Greenwashing and ad agencies: the legal risks

What is greenwashing in advertising? 

Greenwashing is when a company uses various tactics to appear more environmentally responsible than it actually is. As consumers become more and more concerned about the sustainability and environmental impact of the products and services they pay for and more and more interested in sustainable alternatives, companies are finding it increasingly beneficial to use ‘green claims’ to attract customers and drive more business. 

Advertising is one of the most effective tactics used by companies to push an inaccurate understanding of their business or their product. Companies can use advertising campaigns to communicate claims about their environmental credentials to consumers, often over-inflating them or failing to mention their other – less than environmentally friendly – business practices. And of course, organisations will often make use of advertising agencies to do so. 

What laws around environmental advertising do we already have? 

Under common legal rules governing consumer-facing claims , environmental advertising must be backed up by the environmental evidence.  

The minimum expectation is being set by incoming EU regulation, set to require all environmental marketing claims to be checked against environmental evidence by an external verification body, before being used in advertising.  

Various actors are increasingly enforcing the redress of misleading claims, including environmental NGOs, consumer groups, advertising regulators, consumer regulators, class action lawyers and competitors. For example, the European consumer network of 27 consumer regulators is investigating 20 different airlines for making a range of misleading claims. A French prosecutor is investigating an oil and gas company for potential criminal infractions relating to greenwashing. 

Which industries are most at risk of greenwashing litigation from their advertising? 

The fact that green claims made in advertising need to be evidence-based puts a particular focus on the environmental advertising sectors where the environmental evidence is at its worst – the highest polluting industries which bear huge responsibility for climate change, biodiversity loss and harmful pollution. Heavily fossil fuel-linked businesses have found their claims the focus of an increasing amount of litigation and regulatory action.  This includes industries like oil and gas but also airlines, cruise ships, SUV manufacturers, chemicals and plastics.  

How does this new wave of climate litigation affect advertising agencies?

Advertising is one of the most effective tactics used by companies to push an inaccurate understanding of their business or their product. Companies can use advertising campaigns to communicate claims about their environmental credentials to consumers, often over-inflating them or failing to mention their other – less than environmentally friendly – business practices. These new legal and regulatory actions are starting to look beyond instances of individual misleading claims to a more in-depth scrutiny of the strategic, collaborative role that agencies have played in support of polluting clients.

What is the legal risk to ad agencies specifically? 

Previous scandals around environmental claims, including the ‘Dieselgate’ scandal, have attracted further regulatory investigations and follow-on litigation, as claimants and regulators have seen the potential for fines and damages. Such further legal action tends to come with compelled disclosure of internal documents (which may include documents relating to or held by the relevant ad agency) and/or significant financial impacts in the form of fines or damages. These are significant risks to ad agency clients, which relate directly to the work agencies’ do. 

Three legal developments that agencies should take note of:

1. The onset of regulatory actions:

For example, following an EU-wide consumer complaint, the European consumer network of 27 consumer regulators is investigating 20 different airlines for making a range of misleading climate-related claims.  A further EU-wide complaint targets recycling claims for single-use plastic packaging. Actions like these, tend to lead to ‘follow-on’ litigation, including class actions, and regulatory enforcement. 

2. Lawsuits dragging agencies and consultants into the line of fire

As legal action for misleading claims intensifies, agencies and consultants with involvement in the creation or production of false or misleading claims can find themselves directly targeted by lawsuits for climate damage.  The damages settlements relating to tobacco and opioid products are a clear indicator of where litigation relating to deceptive activities may end up.

3. Criminal investigations

Criminal charges for fossil fuel advertising are a real prospect. A French prosecutor is investigating an oil and gas company for potential criminal infractions relating to greenwashing. Following the widespread greenwashing litigation and regulatory enforcement over airline claims, the Danish consumer ombudsman in Denmark reporting KLM to the police for greenwashing. 

However, there are direct legal risks to agencies themselves too. There is a substantial body of litigation, primarily in the US, relating to the harms that high-carbon advertising and PR has caused by holding back progress on climate change. For example, the government of California has brought such a case against a group of the largest private oil and gas companies, seeking to recover the escalating billions in climate damages facing the State. California recently filed a new case seeking damages for the PR strategy around ‘recycling’ plastic to deal with its health and environmental impacts.  

Companies involved in the production of harmful advertising and business practices have been held liable previously, under third party liability theories. The direct legal risks to consultants and advertising agencies are heightened in high-profile public scandals. For example, McKinsey and Publicis have both been sued for alleged involvement in the sales and marketing of opioids in the US. In a case similar to the one brought by the State of California, McKinsey is now the subject of a claim for damages for climate harms brought by a county in Oregon for its alleged coordination and participation in disinformation campaigns to downplay or deny the causal link between oil and gas companies and extreme weather disasters.  

There is currently no case seeking to recover climate damages from ad agencies. However, the calling of agency executives to the US policy-makers’ investigation into climate disinformation, and the UN  Secretary-General’s call on the PR industry to step away from fossil fuel clients, shows a clear risk for agencies nonetheless. The risk is heightened for those agencies directly involved in the fossil fuel industry PR strategy.

Whilst the advertising industry adapts to the ‘new normal’ that claims must be well rooted in the evidence, both anti-greenwashing law enforcement and legal actions for liability for environmental damages, point to a clear lesson: high-carbon advertising is a legal red zone.