Critical Perspectives on Private Environmental Governance: Greenwashing and Anti-ESG Laws

• Pages: 105-128
• Author: Michael P. Vandenbergh,Sarah E. Light,James Salzman

105

Chapter 6

CRITICAL PERSPECTIVES ON

PRIVATE ENVIRONMENTAL

GOVERNANCE: GREENWASHING

AND ANTI-ESG LAWS

This Chapter addresses a number of critical pers pectives on

private environmental governance. First, it discusses the charge that

PEG is just corporate greenwashing rather than meaningful

environmental action, and goes into depth about how both public law

and p rivate action can help to deter or ferret out misleading

marketing claims. Secon d, it discusses recen t backlash in a number

of states against “ESG” or “woke” integration into business and

financing strategies more broadly. The discussion of this backl ash

describes some of the laws th at states have adopted requiring

divestment of pension assets or cancelling of state contracts with

firms that engage in ESG integration, in particular, with respect to

climate change.

I. Greenwashing

When business firms adopt PEG to address environmental

problems like clima te change, biodiversity loss, water scarcity and

toxic chemicals, it is essential to a sk whether these private

commitments are real or whether they are merely “greenwashing,”

burnishing their brand wi th no real intent to change behavior. PEG

may be meaningless, or even harmful, if corporate claims of

environmentally responsible behavior are bogus. Indeed, a major

criticism of PEG stems from skepticism that the claims are real.

To give one concrete example, in the past several years,

thousands of business firms globally have stated their intention to

achieve “net ze ro” emissions by 2050, in line with the goals of the

Paris Agreement. However, a recent study by the New Climate

Institute reviewed the climate strateg ies of twenty-five major global

firms, and concluded that the actual commitments firms had made

were likely to reduce their emissions by only 40 percent, rather than

100 percent.

1

And some firms had not taken any meaningful actions

beyond their vocal pledges.

There is no question that anyone—be it a firm or a government—

making a public climate commitment should make that commitment

1

THOMAS DAY ET AL., CORPORATE CLIMATE RESP ONSIBILITY MONITOR:

ASSESSING THE TRANSPARENCY AND INTEGRITY OF COMPANIES’ EMISSION REDUCTION

AND NET-ZERO TARGETS 5 (2022).

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TOOLS AND CONCEPTS

Pt. I

with integrity. We note as an aside that private companies are not

the only entities that may not be co mpletely fulfilling their climate

commitments. Studies of the extent to which nations have fulfilled

their commitments under the Paris Agre ement suggest that

countries are complying with their commitments at levels that are

comparable to the levels that corporations are complying with their

commitments, and many governments are struggling to regulate

corporate emissions so the viable options may be limited. Thus while

we focus on greenwashing by private firms in this Chapter, keep in

mind that greenwashing applies to both companies and

governments.

We also wish to point o ut that some scholarship questions

whether greenwashing is always problematic. These scholars argue

that even partially fulfil led commitments may make important

contributions to climate mitigation by creating a sen se among

corporate managers that climate commitments are the norm. This

may have positive spillover effects on the extent to which other

companies make—and fulfill or partially f ulfill—their own climate

commitments. This does not suggest that greenwashing is good, only

that lawyers, manage rs, and advocates will benefit by taking the

same critical app roach to thinking about greenwashing as they will

from thinking about other environmental issues.

This Chapter delves into the issue of greenwashing, first

identifying what greenwashing is and why firms might be motivated

to engage in greenwashing. It then discusses the legal limits on

greenwashing, focusing primarily on the Federal Trade

Commission’s authority to enforce laws governing deceptive practices

affecting commerce, Securities and Exchange Co mmission (SEC)

disclosure rules, and state laws that are designed to protect

consumers from false or deceptive advertising. It th en examines the

ways in which PEG itself can address or limit greenwashing,

primarily through the use of third-party certifications and

disclosures.

A. Defining Greenwashing

A co nsumer products company advertises its disposable coffee

pods as “recyclable” when they are technically capable of being

recycled, but are not actually accepted by most local municipal

recycling programs. A fo ssil fuel firm publishes a glo ssy

advertisement touting its major investments in renewable energy

when in fact those investments constitute less than one half of one

percent of the firm’s business. An investment firm publishes a

commitment to achieve “net zero by 2050” in its investment portfolio

but still holds shares in fossil fuel companies and does not vote those

shares in favor of measures that would accelerate decarbonization. A