Allegations of greenwashing — misrepresenting corporate sustainability — present a substantial risk to companies. Cases like the putative class action in Lowry v. Proctor & Gamble Co., filed in the U.S. District Court for the Western District of Washington in January, demonstrate the increasing risk posed by greenwashing allegations.

Public and private actors are increasingly willing to comb through corporate statements and records — as well as those of suppliers — to ferret out potential misrepresentations about the company's environmental impact.

But what counts as "greenwashing" depends on who you ask, making it difficult to know whether your company is on the right side of the line: In 2023, nearly three-quarters of executives surveyed thought that most organizations in their industry would be caught greenwashing if investigated thoroughly.¹

If a company is accused of greenwashing, it faces potentially heavy penalties. Government-imposed fines can be huge; companies have paid tens or hundreds of millions of dollars to resolve greenwashing-related claims. These fines can be imposed on the company, as well as on individual directors.²

In recent years, the number of public and private lawsuits relating to greenwashing has increased dramatically. While the new federal administration may signal a shift away from enforcement, public actors at the state level — particularly New York and California — and international bodies have signaled their willingness to regulate greenwashing and pursue greenwashing claims.

Insurance is one tool that may potentially reduce losses from greenwashing allegations. In the event of an investigation or lawsuit related to greenwashing, insurance may cover defense and indemnity costs. Given the increasing risk posed by greenwashing allegations, reviewing insurance policies for potential coverage should be an item on any risk manager's to-do list.

What is greenwashing?

Greenwashing describes statements by a company that misrepresent the environmental impact of its products or practices. Examples of greenwashing include:

• Stating that a company is "eco-friendly" or "green" without explaining why;
• Using nature-related imagery on packaging, such as flowers and trees, or the color green, to suggest that a product is sustainable;
• Highlighting specific sustainability efforts or claiming to be more environmentally friendly than competitors while still engaging in practices that negatively affect the environment;
• Making claims about the sustainability of a company or product without proof; and
• Misrepresenting, by over- or understating, a company or product's impact on the environment.

While the concept may seem straightforward, whether a statement amounts to greenwashing can be less so. For example, is calling recyclable plastic "eco-friendly" misleading? Some have argued yes, because plastics usually do not biodegrade, only certain types of plastics can be recycled, and plastics negatively affect the environment. Such uncertainties can make it harder to predict what will provoke public or private ire — and the resulting consequences.

What are the risks associated with greenwashing?

Statements about environmental impact are increasingly required by law and, pragmatically, the marketplace. Regulators continue to promulgate disclosure requirements that require companies to explain how their business model affects the planet.

Although new federal regulations on greenwashing are unlikely to materialize under the new administration, other public actors remain interested. For example, California and the European Union are expanding greenwashing disclosure requirements.

Even if these disclosures are not required by applicable law, as a practical matter, companies may need to make them anyway. Consumers care about environmental impact: Nearly half of respondents to a 2024 PricewaterhouseCoopers survey reported prioritizing more sustainable products,³ and a study by McKinsey and Nielsen found that products making claims about their eco-friendliness performed better than others.⁴

In addition to marketplace pressure, investors and business partners, who must comply with regulations and appease their consumer base, may require companies to explain their environmental impact as a condition of their funds or partnership.

But these statements about environmental impact can land companies in hot water. Misrepresentations concerning eco-friendliness are sanctionable by the U.S. Securities and Exchange Commission and the Federal Trade Commission, like any other misrepresentation, and these agencies may continue to bring enforcement actions.

While the new federal administration may be moving away from enforcement of these types of claims, interest by other actors is only growing. For example, states have signaled their willingness to pursue companies in this area; in recent months, multiple state attorneys general have investigated and filed lawsuits against industry leaders for allegedly misrepresenting their eco-friendliness.

Nongovernmental organizations and private actors are also expected to step up their scrutiny, as reflected in Columbia Law School's Climate Change Litigation Databases, which show an increasing number of private lawsuits filed against corporations over alleged greenwashing — among other environmental-related claims.⁵

Notably, there has been increased attention by public and private actors on certain types of greenwashing that go beyond an individual company's representations. These parties are broadly concerned with representations by the plastics industry about recycling, e.g., representing that a product is recyclable when only a few centers will recycle it;⁶ being "plastic neutral," e.g., by purchasing plastics credits; and the safety of "BPA-free" products, which are free of bisphenol A but allegedly shed microplastics.

To express this concern, they target specific companies as representatives of larger industry ills. Thus, a company that repeats representations common to its industry — such as BPA-free plastic products being more environmentally friendly than other types of plastic products — may be investigated or sued as a proxy for the industry as a whole.

Recent cases related to greenwashing include the following. 

The New York attorney general filed People of the State of New York v. JBS USA Food Co. last February against the world's largest beef products producer alleging that it misleadingly committed to attaining net-zero greenhouse gas emissions by 2040 even though it is impossible for it to do so.⁷

The attorney general is expected to file an amended complaint shortly. This lawsuit shows state interest in pursuing big targets and challenging broad claims about sustainability efforts.

Filed on Jan. 16 in the Western District of Washington, Lowry v. Proctor & Gamble Co. is a putative class action alleging that a manufacturer of paper products engaged in greenwashing by, among other things, (1) launching a campaign to promote the manufacturer's sustainability even though its manufacturing relies on practices that harm forests, and (2) misleading consumers by displaying logos on packaging that are restricted to practices with thresholds of environmental friendliness while actually failing to meet those thresholds.⁸

The complaint is packed with photos of the defendant's packaging, logos and other marketing material displayed alongside photos of environments allegedly affected by unsustainable practices.

This action shows that private plaintiffs and their class counsel are willing to challenge a company's possible business practices and marketing tools to make aggressive allegations regarding the veracity of its sustainability claims.

Another putative class action that survived a motion to dismiss is Berrin v. Delta Air Lines Inc., which alleges that an airline misrepresented itself as carbon-neutral based on its purchase of carbon offset credits because issues with the voluntary carbon offset market prevent that statement from being true.⁹

The plaintiff alleged that the defendant made these representations in media as varied as advertisements, LinkedIn posts, podcasts and in-flight napkins. On Jan. 27, the defendant filed an answer to the third amended complaint in the U.S. District Court for the Central District of California. 

This lawsuit shows plaintiffs' willingness to fault individual companies for larger issues with systems promoting sustainability, as well as how individual allegedly misleading statements can suggest broader claims about sustainability.

How can companies reduce these risks?

Greenwashing exposures may seem daunting, but insurance can mitigate losses flowing from these exposures.

Several types of policies may cover greenwashing-related risks. For example, directors and officers insurance typically provides defense and indemnity coverage to companies and their individual directors and officers against claims alleging wrongdoing in the course of running the business. D&O policies may also cover costs relating to government investigations, such as the costs associated with responding to subpoenas and civil investigative demands.

Examples of costs that D&O policies may cover include: (1) costs to respond to a state investigation about whether the company accurately stated its carbon emissions, (2) attorney fees to defend a class action alleging that product packaging misleadingly implies that the product can be recycled, and (3) costs to resolve shareholder claims that the company misrepresented the environmental impact of its manufacturing facilities.

Another coverage that may apply to greenwashing-related risks is commercial general liability insurance. General liability insurance typically covers claims alleging bodily injury or property damage, which could potentially cover claims that an allegedly nonsustainable product like PFAS harmed a consumer. It may also cover claims that a company misused intellectual property, such as seals of sustainability, in company advertisements. General liability insurance usually covers defense costs and indemnity arising out of covered claims.

Errors and omissions insurance may also cover greenwashing-related risks for certain businesses. E&O insurance typically covers the company and its management for mistakes made while providing professional services.

Thus, suppose a public relations firm advises a client about marketing a product and the client is sued because the marketing campaign allegedly misrepresents the product's eco-friendliness. If the client were to turn around and sue the public relations firm, the public relations firm may be covered for defense and indemnity under its E&O insurance policy.

Conclusion

Costs and liabilities for greenwashing — misrepresenting your company's environmental impact — present emerging and potentially material risks. Given the novelty of this issue and complexities of insurance coverage, the best way to get ahead of these risks is to thoroughly review your company's insurance coverage program to determine whether there may be coverage in the event of a greenwashing claim.

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The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

1. Global Executives Say Greenwashing Remains Rife, The Wall Street Journal, April 13, 2023.

2. FTC Takes Action Against Drizly and its CEO for Alleged Security Failures that Exposed Data of 2.5 Million Consumers, Hunton Privacy & Information Security Law Blog, October 27, 2022.

3. Shrinking the consumer trust deficit, PwC’s Voice of the Consumer Survey 2024, May 15, 2024.

4. Consumers care about sustainability—and back it up with their wallets, McKinsey & Company, February 6, 2023.

5. Climate Change Litigation Databases, Columbia Law School | Columbia Climate School, Sabin Center for Climate Change Law.

6. Kristin Della et al. v. Colgate-Palmolive Company, Order Denying Motion to Dismiss First Amended Class Action Complaint, February 6, 2024.

7. People v. JBS USA Food Co., No. 450682/2024 (N.Y. Supr. Ct., N.Y. Cnty.), complaint filed February 28, 2024. 

8. Lowry v. Proctor & Gamble Co., No. 2:25-cv-00108 (W.D. Wash.), complaint filed January 16, 2025.

9. Berrin v. Delta Air Lines Inc., No. 2:23-cv-04150 (C.D. Cal.), complaint filed May 30, 2023.