Energy, Special Topics in Environmental Management

Greenwashing: Lawsuit Charges Oil Companies with False Advertising

On April 22, 2021, Earth Day, New York City (NYC) filed suit in New York Supreme Court against Exxon, Shell, BP, and the American Petroleum Institute. The suit alleges the companies utilize false advertising and deceptive trade practices and made untrue claims about the benefits of using their products (commonly known as “greenwashing” when referring to environmental claims).

Greenwashing

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The “Defendants—three of the largest oil and gas companies and their top industry trade association—have systematically and intentionally misled consumers in New York City about the central role their products play in causing the climate crisis,” according to the suit. “They have engaged in this deceptive conduct both to compete against growing safer energy options and to distinguish themselves from industry competitors as they vie for consumer dollars.”

“Our children deserve to live in a world free from climate change, and we must do everything in our power to give them hope and stop climate change in its tracks,” said Mayor Bill de Blasio in a press release. “That means taking on some of the biggest polluting corporations for false advertising and greenwashing, in direct violation of our Consumer Protection Laws. My Earth Day message to Big Oil: See you in court.”

Specifically, the case alleges defendants have violated NYC’s Consumer Protection Law, and the suit claims:

  • “Defendants’ product promotions, which are positioned to convince consumers that the purchase and use of their products is beneficial in addressing climate change, are false and misleading because they fail to disclose the disastrous impacts associated with the use of those same fossil fuel products; and
  • Through their aggressive and multi-pronged greenwashing campaigns directed at NYC consumers, Defendants falsely present themselves and the oil and gas industry as corporate leaders in the fight against global warming, recognizing that they can sell more products if they are viewed as environmentally responsible corporate citizens.”
  • Climate benefits from the companies’ alternative energy portfolios are misleading by portraying natural gas as “cleaner burning” without disclosing natural gas is a “significant driver of climate change because the extraction, transportation, and combustion of this fossil fuel releases large quantities of greenhouse gas emissions.”
  • The suit charges the American Petroleum industry (API) with greenwashing its members’ fossil fuel products and touting “its members’ purported commitments to reducing their products’ carbon footprints while continuing its core mission of promoting its members’ extraction, production, and sale of fossil fuels to consumers in [NYC] and throughout the United States at unprecedented rates.” Various API social media posts are cited—for example, “We can all agree we need strong climate solutions — and with natural gas as a dominant energy source, U.S. carbon emissions are the lowest levels in a generation.” The lawsuit says these types of statements are deceptive because “they falsely paint the fossil fuel industry as a leader on climate change action while omitting key information about the role of fossil fuels in causing the climate crisis.”

Consumer Protection laws in NYC prohibit “any deceptive or unconscionable trade practice in the sale … or in the offering for sale … of any consumer goods or services.” The law defines deceptive trade practices as “Any false, falsely disparaging, or misleading oral or written statement, visual description or other representation of any kind made in the connection with the sale … or in connection with the offering for sale … of consumer goods or services … which has the capacity, tendency or effect of deceiving or misleading consumers.”

The suit makes the point that consumer buying choices, including fossil fuels, significantly impact climate change and further alleges that “[b]y misleading NYC consumers about the climate impacts of using fossil fuel products, even to the point of claiming that certain of their fossil fuel products may benefit the environment, and by failing to disclose to consumers the climate risks associated with their use of those products, Defendants have deprived and are continuing to deprive consumers of information about the consequences of their purchasing decisions—information Defendants know influences both public perception of their products and consumer purchasing behavior.”

The suit asserts fossil fuel companies purposely misrepresent positive environmental benefits for these products while “omitting any mention of the products’ role in aggravating climate change,” according to a Lexology article by Frankfurt Kurnit Klein & Selz PC. “For example, NYC alleged that Shell advertised on its website that its fuels ‘produce fewer emissions’ and not using them can lead to ‘higher emissions,’ without disclosing the key role that fossil fuels play in causing climate change. Similarly, NYC alleged that BP advertised its fuels as ‘including a growing number of lower-carbon and carbon-neutral products,’ without disclosing ‘the key role’ that fossil fuels play in causing climate change.”

Greenwashing

Investopedia defines greenwashing as “the process of conveying a false impression or providing misleading information about how a company’s products are more environmentally sound. Greenwashing is considered an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly. For example, companies involved in greenwashing behavior might make claims that their products are from recycled materials or have energy-saving benefits. Although some of the environmental claims might be partly true, companies engaged in greenwashing typically exaggerate their claims or the benefits in an attempt to mislead consumers.”

NYC’s suit alleges that fossil fuel companies greenwash their products “by exaggerating their overall investments in non-fossil fuel energy resources and by misrepresenting the climate benefits associated with their investments,” according to the Lexology article. “NYC said, ‘Through these various greenwashing campaigns, ExxonMobil, Shell, and BP seek to divert attention away from the existential threats posed by their core business of selling fossil fuels, and instead reposition themselves in the eyes of consumers as diversified energy companies that are serious about tackling climate change.’ For example, NYC alleged that Shell is making claims such as, it is ‘hard at work creating more efficient ways of moving around’ and that it is ‘taking steps toward developing the infrastructure to support growth in electric and hydrogen-fuel-cell vehicles,’ but did not disclose that ‘its investments in clean energy resources are negligible when compared to its spending on fossil fuels’ and that ‘it plans to continue to ramp up the production and sale of fossil fuels, including those used in transportation.’”

Avoiding Litigation

Greenwashing litigation has been on the rise for some time. Many companies rely on the Federal Trade Commission’s (FTC) Green Guides as an initial starting point to comply with consumer protection laws regarding greenwashing, according to the Lexology article. However, considering the rise in litigation in this type of lawsuit, companies are advised to proceed with caution when making claims about the environmental benefits of their products.

GreenBiz lists six greenwashing sins companies should avoid:

  1. Sin of the hidden trade-off: for example, mentioning paper is recycled without disclosing the environmental costs of producing the product;
  2. Sin of no proof: failing to provide easily accessible evidence that a product is green;
  3. Sin of vagueness: any claim that is so poorly defined or broad that its real meaning is likely to be misunderstood by the intended consumer, such as “chemical free” or “all natural”;
  4. Sin of irrelevance: claims that may be truthful but are unimportant and unhelpful for consumers, such as “CFC-free” products, as ozone-depleting chlorofluorocarbons have been outlawed since the late 1980s;
  5. Sin of lesser of two evils: environmental claims that may be true but that risk distracting the consumer from the greater environmental impacts of the category as a whole, such as organic tobacco or green insecticides; and
  6. Sin of fibbing: claims that are simply false, typically by misusing or misrepresenting certification by an independent authority when no such certification had been made.