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Clifford Chance

Clifford Chance
Business & Human Rights Insights<br />

Business & Human Rights Insights

Another Turn on the Catwalk: Refocusing on Greenwashing in the Fashion Industry

As fashion companies strive to meet consumer demand for sustainable clothing, they must be mindful not to misstate the environmental impact of their products, which could constitute greenwashing.

Fashion has been in the spotlight with designers presenting new looks and fall trends at New York Fashion Week. As Fashion Week has come to a close and consumers' attention shifts from the runway to their closets, consumers' desire to buy something new is counterbalanced by a competing desire to not contribute to environmental harm. The fashion industry has significant environmental impacts, and there is a growing consumer interest in purchasing sustainable products. This creates pressure for companies to meet consumer demand and related economic incentives to market clothing as "sustainable" or "environmentally safe." However, if fashion companies are not careful with how they market their products, they run the risk of "greenwashing" - presenting a product as more "green" than it actually is. Companies should be mindful to avoid overstating the sustainability or environmental benefits of their products or practices, or downplaying any negative environmental impacts, to mitigate the reputational and legal risks that come with a greenwashing claim.

Greenwashing is a cross-border issue, and multinational companies face regulations from numerous jurisdictions, such as the European Union. In the U.S., the legal landscape around consumer product greenwashing includes federal guidance in the form of the Green Guides, which interpret the section of the Federal Trade Commission ("FTC") Act prohibiting "deceptive acts and practices in or affecting commerce" in the context of environmental marketing claims, as well as state consumer protection law and state common law rights of action.

Green Guides

The FTC's "Guides for the Use of Environmental Marketing Claims," or Green Guides, provide guidance for making claims about the environmental attributes or impact of a product. Although the Guides are not legally binding, they are often cited by private parties challenging environmental claims and by the FTC when it brings an enforcement action under Section 5 of the FTC Act. The Guides explore how consumers are likely to interpret environmental claims and how companies can substantiate such claims to avoid deception, and they provide that claims "should not overstate, directly or by implication, an environmental attribute or benefit." Further, companies should be able to substantiate the environmental claims they make.

Various terms defined in the current version of the Guides may be used by fashion companies to describe their products for example, "made with recycled content."

In December 2022, the FTC announced that it will be considering updates to the Guides, and it is seeking public comments. While comments may address the Guides generally, the FTC has identified specific issues it expects to receive comments on. Key to the fashion industry, it is looking for comments on the terms "recycled" as well as the need for additional guidance on the terms "sustainable" and "organic."

State Law

Several states have adopted all or portions of the Green Guides, including New York. In states that have adopted the Guides (as well as some that have not), courts may consider the Guides when determining whether a challenged environmental marketing claim is deceptive. Because fashion companies generally market their products across the U.S. and internationally, the fact that some states have codified the Guides means that virtually every fashion company, if faced with a greenwashing suit, could have the Guides applied as a yardstick against which to measure the challenged claims.

Beyond this, most states have other laws which give rise to a private right of action for misleading marketing. In New York, statutes create a private right of action for "[d]eceptive acts or practices in the conduct of any business, trade or commerce," and make false advertising unlawful. These statutes were cited to support claims against a major fashion retailer in a class action suit filed last year in New York. Further, the New York legislature is considering a bill that would impose specific disclosure obligations on fashion retailers and manufacturers meeting certain jurisdictional thresholds. If enacted, the law would require affected companies to disclose environmental impacts and due diligence programs, and violators could face civil enforcement as well as private actions. In addition to statutory rights of action, fashion companies accused of greenwashing may face claims under New York common law, such as breach of warranty or unjust enrichment.

Considerations for Fashion Companies

As focus on environmental impact increases, fashion companies should be aware of the implications of their voluntary environmental marketing claims and required environmental disclosures.

In particular, Companies should avoid classifying products as "sustainable" unless they have a basis for the claim. The word "sustainable" lacks a generally accepted definition or interpretation, as the Green Guides acknowledge. However, the FTC emphasizes that marketers must substantiate consumers' reasonable interpretations of environmental marketing claims. Given the lack of consensus on what "sustainable" means, and the ambiguity of consumers' "reasonable interpretation," companies are left with uncertainty. This opens the door to claims of deceptive advertising. If the company decides to classify an item as "sustainable," it should avoid making a generalized claim and instead clarify what part of the product is sustainable to limit risk.

Further and particularly challenging for the fashion industry, companies should understand the traceability of their products before making sustainability claims. Environmental and human rights marketing claims likely implicate supply chains where materials are sourced, fabrics are made, and articles of clothing are manufactured. Tracing the origins of a product is critical, but this can be challenging for a large clothing brand with a global supply chain. Unless a company has a clear understanding of the origins of a product, it should limit sustainability statements to areas within its control.

The fashion industry faces unique challenges when making environmental and sustainability claims and remains an easy target. Companies must take into account the legal landscape around greenwashing and the reputational and litigation risks they may face when making environmental claims. To mitigate the risks, companies should ensure that their statements are factually truthful, able to be substantiated, and not materially misleading.

Our team includes multi-disciplinary lawyers who stand ready to address the many questions that might arise within the U.S. and globally as companies navigate the ever-changing greenwashing landscape.

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