ravishankar:
So, like gas lighting, green lighting, oh my gosh, where companies tout their environmental bona fides, but in doing that they're really trying to draw attention away from the negative aspects of what they're doing. So it's like they're great partners and contributors to the fight against climate change, but really, on the whole, they're probably not doing enough relative to their externalities that they're contributing.
Tom Hagy:
Okay, Any other variations on green? I'm sure there's a few others.
Ramya Ravishankar:
These are just my favorite and I feel like they're all reactions and counter reactions to an increasingly sophisticated consumer base that cares about sustainability and that wants to see its dollar going to businesses that are making more sustainable choices.
Tom Hagy:
Yeah, it just seems like a very tricky area right now. You want to do the right thing, or maybe you have to do the right thing, but if you don't do it right you're in a lot of trouble. You want to tell everybody about it, but you don't want to be too obvious, Like hey, look at me over here. So it's tricky. But I think your advice around having statements backed up by data or good data partners being transparent, those kinds of things to keep you on the straight and narrow Sound like good guidance.
Ramya Ravishankar:
What I'd leave your listeners with at the end, I think, is this is really a cross-functional project for companies. It's not just the responsibility of legal, it's not just the responsibility of marketing. You really want your procurement teams, your communications teams, your compliance teams all working in lockstep with legal and marketing to make sure that the company's reputation and the company's value proposition are appropriately and adequately communicated. One way to do that is having some sort of working group or committee in place that owns and is responsible for this. Tracking trends and regulatory developments and incorporating them into the company-wide strategy around sustainability will be really helpful.
Tom Hagy:
Well, ramya Ravi Shankar, thank you very much for talking with me about this today.
Tom Hagy:
Thank you, it's been a pleasure much for talking with me about this today. Thank you, it's been a pleasure. That concludes this episode of the Emerging Litigation Podcast, a co-production of HB Litigation, Critical Legal Content, VLEX Fast Case and our friends at Losty Media. I'm Tom Hagee, your host. Please feel free to reach out to me if you have ideas for a future episode and don't hesitate to share this with clients, colleagues, friends, animals you may have left at home and certain classifications of fruits and vegetables, and if you feel so moved, please give us a rating. Those always help. Thank you for listening.
