Up, up and away … the rise of ESG legal claims

What can ordinary businesses learn from the ASA’s decisions striking down “green” ads from three airlines? And what is the risk landscape for ESG claims more generally?

The Advertising Standard Authority has come down hard on:

• Lufthansa‘s “Fly now with Lufthansa… Book your ticket directly with Lufthansa and explore destinations around the world… Fly more sustainably.”
• Etihad‘s“Etihad Airways – Book Your Flight Today… Enjoy Great Discounts, Offers and Deals On Your Flight Bookings. Explore the World With Confidence and Total Peace Of Mind With Etihad Airways. Environmental Advocacy. Award-Winning Service.”
• Air France’s“Manchester to Bangkok… Air France flights… Air France is committed to protecting the environment: travel better and sustainably.”

Why?

Because there was no evidence to back up the environment claims; a dangerous game to play by companies in an industry in the cross hairs for CO2 emissions.

Big brother is watching …

That’s not all we should take from these decisions. The adverts were identified for investigation by the ASA’s “Active Ad Monitoring” system, which uses AI proactively to search for online ads that might break the advertising rules. Therefore, it is becoming increasingly hard to avoid the scrutiny of the advertising watchdog.

Anything else?

Yes, Environmental, Social and Corporate Governance issues are the focus of ever greater scrutiny. There are claims management companies, pressure groups and environmental campaigners circling around a number of sectors ranging from agriculture and transport to retail and manufacturing.

So, here are a few key E.S.G. risks for businesses to consider.

• Environmental claims – or greenwashing – relate to claims like those above but also cover emissions, waste reduction, biodiversity and carbon footprints
• Social claims – look at fair pay, D&I (diversity and inclusion) and equal opportunities as well as modern slavery, working conditions and human rights.
• Governance claims – look at data protection, director duties, corporate reporting and accounting obligations as well as anti-bribery and corruption and financial crime.

Increased obligations on businesses to report on ESG matters lead to public statements which can find their way into promotional material.  Given that ESG claims are public, the risk of claims increases.

Employees, consumers, shareholders or anyone competing against you, working for you, buying from you, selling to you or investing in you could examine your ESG credentials. And its not just the ASA monitoring the market, the CMA (Competition and Markets Authority) has an active role in regulating the market and is increasingly concerned about ESG issues.

What should businesses do?

In order avoid unwanted attention, make sure that your ESG claims are backed up by evidence.

Whether complying with regulatory requirements or promoting ESG credentials in marketing materials, if it is discovered that you have made a misleading statement or omitted to include some important information, there is a risk of legal action.

Action

Check all ESG claims are backed by your own evidence (accepted facts may not support specific claims about your products and services).

Avoid absolute claims but state achievable progress towards ESG goals and include appropriate qualifications and limitations. Consider an annual ESG audit, so you can monitor progress to agreed goals.

Avoid the “puffery” of unqualified claims such as “sustainable”, “green” or “environmentally‑friendly”; whether reporting on a voluntarily basis or because of a legal requirement, ESG reports need to be precise.

Provide training on ESG issues for all staff and anyone in your supply chain on whom you rely.

Finally, check your insurance cover to see if you have legal expenses insurance to pay the costs of any litigation that might arise in the event that an ESG claim arises.

If you want to discuss ESG reporting or legal issues relating to advertising or marketing, please contact Iain Connor, Partner who specialises in intellectual property disputes and brand protection.

This article is for general information only and does not, and is not intended to, amount to legal advice and should not be relied upon as such. If you have any questions relating to your particular circumstances, you should seek independent legal advice.