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Zero tolerance for greenwashing to inform future legislation

In this video, Bowmans partner and public law and regulatory head Claire Tucker discusses greenwashing and its legal implications.

29th November 2023

By: Darren Parker

Creamer Media Contributing Editor Online

     

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A zero tolerance for “greenwashing” is a sentiment that is likely going to inform much environment- and climate-related legislation as it develops going forward, legal firm Bowmans partner and public law and regulatory head Claire Tucker has said.

Speaking at a seminar at Bowmans' offices in Sandton on November 29, she echoed statements made by United Nations secretary general António Guterres at COP27 in November last year, where he criticised the practice as dishonest and undermining the fight against climate change.

Greenwashing is a deceptive marketing practice where an organisation exaggerates or falsely states its environment-friendliness to attract environmentally conscious customers and investors.

Companies engaging in greenwashing may use misleading labels, advertising or promotional materials to give the impression that their products or operations are more environmentally sustainable than they actually are. This can involve highlighting minor environmentally friendly features while downplaying overall negative environmental impacts.

Tucker warned that greenwashing was not only restricted to wording but could also be found in imagery. She noted that green claims made by organisations might also be challenged based only on imagery such as landscapes and wildlife, or specially developed symbols, pictures or labels, as well as colours.

“We're starting to see [greenwashing] coming up in all sorts of corporate branding, and in all sorts of ways that corporates describe their net-zero journey to the market, both to their consumer market, but also increasingly to their investor market, to their shareholder market,” Tucker said.

However, she warned that South Africa was beginning to see a rise in greenwashing litigation, following in the footsteps of the myriad greenwashing cases in the northern hemisphere.

“We are starting to see new and innovative ways in which activists from the north are seeking to hold corporates to the claims that they make and are seeking to enforce their own version of what a net zero journey should look like onto these corporates,” Tucker said.

She added that South Africa would be in an interesting position regarding this kind of litigation, as the country straddles the line between the developing and the developed worlds, where environmental targets and timetables are firmly part of the legal regime.

Until further laws are developed in the country to deal with greenwashing directly, Tucker said the main set of laws currently being used to address this was the Consumer Protection Act (CPA), particularly where branding or product claims are being made.

“The general principle [of the CPA] is that a person must not knowingly apply to any goods a trade description that is likely to mislead the consumer as to any matter expressed or implied,” she said.

Tucker noted that an interesting part of the CPA was that it specifically required that international law and international precedent be used in consumer protection interpretation and the Act’s application.

“That means that this is an area where we can see quite quickly the possibility of international developments of thinking from developing countries around sustainability being used quite specifically in applying what a misleading claim might be,” she said.

However, Tucker noted that, fundamentally, the CPA and the regulatory mechanisms under it were not all that effective.

“It's not an area where we see a lot of action,” she said.

However, while there was a lack of laws directly dealing with sustainability and green claims in South Africa, there is a series of voluntary standards. While these standard have not been incorporated into legislation, they have come to be seen as the reasonable measure of action.

“When you want to demonstrate that you have not sought to mislead, being able to rely on a voluntary standard is a very strong and effective way of showing that you have not in fact, been misleading, because you have complied with generally accepted principles as per the standard,” she explained.

However, she noted that some of these standards have been incorporated into law, albeit obliquely.

“For example, some of these environmental labelling standards have been incorporated into the extended producer responsibility regulations under the Waste Act. Therefore packaging, which is regulated under that regime, is required over time to have labelling that conforms to these voluntary standards, because that obviously facilitates return and standardisation,” Tucker explained.

She noted another way that greenwashing could be challenged legally was if it amounted to unlawful competition.

“So, where you make a claim about your product that has an impact of causing a loss to your competitor, that is unlawful competition. The [greenwashing] claim would have to be [provably] wrong, and it would have to be made in a context where you knew it wasn't correct and it causes a loss of market share to a competitor, who is not making the claim. That is something that could possibly give rise to damages,” she explained.

Tucker said it was unlikely in South Africa that competitor claims formulated on misrepresentation could lead to fines and penalties, but it was possible in other African jurisdictions.

Ultimately, greenwashing could lead to significant damage to reputation and customer trust at best, and criminal charges in cases involving fraud or other illegal activities at worst.

She highlighted several recent greenwashing legal cases worth noting.

The former head of car manufacturer Audi was convicted in Germany, receiving a suspended sentence of one year and nine months for his involvement in a European diesel emissions testing scandal. This conviction was rooted in allegations of fraud.

Concurrently, Audi faces civil claims totalling €9-million. Among these claims, a notable class action was initiated in South Africa against Audi and fellow car manufacturers Volkswagen and Porsche. Buyers of affected motor vehicles alleged reliance on marketing claims in South Africa, where the vehicles were promoted as “green”. Additionally, there is contention over the validity of European marketing material asserting compliance with European emission standards.

In the US, the Securities and Exchange Commission has imposed fines on several financial institutions for misleading statements related to environmental, social and governance (ESG) matters.

Notable fines include Goldman Sachs facing a penalty of $4-million, BNY Mellon being fined $1.5-million, and Deutsche Bank-controlled investment firm DWS paying $25-million.

In the Netherlands, a groundbreaking class action has been permitted to proceed under the new Dutch class action law. This legal action targets airline KLM, marking the first challenge to greenwashing practices in the airline industry. The lawsuit argues that KLM's climate-related advertisements, such as "Fly Responsibly" and offset marketing create a false impression that their flights do not contribute to the climate emergency.

The plaintiffs contend that these marketing strategies breach European Union consumer law standards.

Tucker said the outcome of these legal proceedings may significantly impact the accountability and transparency standards within the automotive and aviation industries across the world, including South Africa.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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