Zhang – Spring 2023 – MJEAL

Conscious Consumerism, Class Actions, and Carbon Offsets

Rina Zhang

A growing segment of environmentally-minded consumers choose to spend their money on brands and products that signal their commitment to sustainability.”[1] However, as more companies label their products with environmental sustainability claims like “green,” and “carbon neutral”, there are increasing concerns that some of these terms are misleading and misrepresent practices that fall short of consumer perceptions.[2] As more corporations turn towards carbon offsets to reduce their environmental footprint, recent greenwashing class actions highlight issues that arise when voluntary carbon markets and marketing intersect.[3]

In October 2022, plaintiffs filed a class action in the Southern District of New York against Danone, the producer of Evian water bottles. [4] The complaint alleges that advertising and labeling Evian bottles as “carbon neutral” is misleading for two reasons.[5] First, some consumers perceive the term “carbon neutral” to mean that no carbon emissions are generated in the bottle’s production and distribution process.[6] Secondly, regardless of consumer perceptions, Danone does not meet its claims of carbon neutrality due to the unregulated and uncertain benefits of carbon offsetting.[7]

Voluntary carbon markets such as the one Danone participates in commodifying reductions in carbon emissions in the form of offsets. Broadly speaking, there are three ways to create an offset: by preserving existing carbon sinks that would otherwise be destroyed; by preventing new carbon emissions from being generated; and by creating new sources of carbon absorption.[8] In practice, the price of a carbon offset may fund payments to landowners to preserve and care for mature forests; finance renewable energy projects in areas historically powered by nonrenewable sources; and sustain tree-planting programs to create new forests.[9] Companies seeking to achieve a “net zero” or “carbon neutral” footprint can estimate the carbon footprint of their operations and pay for the equivalent amount of carbon emissions to offset their activities.[10]

The Danone class action illustrates important questions regarding the effectiveness of carbon offsetting. Valuing a carbon offset is a complex problem that involves “inherent uncertainty” due to the manifold assumptions scientists must make to estimate the amount of carbon dioxide emitted and absorbed or stored by each offsetting activity.[11] In addition to scientific challenges, there are also logistical difficulties in distinguishing what carbon reductions are truly “additional” versus ones that would have occurred regardless of an offset’s protective effect.[12]

Common offsetting practices like tree-planting also raise biodiversity concerns and questions of permanence and accountability in the long-term. If a tree in a forest designated as a carbon offset burns down (potentially releasing much more carbon than the tree itself absorbed in its lifetime), should those offsets still count? Some carbon offsetting programs address this issue by planting an excess of trees for each offset as a “buffer zone” to absorb unexpected losses from wildfires and tree disease.[13] However, recent studies have shown that such measures may not adequately account for increasing risks to tree populations that are intensified by climate change.[14]

Danone is certified by PAS 2060, an international standard administered by a third-party non-profit that sets requirements for “quantifying, reducing and offsetting greenhouse gas (GHG) emissions.”[15] Unlike mandatory carbon markets implemented by government-run “cap and trade” programs that regulate greenhouse gas emissions in some countries and California, voluntary carbon markets are administered by an unregulated and decentralized network of project developers, brokers, and standards organizations.[16]

The FTC’s forthcoming update to its Green Guides, which advise marketers on how to avoid misleading consumers when making environmental claims, could prove consequential to the ongoing Evian litigation and future greenwashing decisions involving carbon offsets.[17] The Green Guides, although non-binding authority, have been adopted by many states and are often cited by courts as a standard for assessing false advertising in “greenwashing” class actions.[18] The FTC last revised the guides in 2012 and is currently seeking public input to inform the revision process.[19] The latest request for public comment from the FTC highlights carbon offsets and climate change as a key topic it wishes to receive public input on.[20]

The current version of the Green Guide provides general guidance on “carbon offsets” [21] but does not mention “carbon neutral” activities. Especially as more companies adopt carbon offsetting, clarifying what constitutes carbon neutrality could encourage companies to communicate their practices more effectively to consumers. Clearer standards may also put pressure on companies internally and externally to thoroughly vet their carbon offset providers and ensure that any environmental claims they make about their offsets stand up to potential litigation.

Despite their challenges and limitations, carbon offsets, if used effectively, could help address a pressing need to reduce greenhouse gas emissions. Although corporate participation in carbon offsetting has been growing, the lack of a regulated carbon market and the risks posed by greenwashing litigation could dissuade more companies from joining in. Revisions to the FTC’s Green Guides present one opportunity to influence how carbon offset providers and buyers manage consumer expectations and encourage accountability. However, more extensive government regulations are likely needed to ensure that carbon offsets can live up to their promise.

Rina Zhang is a Junior Editor with MJEAL. Rina can be reached at [email protected].

[1] Cristianne Close, The global eco-waking: how consumers are driving sustainabilityWorld Economic Forum (May 18, 2021), https://www.weforum.org/agenda/2021/05/eco-wakening-consumers-driving-sustainability/.

[2] Kaley Roshitsch, FTC Weighs Greenwashing Crackdown, Fashion Speaks UpWomen’s Wear Daily (Dec. 14, 2022, 2:18 PM), https://wwd.com/sustainability/environment/ftc-weighs-greenwashing-crackdown-green-guides-fashion-1235449329/.

[3] Quinn Emanuel Trial Lawyers, Carbon Offsets: A Coming Wave of Litigation? Firm Memoranda (Sep. 7, 2022), https://www.quinnemanuel.com/the-firm/publications/client-alert-carbon-offsets-a-coming-wave-of-litigation/.

[4] Jonathan Capriel, Evian Water Hit With Suit Over ‘Carbon Neutral’ BottlesLaw360 (Oct. 14, 2022, 5:14 PM), https://www.law360.com/articles/1539820.

[5] id.

[6] id.

[7] id.

[8] Quinn Emanuel Trial Lawyers, supra note 3.

[9] id.

[10] id.

[11] Barbara Haya et al., Managing uncertainty in carbon offsets: insights from California’s standardized approach20 Climate Policy 9, (2019)

[12] Quinn Emanuel Trial Lawyers, supra note 3.

[13] Craig Welch, Polluters are using forests as ‘carbon offsets.’ Climate change has other plansNational Geographic (May 4, 2022), https://www.nationalgeographic.com/environment/article/forests-as-carbon-offsets-climate-change-has-other-plans.

[14] id.

[15] Carbon Trust, Carbon neutral certification, (last visited Mar. 17, 2023), https://www.carbontrust.com/what-we-do/assurance-and-labelling/carbon-neutral-certification.

[16] Dee Lawrence, An Overview Of The Voluntary Carbon MarketForbes Nonprofit Council (Nov. 10, 2021, 7:00 AM), https://www.forbes.com/sites/forbesnonprofitcouncil/2021/11/10/an-overview-of-the-voluntary-carbon-market /?sh=51bd2eb078b1.

[17] Press Release, Federal Trade Commission, FTC Sees Public Comment on Potential Updates to its ‘Green Guides’ for the Use of Environmental Marketing Claims (Dec. 14, 2022), https://www.ftc.gov/news-events/news /press-releases/2022/12/ftc-seeks-public-comment-potential-updates-its-green-guides-use-environmental-marketing-claims.

[18] Bruce Retain et al., What Cos. Can Expect From FTC’s Green Guides UpdatesKirkland & Ellis (Jan. 12, 2023), https://www.kirkland.com/publications/article/2023/01/what-cos-can-expect-from-ftcs-green-guides-updates.

[19] FTC, supra notes 17.

[20] id.

[21] Guides for the Use of Environmental Marketing Claims, 77 Fed. Reg. 197 (Oct. 11, 2012) (16 CFR Part 260) https://www.ftc.gov/sites/default/files/documents/federal_register_notices/guides-use-environmental-marketing-claims-green-guides/greenguidesfrn. pdf. The Green Guides advise companies to use “competent and reliable scientific and accounting methods to properly quantify claimed emission reductions and to ensure that they do not sell the same reduction more than one time.” They also discourage misrepresenting carbon offsets as having had effects in the past or immediate future or misrepresenting offsets as having reduced emissions if such emissions are required by law.

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