We were flying. The triple bottom line actualized — soaring sales and prolonged growth, tremendous opportunities for employees, and real, tangible positive environmental and community impacts. We felt like the proof in the sustainability-can-equal-growth pudding. 

And then it hit: a class-action lawsuit calling into question the integrity of our materials that were so fundamental to our brand. 

At the time, I was directing sustainability and communications for the brand, and it felt like the rug had been pulled out from underneath us. The lawsuit had flimsy grounds, but the details and merits of the suit hardly mattered. Class action lawsuits typically most benefit the litigators who bring forth the lawsuit, and this claim was filed by a firm that specializes in exploiting holes in “green” brand language to extract lucrative settlements from companies, ostensibly on behalf of a couple of our customers they recruited on social media. (Apple recently became the subject of a class-action lawsuit on similar grounds.) Instagram influencers ran with the headline about the lawsuit, and the damage to our sales, not to mention our reputation, was immediate and significant. The lawsuit sapped meaningful resources from the company — in attorney fees and the time our team had to devote to mitigating its impacts — and diminished company morale. 

After the suit became public, several peers in the sustainable business space reached out in support, as we came to understand that class-action lawsuits aimed at businesses like ours were practically a rite of passage. My team and I knew that greenwashing risk was real, and the regulatory environment around sustainability claims was getting increasingly tight. But because we were a private company and a relatively small player in our industry, not to mention our intention of being honest and transparent in our communications, we assumed we weren’t exposed. The takeaway was that even businesses like ours that were trying to do the right thing and not greenwash could still, and might even be more likely to, get caught in the snare of greenwashing litigation. 

‍Read more: Greenblushing — the art of honest communications

The rise of greenwashing risk

Driven by demand for more sustainable products, evolving guidelines and legal regulations, and an increasingly aggressive and predatory plaintiffs bar chasing ever higher damages, greenwashing cases are pervasive. Recently, RepRisk's third edition report identified 1,841 instances of misleading communications by companies between June 2023 and June 2024, with 56% relating to environmental claims. Although overall greenwashing cases decreased by 12% during this period, high-severity cases increased by 30%. The report also revealed that private companies were responsible for 70% of these cases, while public companies accounted for only 30%.

Regulatory fines and civil litigation

Regulatory changes aimed at addressing greenwashing, such as the updated Green Guides by the FTC and the EU green claims directive, are having a broader impact beyond their immediate legal jurisdictions. Companies are not only facing fines or penalties imposed by regulators and advertising standards authorities but are also becoming targets of civil litigation. Lawyers are increasingly going after companies that use unsubstantiated environmental claims, opening the door to lawsuits and significant financial damages. As noted in a recent Forbes article called "Businesses Beware: Greenwashing Is a Goldmine for Litigators," greenwashing fines can carry penalties of at least 4% of a company’s total annual revenue. The Enforcement Task Force Focused on Climate and ESG Issues recently imposed a $19 million fine on a major investment advisor for misleading claims about the green credentials of an investment fund. 

These developments highlight the growing interconnection between regulatory fines and civil litigation, with new legislation and enforcement efforts setting the stage for a broader expectation of corporate accountability, which is now being reinforced through lawsuits.

‍The need for honest and transparent communication

Facing the twin hurdles of legislation and litigation, more companies than ever are practicing greenhushing, meaning they are limiting their risk by not talking about their environmental progress at all. A recent EY survey found that while nine out of ten investors have increased their use of ESG data over the past year, most also believe that greenwashing is a growing problem. Investors are distrustful of the data and are looking for improved materiality, comparability, and accuracy in sustainability reporting.

‍As my colleague Sami Grover, the co-author of the term “greenhushing” recently put it, the tactic serves no one. “Imperfection is inevitable,” he writes. “And it is deeply human. Not only do consumers and stakeholders understand this. But they relate to it. This creates common ground. And common ground is where communications can really come alive.”

Rather than just silencing good sustainability work, the rise of greenwashing litigation underscores the critical importance of honest and transparent sustainability communication. Companies must ensure their environmental claims are substantiated and aligned with regulatory guidelines. Clear and accurate disclosure of sustainability efforts builds trust with stakeholders, including investors, customers, and employees and helps push forward the common cause of responsible business. 

Navigating the complex landscape of greenwashing litigation

In hindsight, the communications at the company where I worked could have been tighter. We learned the hard way to leave nothing open to interpretation and to get clear on, and substantiate, all our claims, in every single place we made them. Navigating the complex landscape of greenwashing litigation requires companies to adopt a more proactive approach. This includes:

• Conducting regular audits of sustainability claims and marketing materials.
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• Ensuring that environmental claims are backed by credible data and third-party certifications.
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• Implementing robust internal controls to monitor and verify sustainability performance.
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• Engaging with stakeholders transparently and addressing concerns proactively.
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• Staying informed about evolving regulations and industry best practices.

By prioritizing honesty, transparency, and accountability, businesses can mitigate the risks of greenwashing litigation while contributing to a more sustainable future.

‍Need help turning your environmental work into on-point, credible, and substantiated communications? We’re here to help. Reach out to book a meeting with one of our sustainability communications experts any time.