In response to growing customer focus on sustainability, fashion companies are increasingly pursuing and touting green initiatives, such as making products with recycled materials or manufacturing them using less nonrenewable resources. Regulators and consumers are also taking notice, intensifying their scrutiny of environmental claims to ensure that companies are actually doing what they say they are.
H&M Facing Greenwashing Suit
In addition to regulatory enforcement actions, companies are also facing an uptick in consumer lawsuits alleging “greenwashing,” or making unsubstantiated or overly broad environmental claims. This summer, H&M was hit with a proposed class-action lawsuit alleging that the company used “misleading” environmental scorecards, known as “Sustainability Profiles,” to tout clothing from the brand’s Conscious Collection. The lawsuit accuses H&M of engaging in deceptive acts or practices and false advertising in violation of the New York General Business Law by way of its alleged “[misrepresentation of] the sustainability and attributes of the products to induce consumers to purchase H&M’s products,” citing that “a consumer acting reasonably under the circumstances would reasonably believe those claims, particularly given that H&M is a nationally recognized and well-established company.” In one example cited in the suit, H&M allegedly presented “a particular product as being produced with 30% less water” when the Higg Index, which is where H&M obtained its information, “showed that the item was actually made with 31% more water, making it worse than conventional materials.”
FTC’s Green Guides
H&M is not the only fashion company to face allegations of greenwashing. To avoid unintended liability, fashion companies must be mindful when making environmental claims, which may include statements that products are “sustainable,” “eco-friendly,” “green,” or “responsibly-made.” Such statements must not only be accurate, but also readily substantiated.The Federal Trade Commission’s “Guides for the Use of Environmental Marketing Claims,” or Green Guides, are designed to help marketers ensure that the environmental claims they are making are true and verifiable. While the Green Guides are not agency rules or regulations, they provide general principles that apply to all environmental marketing claims, as well as address how consumers are likely to interpret particular claims and how marketers can substantiate and qualify these claims to avoid deceiving consumers. While the FTC hasn’t updated its Green Guides since 2012, the agency continues to bring enforcement actions under Section 5 of the Federal Trade Commission Act (FTC Act). Under Section 5, the FTC can take enforcement action against deceptive claims, which ultimately can lead to Commission orders prohibiting deceptive advertising and marketing, and fines if those orders are later violated. Retail giants Kohl’s and Walmart recently agreed to pay millions of dollars to resolve claims that they made misleading representations that violated the FTC Act and the Textile Act. According to the FTC, the companies knowingly advertised textile products as made from “bamboo” when they were actually made of rayon. In addition to imposing combined penalties totaling $5.5 million, the proposed settlements with Kohl’s and Walmart include provisions dictating how the companies must make textile representations and bamboo-related environmental claims going forward.
Regulation of Sustainability Claims Outside the U.S.
The FTC announced in 2021 that its regulatory review of the Green Guides will begin this year. The agency had faced pressure from groups within the fashion industry to modernize its guidance to reflect advances in technology and changing views on sustainability. In a letter spearheaded by PoliticallyInFashion and sustainable denim brand Amendi, a coalition of brands, nonprofit organizations, journalists and others called on the FTC to take action, writing: “In the past nine years, there has been an exponential growth in sustainability claims by businesses. But, without guardrails on this term, or data to substantiate these claims, there is risk the term becomes meaningless, or even detrimental to efforts to promote healthy environmental practices.” Additional signatories included organizations such as Sustainable Brooklyn, Wearable Collections, The OR Foundation and the New York University Stern School of Business Social Impact and Sustainability Association. Other countries have been more proactive in addressing sustainability claims, particularly in the fashion industry. Last year, the United Kingdom’s Competition and Markets Authority (CMA) published its Green Claims Code. After giving companies time to come into compliance, the CMA recently announced that it has started “looking into environmental claims of fashion companies to weed out businesses it believes are ‘greenwashing’ their operations in a way that violates consumer protection law.” In the Netherlands, the Authority for Consumers and Markets (ACM) has also issued guidelines and launched investigations into the sustainability claims of several fashion companies. Closer to home, the State of New York is considering its own local regulation. The Fashion Sustainability and Social Accountability Act (Assembly Bill A8352) would require businesses to identify, mitigate, and disclose potential adverse social and environmental impacts in their supply chains.
For U.S. fashion companies operating across borders, it’s essential to recognize that many other countries have more rigorous standards regarding environmental claims. It would be advantageous for the FTC to keep pace, as having clear regulatory guidance not only helps brands avoid making misleading environmental claims, but also promotes fair competition among businesses making such claims. In the meantime, it’s imperative that fashion companies be transparent about the success and the limitations of their sustainability initiatives.
Howard D. Bader is a NYC attorney who serves as general counsel for clients in a wide range of industries on an international scale. With over three decades’ worth of legal experience, he has represented clients in numerous legal matters, including commercial litigation, intellectual property, bankruptcy, creditor’s rights and mergers and acquisitions, as well as numerous corporate transactions and business law matters.
Howard D. Bader