Zhang – Spring 2023 – MJEAL

Zhang – Spring 2023 – MJEAL

Conscious Consumerism, Class Action, and Carbon Offsetting

Rina Zhang

An increasing number of environmentally conscious consumer segments are choosing to spend their money on brands and products that signify their commitment to sustainability.”[1] However, as more and more companies label their products with environmental claims such as “green”, and “carbon neutral”, there is growing concern that some of these terms are misleading and describe practices that are inconsistent with consumer perceptions.[2] As more companies turn to carbon offsets to reduce their environmental footprint, the recent greenwashing class action highlighted the issues that arise when voluntary carbon markets and marketing intersect.[3]

In October 2022, plaintiffs filed a class action lawsuit in the Southern District of New York against Danone, the manufacturer 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 think the term “carbon neutral” means no carbon emissions are produced in the production and distribution process of the bottle.[6] Second, regardless of consumer perception, Danone does not live up to its carbon neutrality claims due to unregulated and uncertain carbon offset benefits.[7]

Voluntary carbon markets such as the one followed by Danone in commodifying carbon emission reductions in the form of offsets. Broadly speaking, there are three ways to strike a balance: by conserving existing carbon sinks that would otherwise be destroyed; by preventing new carbon emissions from being generated; and by creating new sources of carbon sequestration.[8] In practice, carbon offset prices can fund payments to landowners to conserve and care for mature forests; finance renewable energy projects in areas historically powered by non-renewable sources; and maintaining a tree planting program to create new forests.[9] Companies wishing to achieve a “net zero” or “carbon neutral” footprint can estimate the carbon footprint of their operations and pay an equivalent amount of carbon emissions to offset their activities.[10]

Danone’s class action illustrates an important question regarding the effectiveness of carbon offsets. Assessing carbon offsets is a complex issue involving “inherent uncertainty” because of the many assumptions scientists must make in order to estimate the amount of carbon dioxide emitted and absorbed or stored by each compensation activity.[11] As well as scientific challenges, there are also logistical difficulties in distinguishing truly “add-on” carbon reductions versus those that would occur regardless of the protective offset effect.[12]

Common offset practices such as tree planting also raise biodiversity concerns and questions of long-term sustainability and accountability. If a tree in a forest designated as a carbon offset burns to the ground (potentially releasing more carbon than the tree itself absorbs over its lifetime), should that offset still count? Some carbon offset programs address this problem by planting more trees for each offset as a “buffer zone” to absorb unexpected losses from forest fires and tree disease.[13] However, recent studies suggest that such measures may not adequately explain the increased risks to tree populations intensified by climate change.[14]

Danone is certified by PAS 2060, an international standard managed by a third-party non-profit organization that stipulates requirements to “measure, reduce and offset greenhouse gas (GHG) emissions.”[15] Unlike mandatory carbon markets implemented by government-run “cap and trade” programs that regulate greenhouse gas emissions in several states and California, voluntary carbon markets are administered by an unregulated, decentralized network of project developers, brokers, and standards organizations.[16]

The FTC’s upcoming update to its Green Guides, which advise marketers on how to avoid misleading consumers when making environmental claims, could prove to be a consequence of the ongoing Evian litigation and future greenwashing decisions involving carbon offsets.[17] The Green Guides, although non-binding in authority, have been adopted by many states and are frequently cited by courts as the standard for judging false advertising in “eco-washing” class torts.[18] The FTC last revised the guidelines in 2012 and is currently seeking public input to inform the revision process.[19] The FTC’s latest request for public comment highlights carbon offsets and climate change as key topics seeking public input.[20]

The current version of the Green Guide provides general guidance on “carbon offset” [21] but does not mention “carbon neutral” activities. Especially as more companies adopt carbon offsets, clarifying what carbon neutrality means can encourage companies to communicate their practices more effectively to consumers. Clearer standards could 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 are justified by potential litigation.

Despite the challenges and limitations, carbon offsets, when used effectively, can help address the urgent need to reduce greenhouse gas emissions. Although corporate participation in carbon offsets has increased, the lack of regulated carbon markets and the risks posed by greenwashing litigation may deter more companies from joining. The revisions to the FTC’s Green Guidelines present an opportunity to influence how carbon offset providers and buyers manage consumer expectations and drive accountability. However, more extensive government regulation may be needed to ensure that carbon offsets deliver on their promises.

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

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

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

[3] Trial Attorney Quinn Emanuel, Carbon Offsets: The Coming Wave Of Litigation? Firm Memoranda (7 September 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 (October 14, 2022, 17:14), https://www.law360.com/articles/1539820.

[5] Identifier.

[6] Identifier.

[7] Identifier.

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

[9] Identifier.

[10] Identifier.

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

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

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

[14] Identifier.

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

[16] Dee Lawrence, Overview of the Voluntary Carbon MarketForbes Nonprofit Council (November 10, 2021, 7:00 a.m.), 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 Seeking Public Comment on Potential Update for ‘Green Guide’ for Use of Environmental Marketing Claims (14 December 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 to Expect Cos. From the FTC Green Guides UpdateKirkland & Ellis (January 12, 2023), https://www.kirkland.com/publications/article/2023/01/what-cos-can-expect-from-ftcs-green-guides-updates.

[19] FTC, supra note 17.

[20] Identifier.

[21] Guide to Using Environmental Marketing Claims, 77 Fed. Reg. 197 (11 October 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. Green Guides advise companies to use “competent and reliable scientific and accounting methods to properly measure claimed emission reductions and to ensure that they do not sell the same reduction more than once.” They also don’t suggest misrepresenting carbon offsets because they have had past or immediate future effects or misinterpreting offsets as reducing emissions if those emissions are required by law.

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