A recent decision by a federal district court concerning the use of the term “carbon neutral” may be a harbinger of similar claims and, in any event, serves as a reminder to consumer goods manufacturers and marketers of the importance of setting out their environmental claims with precision and ample substantiation and to consider providing access to information on that substantiation.
In the subject decision, a federal district court permitted a class action lawsuit against Danone Waters to advance beyond the motion-to-dismiss stage based on allegations that the company’s claim that Evian brand water was “carbon neutral” was unfair and deceptive under state consumer protection laws. [1]
District Judge Nelson S. Román’s decision denying Danone’s motion to dismiss most of the plaintiffs’ claims highlights the potential legal exposure concerning the use of environmental marketing claims, including the importance of specificity and substantiation.
The plaintiff consumers alleged that Danone’s claim of carbon neutrality violated a number of state consumer protection laws barring unfair and deceptive trade parties laws, including New York General Business Law (GBL) Sections 349 and 350, Massachusetts General Laws Chapter 93A (Chapter 93A), and the California Consumers Legal Remedies Act (CCLRA), Cal. Civ. Code §§ 1750 et seq. The plaintiffs also asserted claims again Danone for breach of express warranty, breach of implied warranty, unjust enrichment, and fraud.
The central thrust of the plaintiffs’ suit was that Danone’s claim that its Evian brand of water is “carbon neutral” was false and misleading because a reasonable consumer would conclude that this meant the bottling of Evian is sustainable and does not leave a carbon footprint, notwithstanding their allegations that the bottling process releases carbon dioxide. The plaintiffs allege they paid a “price premium” based on Danone’s representations about its carbon emissions.
Danone moved to dismiss, arguing that the company’s claim that the bottling process was “carbon neutral” was accurate because (1) when carbon offsets are considered zero net emissions were produced and (2) an independent third party, Carbon Trust, had certified that Evian was “carbon neutral.”
Danone further argued that no reasonable consumer would interpret “carbon neutral” to mean that Evian bottling emitted zero carbon dioxide emissions given that “(1) no carbon zero products exist, (2) the dictionary definition of ‘carbon neutral’ describes the use of offsets to balance emissions, and (3) the Product’s website explains Evian® water’s approach to reducing and offsetting carbon emissions.” [2]
The plaintiffs responded that Danone fails to disclose “how it calculates its carbon neutrality, the meaning of the Carbon Trust standard and how Defendant complies to that standard, and whether the standards themselves are ‘carbon neutral’ in that any pollution output is truly offset by other projects.” [3]
Judge Román denied Danone’s motion to dismiss most claims asserted, concluding that the phrase “carbon neutral” is a technical term, which may be confusing and ambiguous to consumers, and that a reasonable consumer could plausibly conclude that “carbon neutral” meant that no carbon is emitted at all during Evian’s bottling.
Judge Román further found that a reasonable consumer could conflate the terms “carbon neutral,” “carbon zero,” and “carbon free,” particularly given the plaintiffs’ allegations that nearly 60% of consumers did not understand the meaning of “carbon neutral.” Accordingly, the court concluded at the motion-to-dismiss stage that it had been sufficiently alleged that Danone’s claim that Evian was “carbon neutral” could mislead consumers.
As further support for his conclusion, Judge Román relied on the dictionary definition of carbon neutral—which “lack[ed] specificity and may be difficult to comprehend” [4]—as well as the US Federal Trade Commission’s (FTC’s) Guides for the Use of Environmental Marketing Claims (the Green Guides), which caution marketers against making claims of “unqualified general environmental benefit.” [5] Judge Román reasoned that, as alleged, Danone’s “carbon neutral” claim constitutes such a claim. As Chapter 93A incorporates FTC regulation, Judge Román deemed the Green Guides informative.
While Danone argued that its inclusion of a link on the Evian bottle label—further explaining the issue of carbon neutrality—minimized any potential consumer confusion, Judge Román rejected that this reference alone was curative and found that any labels used needed to be reasonably clear to consumers without further research by the customer. Finally, Judge Román concluded that the plaintiffs had sufficiently alleged that they suffered an injury, namely that they paid a price premium based on Danone’s environmental claims.
For similar reasons, Judge Román also denied Danone’s motion to dismiss plaintiffs’ claims for violation of Chapter 93A, violation of CCLRA, breach of express warranty (California), unjust enrichment (California), and fraud. However, Judge Román dismissed the plaintiffs’ remaining claims, including their claims for violations of GBL Sections 349 and 350, on the grounds that there were no allegations the relevant activity occurred in the State of New York, and breach of implied warranty (Massachusetts, New York, and California).
This recent decision, while only one decision by a federal district court, serves as an important reminder of the need to carefully evaluate environmental marketing statements. It may be appropriate to document that the claims are substantiated by competent evidence and provide robust, apparent, and accessible information about such claims. Our team of consumer protection and advertising lawyers can help advise on these issues.
This decision may incentivize lawyers to bring similar actions concerning other products’ environmental claims. In reviewing environmental statements, companies should review internal processes and document both the internal and consumer-facing work with an eye toward potentially documenting the record of measures that demonstrate compliance and robust consumer disclosures.
It may be prudent to perform a review or audit of current environmental marketing claims. Our dedicated team of consumer protection and advertising lawyers that can help with those efforts.
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