Activists Increasing Scrutiny of Net-Zero Climate Pledges and Alleged “Greenwashing”

A growing number of companies are pledging to achieve net-zero carbon emissions over the coming decades. With this, activists and academics are increasing scrutiny of such claims. Congress is holding hearings examining alleged “greenwashing” by corporations. And activists recently published a report examining the net-zero pledges of specific companies and criticizing the transparency and integrity of many such pledges. Now is the time for companies to revisit their climate, sustainability, and environmental, social, governance (ESG) substantiation and compliance procedures. 

House Committee Hearings 

On February 7, 2022, the United States House Committee on Oversight held a hearing to investigate corporate attempts to allegedly “greenwash” their operations and efforts to reduce greenhouse gas emissions.^[1] The committee heard from climate scientists and environmental advocates who testified about corporate promises to achieve net-zero emissions. The individuals criticized advertising campaigns that allegedly obscure true intentions. 

Congress is directing its attention at more than just companies producing and selling fossil fuels. On January 20, the House Committee on Energy and Commerce similarly held a hearing titled “Cleaning Up Cryptocurrency: The Energy Impacts of Blockchains.”^[2] Members of the committee spoke to six witnesses that each work adjacent to blockchain or digital-currency mining. The witnesses were concerned with the increasing computational power being used to “mine” cryptocurrencies. Congress examined the effect that the increasing energy consumption may have on the environment.        

Climate Report 

Beyond Congress, activist entities are increasing scrutiny of corporate climate and ESG claims. NewClimate Institute and Carbon Market Watch, two nonprofit climate advocacy entities, recently published The Corporate Climate Responsibility Monitor.^[3] The nonprofits closely examined the climate commitments of 25 large companies, primarily outside the area of fossil fuel extraction. The report looked at the net-zero claims by companies in the technology, pharmaceutical, retailing, consumer goods, automotive, and transportation industries. Their report sought to “assess the transparency and integrity of companies’ emission reduction and net-zero targets.”^[4]   

The 25 companies were chosen in part because of their high-profile climate change mitigation pledges. Many companies have been making public pledges—indeed, over 3,000 companies have joined the United Nations–backed “Race to Zero” campaign. This is more than double the number of companies that set the pledge the year before.  

The report finds that “[t]he rapid acceleration in the volume of corporate climate pledges, combined with the fragmentation of approaches and the general lack of regulation or oversight, means that it is more difficult than ever to distinguish between real climate leadership and unsubstantiated greenwashing.”^[5] The authors’ “main findings” included that “companies’ net zero pledges are not what they may seem.”^[6] Instead, these pledges “require detailed evaluation and in the majority of cases today cannot be taken at face value.”^[7] In particular, headline pledges are often ambiguous and emission reduction commitments are limited.  

Even though each of these companies has released ambitious climate change plans, the report found that of the 25 companies, none was considered to have high “integrity” and “transparency.”^[8] And 21 out of the 25 were found to have “low” or “very low” integrity, with eleven companies falling into the “very low integrity category.”^[9] Only six companies were found to have comprehensive disclosures on their GHG emissions on an annual basis.^[10]   

Other Increasing Scrutiny of Climate-Related Claims 

This increasing public scrutiny of corporate claims comes as federal-government regulators and others around the world are enhancing scrutiny of climate-related and other ESG claims that companies are voluntarily making.^[11] In September 2021, the Securities and Exchange Commission (SEC) publicly acknowledged that the agency was sending letters to public companies about discrepancies in their climate-related financial and ESG disclosures.^[12]   

The SEC is also in the process of drafting proposed regulations that would mandate enhanced climate-related and other ESG disclosures.^[13] The SEC has not given an indication of when it will release its proposal on mandatory ESG-related disclosure rules. Since SEC Chairman Gensler often talks about these rules as being a priority for the SEC, many expect a proposal in the first quarter of 2022.      

In addition, private-party suits against companies making climate-related, sustainability, and other ESG claims appear to be increasing.^[14] These new lawsuits bring claims relating to misrepresenting and breach of warranty, unfair business practices, and securities fraud claims. Whereas in prior years, few such cases were surviving motions to dismiss, more-recent greenwashing cases are reaching discovery. 

Key Takeaways 

• The House hearings and the Climate Responsibility report make clear that companies should expect that regulators, nonprofits, and private litigants will be examining even voluntary climate, sustainability, and ESG claims with increasing stringency.
• Companies making such claims should review and consider updates to their substantiation and compliance procedures.

For further information or answers to questions on ESG disclosures, and their implications, contact Jonathan D. Brightbill* (partner, White Collar, Regulatory Defense, and Investigations, Environmental Litigation) or Jennie Roualet (associate, White Collar, Regulatory Defense, and Investigations).  

*Jon served in senior leadership at the United States Department of Justice from 2017–2021, including as Acting Assistant Attorney General leading national enforcement of federal criminal and civil environmental laws.

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^{[1] H. Comm. on Oversight, Fueling the Climate Crisis: Examining Big Oil’s Climate Pledges (Feb. 7, 2022), https://oversight.house.gov/legislation/hearings/fueling-the-climate-crisis-examining-big-oils-climate-pledges.}

^{[2] Comm. on Energy & Com., Memorandum Re: Hearing on “Cleaning Up Cryptocurrency: The Energy Impacts of Blockchain” (Jan. 17, 2022), https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Briefing%20Memo_OI%20Hearing_2022.01.20.pdf.}

^{[3] New Climate Inst., Corporate Climate Responsibility Monitor 2022 (Feb. 7, 2022), https://newclimate.org/2022/02/07/corporate-climate-responsibility-monitor-2022/.}

^{[4] Id.}

^{[5] Id.}

^{[6] New Climate Inst., Q&A with the authors: Corporate Climate Responsibility Monitor 2022 (Feb. 7, 2022), https://newclimate.org/2022/02/07/blog-corporate-climate-responsibility-monitor-faq/.}

^{[7] Id.}

^{[8] Note 3, supra, at 9.}

^{[9] Id.}

^{[10] Id. at 8.}

^{[11] Jonathan Brightbill & Jennie Roualet, Government Enforcers Ramp Up Climate and ESG Claim Investigation, Winston’s Environmental Law Update (Sept. 7, 2021), https://www.winston.com/en/winston-and-the-legal-environment/government-enforcers-ramp-up-climate-and-esg-claim-investigation.html.}

^{[12] Jonathan Brightbill & Jennie Roualet, SEC Demanding Expanded Climate and ESG Disclosures, Winston’s Environmental Law Update (Sept. 28, 2021), https://www.winston.com/en/winston-and-the-legal-environment/sec-demanding-expanded-climate-and-esg-disclosures.html.}

^{[13] Off. of Info. & Regul. Affs. Off. of Mgmt. & Budget – SEC Climate Change Disclosure (June 17, 2021), https://www.wsj.com/articles/climate-fight-brews-as-sec-moves-toward-mandate-for-risk-disclosure-11624267803.}

^{[14] See, e.g., Bentley v. Oatly Group AB, No. 1:21-cv-06485 (S.D.N.Y., filed July 30, 2021); Jochims v. Oatly Grp. AB, No. 1:21-cv-06360 (S.D.N.Y., filed July 26, 2021).}