Podcast – Introducing the Greenwashing Mitigation Team

Hannah Coulter: Hello and welcome to the podcast launching Holland & Knight's multidisciplinary Greenwashing Mitigation practice. My name is Hannah Coulter. I'm a public affairs advisor here in the Holland & Knight Public Policy & Regulation Group based in the Washington, D.C., office. My practice focuses on legislative and regulatory policy related to energy and the environment. I work with a broad range of clients to navigate federal programs aimed at addressing climate change and environmental sustainability. And as I mentioned, this podcast serves in part as a launch to our Greenwashing Mitigation Team, comprised of both lawyers and lobbyists that are uniquely positioned to assist marketers with mitigating liability across the life cycle of potential risks related to marketing products and services that are increasingly becoming more sustainable, reducing greenhouse gases and reducing waste in landfills. I'm joined here today by my colleagues Meaghan Colligan and Andy Kriha, who are both associates in the Public Policy & Regulation Group. And I'd love to turn it over to Meaghan to introduce herself.

Meaghan Colligan: It's a pleasure to be here. I am, again, an associate at Holland & Knight. I provide strategic legal, policy and business advice to principally manufacturing, transportation and energy clients that are developing innovative technologies and sustainable practices that reduce emissions, increase renewable energy and principally increase the recyclability of products. I also do the development of compliance programs and related enforcement issues. Passing it over to Andy.

Andy Kriha: Thanks, Meaghan. I'm Andy Kriha. I'm an associate in the Washington, D.C., office. I have a broad-based energy practice, and among the activities that I advise on are things related to decarbonization, particularly trading environmental attributes in both compliance and voluntary markets. I also advise clients on how to decarbonize their businesses and leveraging laws and legal incentives to do so, as well as helping clients understand how to monetize carbon reductions that they achieve, whether that be through creating voluntary carbon offsets and selling those or through other means. And one of the legal areas that intertwines with all of those is once we participate in this program, once we achieve this decarbonization, how are we allowed to advertise that to our consumers? And so that brings us to what we're talking about today, which is greenwashing. And we're going to start out with Hannah telling us what greenwashing is. We're going to introduce our capabilities here at Holland & Knight a little bit, and then we're going to dig in a little bit more substantively and give a high-level overview of what the issues are right now in some specific areas, as well as the history and purpose of greenwashing law at both the federal and state level. Hannah, would you like to introduce us to the concept of greenwashing?

Definition and Overview of Greenwashing

Hannah Coulter: Absolutely. Thanks, Andy. In the simplest of terms, we'll define greenwashing as a form of advertising or marketing in which advertisers make false claims about the environmental benefits of a product or service or practice. The phrase was first coined back in the 1980s, and it's really grown in popularity as consumers are increasingly interested in buying products and investing in companies that are taking meaningful steps toward being more sustainable. In light of this increased interest from consumers on eco-friendly products, companies have really increased their green advertising efforts. So in response to this, the Federal Trade Commission recently announced a regulatory review to consider revisions to its guides for the use of environmental marketing claims, which is colloquially referred to as the Green Guides. They were first published back in 1992 to guide advertisers on these claims, and they were last updated in 2012, so over a decade ago. Now, before I dive too deep on to the role of the Green Guides and greenwashing, I'd love for Meaghan to tell us a little more about Holland & Knight's capabilities, assisting its clients to navigate this evolving landscape.

In the simplest of terms, we'll define greenwashing as a form of advertising or marketing in which advertisers make false claims about the environmental benefits of a product or service or practice.

Holland & Knight's Greenwashing Mitigation Capabilities

Meaghan Colligan: Thank you, Hannah. It is my pleasure to talk about our multidisciplinary Greenwashing Mitigation team. We have an array of practitioners across many practice areas that are diving deep into the Green Guides, greenwashing claims from an enforcement and litigation perspective, how these marketing concerns intersect with environmental sustainability and governance issues known as "ESG," as well as general compliance, contracts and strategy. And so we have, just to name some of those capabilities, a spectacular environmental team and a spectacular energy team that are advising companies across sectors on how to maximize the value of their sustainability efforts, which then intersect incredibly well with our ESG teams that are looking at that from a governance perspective. And then again, our FTC litigation enforcement teams are looking at consumer protection, defense and compliance as well. So we have a group of more than 20 attorneys that are diving in on these topics and ready to assist on a variety of terms. As Andy and I will talk about a bit later, we're both focusing on specific topics in the Green Guides, and our practices. I'm focusing on "recyclable" and "recycled content" claims, given my experience with drafting policy, regulatory issues and legislation on those topics, whereas Andy will share much more eloquently about his area of focus on "carbon offsets" later. And then we have other members of our team that are diving deeply into the other marketing terms that are at issue right now in the Green Guides, and that can lead to potential greenwashing claims, such as "organic" and "degradability." What does compostable really mean, for example? And with that, I will kick it back to Andy to actually give a bit more color on the Green Guides, and of what I just talked about.

We have an array of practitioners across many practice areas that are diving deep into the Green Guides, greenwashing claims from an enforcement and litigation perspective, how these marketing concerns intersect with environmental sustainability and governance issues known as "ESG," as well as general compliance, contracts and strategy.

Goal of the Green Guides

Andy Kriha: Yeah. Thanks, Meaghan. So the Green Guides, as Hannah mentioned earlier, were originally promulgated in 1992. They've been updated a handful of times since then, most recently 2012. And what the Green Guides are is they're nonbinding guidance for how the FTC is going to interpret its very broad authority under Section 5 of the FTC Act, which gives FTC the authority to prosecute unfair and deceptive practices in marketing. And what it's really intended to do is to guide businesses on what is an appropriate environmental claim, what is a real claim that will not be unfair and deceptive to consumers, and then also give them guidance on how they can qualify their claims if something exists in a gray area. What sort of disclaimers can they put on it to help consumers understand what they're saying without running afoul of the law?

And what the Green Guides are is they're nonbinding guidance for how the FTC is going to interpret its very broad authority under Section 5 of the FTC Act, which gives FTC the authority to prosecute unfair and deceptive practices in marketing.

Updates and Changes to the Green Guides

Hannah Coulter: Yeah, I was just going to ask, why do you think they're being updated now?

Andy Kriha: Yeah, absolutely. So I think there's really three reasons that I would point to why they're being updated now, and they're all kind of on the backdrop of just larger consumer interest in purchasing green products, products that are better for the environment in general. But I'd say the three more specific reasons are that the Biden Administration, and particularly the commissioners that he has appointed to the FTC, are just taking FTC law much more seriously, not just in this area, but in the antitrust area. And we've just seen more enforcement in general from that agency than we've seen in past administrations. Additionally, this is part of the Biden Administration's whole of government approach to climate change. So trying to find new and unique ways to regulate in this space and drive the country toward a lower emissions future. And then the last one that I would say is that there have been a lot of lawsuits recently that have been brought predominantly under state law, which are really drawing attention to this issue and kind of shining a spotlight on some of the federal government's inaction.

I think there's really three reasons that I would point to why they're being updated now, and they're all kind of on the backdrop of just larger consumer interest in purchasing green products, products that are better for the environment in general.

Hannah Coulter: Awesome, thanks. So with these updates, what are the potential changes, and what is the FTC contemplating now?

Meaghan Colligan: As I kind of started to allude to, the FTC Green Guides that have been in place have had a couple of terms of art to give guidance to companies that are marketing their products as "compostable," "recyclable" and "ozone-safe," and FTC is looking for comments on those terms, but interestingly have added some new terms. So the commission is now seeking input on carbon offset claims, net zero claims, carbon neutral claims and low carbon claims given the fact that has become a new focus, particularly as the ESG requirements for companies have increased. But really what's very interesting to me about the whole process of documents and data information that the FTC is gathering through the comment process is they're really trying to understand the type of evidence that is available, that can be available to support these types of claims, that they're achievable and that they're science-based. They appear to be particularly concerned about the claims that are overstated. And so I believe that a large focus of the FTC is trying to figure out how can we create that type of a standard, obviously through the guidance of the Green Guides. So I think we can look to the questions that the FTC asked the public for comment on for some interesting insights. For example, they want to know, even if their Green Guides provided any benefits to consumers, what type of added costs might the Green Guides impose on businesses? Are they generally complying with the guides, given the fact that they are seeing increased lawsuits? Are there any particular types of green claims that are being made but are not necessarily being assessed in the Green Guides? And also they are looking for feedback on whether or not the guides should be extended to international laws, regulations and standards and how they should think through importation concerns and issues. So it's a very broad set of questions that the FTC has asked for. And Hannah I actually want to kick it back to you really quickly, because I know that you have been heavily focused on the comments that have been issued to date. Do you know how many we have received to date and what type of businesses and stakeholders have submitted comments on the Green Guides to date?

They appear to be particularly concerned about the claims that are overstated. And so I believe that a large focus of the FTC is trying to figure out how can we create that type of a standard, obviously through the guidance of the Green Guides. So I think we can look to the questions that the FTC asked the public for comment on for some interesting insights.

FTC's Request for Comment on the Green Guides

Hannah Coulter: That's a great question. Yeah, the request for comment was issued back in December. And as you know, around today, the request for comment has yielded more than 7,000 comments from a wide range of stakeholders, and that's including environmentalists, industry groups and individual companies. I would say the lion's share of companies that commented were companies that are in the consumer brands space. So because they are the companies interacting with consumers and making the claims to appeal to their customers. So it's really interesting to browse all of the comments and all of the concerns that different entities have. In many cases I think we can conclude that the resounding feedback is that there is a need for updates to the Green Guides in light of how the market has changed and evolved since they were last updated in 2012. But there's really some divisions between different groups on what those changes should look like.

The request for comment has yielded more than 7,000 comments from a wide range of stakeholders, and that's including environmentalists, industry groups and individual companies. I would say the lion's share of companies that commented were companies that are in the consumer brands space.

State Laws Impacting Greenwashing

Meaghan Colligan: And that is interesting, Hannah, because we also have observed many comments that are talking about the need for increased coordination with other federal regulatory agencies, such as the EPA, for example, as well as how these statutes interact with foreign and state laws. I was wondering, Andy, if you could touch base about how the state laws impact the greenwashing concerns that we're observing?

Andy Kriha: Absolutely. So the vast majority of states have laws that are very similar to the FTC Act. In fact, so similar that they're often referred to as little FTC acts. And the state authority has managed to co-exist with the FTC's authority in this space for as long as it's been in existence. There is some question if the FTC expands its authority or at least starts stricter enforcement than it has in the past, to what extent that might impact state laws through either conflict preemption, if the FTC starts issuing rulings that are contrary to state rulings, or through field preemption, if the FTC just expands what it's willing to enforce so much that it crowds out the ability for state action. But in the meantime, state action provides a pretty interesting wrinkle in that most of the state acts actually allowed for private citizens to bring suit, which is not true of the federal FTC Act. And so a lot of what we've been seeing, a lot of what has been driving the greenwashing discussion in the last couple of years, has been these private citizen suits against entities. And most of these haven't been resolved yet. So we don't know how the states are going to end up ruling on these. But it does present an opportunity for potentially a patchwork of different rulings in different states and different standards coming out of it. One very interesting note is that while this is true of unfair and deceptive practices, laws that fall under FTC authority, there are actually a handful of industries that have been carved out from FTC authority. One very prominent example just from the last couple of weeks is airlines. Airlines have been carved out from FTC authority and been placed with the Department of Transportation. And the law that pertains to the Department of Transportation actually expressly preempts state authority. And so we actually wrote a blog post about a big case in California that was just brought against an airline under state law that we think is probably going to fail because it's preempted under this DOT authority, whereas other industry is not quite so lucky if they get sued. State law is very much still going to apply.

The vast majority of states have laws that are very similar to the FTC Act. In fact, so similar that they're often referred to as little FTC acts. And the state authority has managed to co-exist with the FTC's authority in this space for as long as it's been in existence.

Preemptive Authority

Meaghan Colligan: Andy, thanks for bringing up the preemption issue. One of the things that we regularly get asked questions about is whether or not the Green Guides have preemptive authority over any industries given the fact that they are technically a guidance document. Do you have any thoughts about how the guidance document could be changed to affect preemption, or do you think that will happen? And if so, why not?

Andy Kriha: Yeah. So you're right that this is just guidance at this point. And one of the things that the FTC is asking commenters to weigh in on is whether this should become binding guidance. And I think at least the comments that I was able to read, as Hannah said, there were over 7,000, I think around 1,400 of them were publicly posted. So I didn't read them all. But, people were generally against making this binding guidance. And the reason for that is that they want to maintain flexibility for the FTC to respond to new information. And if we lock in some of this guidance into law and have to go through a full notice and comment rulemaking every time our understanding of the science becomes more updated, that's going to cause some problems and it's going to make us, make the FTC, slow to act. So, you know, from that standpoint, I would be surprised if the FTC decides to make this into a binding rule as opposed to non-binding guidance. I don't think the binding versus non-binding question really affects preemption. Preemption to some extent, unless there's express preemption like there is in the aviation sector and a couple of other sectors, is kind of a fuzzy concept where it's up to judges in individual cases to decide if there is a clear conflict between how the federal law is enforced and how the state law is enforced. Or further, if the federal law is just so vast that there's no room at all for states to really have authority in this area. And to a certain extent, that's going to depend, I think, on how far the FTC decides to take its authority, if it interprets its authority very broadly and actually starts enforcing in some of these areas that it previously hasn't, it hasn't gone after, at least in my area, any of these offset-based claims in the past, that will raise questions. When companies are sued in state court, they will be able to say, hey, the FTC is acting in this area, the state should not also be allowed to act, and that will be a valid argument. But we'll have to see how it plays out in the courts. I can't say for sure one way or the other how that's going to turn out.

Preemption to some extent, unless there's express preemption like there is in the aviation sector and a couple of other sectors, is kind of a fuzzy concept where it's up to judges in individual cases to decide if there is a clear conflict between how the federal law is enforced and how the state law is enforced.

Applicable Guidance: Recycled Content

Meaghan Colligan: That's interesting. And I appreciate your perspective on that because we are starting to see that issue in the "recycled content" world, which is one of the major issues of the area that I'm working on right now. You know, we have had several very critical states that have issued recycled content rules, which basically means that certain products, generally plastic, and paper in some instances, need to over time get to a level where they are comprised of a certain percentage of recycled material or recycled content. And right now, the Green Guides state that marketers should not claim their products are recyclable unless recycling facilities for those products are available to a substantial majority of customers. And then for recycled content similarly, they're looking for 60 percent value, whereas the states are, even in the strictest sense, are really allowing for a phase up period for their material to have recycled content. I am noticing that a majority of state laws are starting at 20 percent as an initial threshold, which then is moving up to closer to 40 percent or 50 percent of recycled content. And at the same time, having a recycling claim linked to whether or not the materials are actually recyclable is challenging. EPA recently set a national goal for the country to achieve a 50 percent recycling rate by 2030. And so as a nation, we're just not at the 60 percent value. And so requiring those types of percentages when we don't necessarily have the market or infrastructure there yet is interesting and I believe is one of the main questions and concerns that most folks are seeing. And so a lot of the companies that are coming to us around recyclable issues are focusing on what they could do to get ahead of the various patchwork of state content requirements in lieu of the fact that we are still growing as a nation in our recyclable capacity. What are you seeing on the ground for your area in carbon offsets so far, Andy?

So a lot of the companies that are coming to us around recyclable issues are focusing on what they could do to get ahead of the various patchwork of state content requirements in lieu of the fact that we are still growing as a nation in our recyclable capacity.

Applicable Guidance: Carbon Offsets

Andy Kriha: Well, I guess first of all, just kind of along the same lines of what you just talked about in that same type of area, I think one wrinkle to the preemption question is, you know, we have to remember that at the end of the day, this is unfair and deceptive practices law, greenwashing law, is all just about disclosure, right. And disclosing the basis of your claim. And so it doesn't necessarily conflict with state programs that have state compliance programs that have certain requirements. It's just that if you're basing your claim on meeting this particular state program, then you just have to disclose, hey, I'm saying this is, in your case, recyclable under this state program that I'm participating in. That's not necessarily true under the broader consumer's general understanding of recyclability. And we've advised on that in my area, particularly with certain fuels such as renewable natural gas, that under state programs like the California Low-Carbon Fuel Standard qualify as carbon negative. And how they qualify as carbon negative is through an accounting process that accounts for avoided methane at landfills or at farms, in the case of renewable natural gas and other situations, and that captured methane in that initial process avoids more emissions than are ultimately emitted by combustion of the fuel downstream. And so they call that carbon negative. And not all reasonable consumers nationwide are going to consider that carbon negative, right. That gets into an issue that's a little too complex to explain in this short of a podcast. We did a previous podcast that dives deeper into it back in March of avoidance versus removal-based offsets. But you know, that carbon negative claim isn't necessarily going to hold up the way the FTC would define it. And so how we advise clients then is if you are using this as part of a marketing claim, you just say, hey, this is carbon negative for the purposes of the California Low-Carbon Fuel Standard, and you just have to disclose that extra little basis of your claim along with the marketing. And that's how you arrive at a lawful claim at the end of the day.

How we advise clients then is if you are using this as part of a marketing claim, you just say, hey, this is carbon negative for the purposes of the California Low-Carbon Fuel Standard, and you just have to disclose that extra little basis of your claim along with the marketing. And that's how you arrive at a lawful claim at the end of the day.

Greenwashing Standard: State Law vs. Green Guides

Hannah Coulter: Andy that's really interesting, and something I want to dig a little deeper on that I'm curious about is what is the standard for whether something is greenwashing under the Green Guides versus state law?

Andy Kriha: So the standard is generally going to be the same for both the Green Guides or state law. And that standard is what any reasonable consumer in the target class would think is deceptive. And there's a really critical point here, right, because a lot of businesses want to make claims and say, well, there's one reasonable interpretation under which our claim is true. And that's not how the FTC looks at it. The FTC says any reasonable consumer, you have to cover off every reasonable interpretation of your claim, but only to the extent it's reasonable to the target audience. So a lot of business-to-business contracts, you know, say an oil supplier selling what they want to claim is a carbon neutral crude load to another business. As long as they understand in the business what that means, that it's paired with offsets or something like that, that claim is not going to be a problem. But when you're advertising to the general public at large, there is really a lot of interpretations that you have to have to be able to cover off. And when it comes to state law, that's going to be up to certain judges, and they may interpret what that means a little bit more broadly or less broadly. The FTC at the federal level, I think we expect to generally be, have a little bit tighter of a definition there. But, just a reminder of what I've already said, what we can't lose is that this is just a disclosure law. If you can't make an unqualified claim that your product is carbon neutral or net zero, you can still call it carbon neutral, net zero, you just have to disclose why you think that's true.

So the standard is generally going to be the same for both the Green Guides or state law. And that standard is what any reasonable consumer in the target class would think is deceptive. And there's a really critical point here, right, because a lot of businesses want to make claims and say, well, there's one reasonable interpretation under which our claim is true. And that's not how the FTC looks at it.

Meaghan Colligan: That kind of falls into what I'm seeing, Andy, a lot in the recyclable world. You know, a lot of comments have gone in around whether or not something is actually getting recycled, even if it is recyclable. So many companies can prove that their product or their label or their material can actually physically be recycled. But "is it actually happening?" is the question in many instances and many cases that we're seeing. That also touches on the concept of what is the capability versus the actuality of how advertisers can move forward with evidence that a product is actually being recycled, but puts the concept into their hands to not only develop the products and materials to become recyclable, but to then confirm that it is actually recycled at the same time. Ultimately, several state attorneys have submitted comments to date arguing that the term recyclable is very overused at this point in time and is exacerbating all of the solid waste and recycling inadequacy that we're seeing to date. So one thing that we continue to work on with our clients, is what type of certification systems are you using to track the data for any of your claims? There are several international certification systems already in place for, for instance, recycled content. And what is yet to come, I think will be very interesting in the in the type of data that becomes acceptable to prove these claims.

One thing that we continue to work on with our clients, is what type of certification systems are you using to track the data for any of your claims?

Andy Kriha: You know, that's interesting. And that's really largely the same as what I'm seeing over on the offset side. A lot of the comments in offsets were also around third party certification schemes and to what extent the FTC has the authority to require certain schemes or certain types of information. And all of this is getting at this concept of additionality on our side, which is the concept of whether or not a carbon reduction is in addition to any reduction that would have occurred in the business as usual case and in addition to any carbon reduction that is required by law. And there's a lot of debate. There have been a lot of articles written, particularly around nature-based offsets, that say, hey, you know, these forests, for example, that are being protected and generating carbon credits off of the protection of the forest. Well, you know, for X reason or Y reason, we don't really think that forest was going to be cut down anyway. So that carbon reduction really isn't additional. And that's been the kind of singular major concern in the offset space and the focus of many of the comments as well.

Uncertainty as the FTC Reviews and Updates the Green Guides 

Hannah Coulter: Thanks for that. It's really interesting to hear because you two have very different practices, the interplay there. So are there any other major issues causing uncertainty at this time as the FTC goes under this review? I guess that question is to both of you.

Andy Kriha: Yeah, I mean, I think from my side the major sources of uncertainty, you know, as we've kind of talked about already, the overlapping state and federal authority, there are some court cases coming down the pike that are not specifically about greenwashing, but more about administrative law in general. And this kind of general trend that we've seen in the last few years from the Supreme Court to restrict agency authority. There are some risks that the FTC's authority in this space is going to be significantly restricted, and that opens it up to more of a patchwork of state decisions and state judges kind of creating this law where you'll see national advertising campaigns potentially governed by the biggest and the strictest states, probably California and New York, states like that. And smaller advertising campaigns, business-to-business transactions being governed by other states that may or may not be as strict. So, that's, I think, one major source of uncertainty. And then just specifically in how the FTC is going to enforce this from the offset side. And I'm sure Meaghan has opinions on the recyclability side. We haven't seen them enforce the guides on offsets before, despite the fact that they've had guidance on offsets for quite some time. So exactly how they do this, where they're going to set the limits, and then what sort of litigation arises out of where they set the limits is going to lead to some uncertainty for at least the next few years.

There are some risks that the FTC's authority in this space is going to be significantly restricted, and that opens it up to more of a patchwork of state decisions and state judges kind of creating this law where you'll see national advertising campaigns potentially governed by the biggest and the strictest states, probably California and New York, states like that.

Meaghan Colligan: Yeah, I have, you know, pretty much the same comments as you there Andy, and my biggest focus on uncertainty relates to the recycling market itself. You know, we are seeing an incredible effort, both nationally and internationally, to develop a circular economy for, for example, plastics materials, which would, depending on how this all moves forward, allow for greater recyclability across the states, the nations and internationally. So I think that greater coordination between EPA and the FTC came up significantly in the comments, including one from the EPA itself. The EPA definitely affirmed strengthening of the environmental marketing claims, but it also clearly has its own focus on how to move the market in that direction. So I think at the same time, if we're paying attention to the various Supreme Court decisions, agency and state law changes and the patchwork that we have going on, that we really need to be paying attention to what type of federal and state efforts are going to be made to increase the recycling infrastructure, to handle all materials, to make sure that things are not only made to be recyclable, but that they actually can be recycled. Andy, is there anything else that you wanted to talk about or Hannah before we close out for our listeners?

Andy Kriha: No, I think we've provided a pretty good overview of the state of play.

Meaghan Colligan: Hannah, anything on your end?

Hannah Coulter: No, this is really, really exciting, and I'm eager to watch this closely, to see what kind of updates we get from the FTC and how that might impact the broad range of clients we have.

Meaghan Colligan: Thank you both. So, everyone, thank you for joining us today. That brings us through all of our content. Our Greenwashing Mitigation Team is comprised of many other amazing attorneys at our firm, and we will all be releasing new content on the areas that we've discussed today, as well as some of the other interesting topics related to greenwashing mitigation. I know specifically that Andy, your team is going to be issuing a report on carbon offset comments, and our environmental team is going to be issuing a specific report on the comments related to recyclable and recycled content topics. And these reviews are going to analyze the comments in more detail. And our larger teams will undoubtedly be talking to you again soon on ESG considerations, litigation enforcement risks, as well as how can we protect and mitigate greenwashing risk in transactions. Please reach out to us if you have any questions or concerns about greenwashing, and we thank you so much for joining us. Andy and Hannah, thank you for speaking with me today and to all of our listeners for joining.