Back in August, shoe manufacturer Allbirds was talking about being the world’s first “sustainable public equity offering.” The company’s initial IPO prospectus filed with the SEC contained numerous references to, and claims about, its sustainability principles and objectives framework (“SPO framework”). Not surprisingly, Allbirds garnered much supportive media attention.

In Allbirds’ initial S-1, “ESG” alone was referenced over 100 times. Compare that to two other upcoming sustainability-forward fashion industry filings:

Then the other shoe dropped – the company was accused of misrepresenting sustainability attributes of its products. Apparently stemming from a PETA article published in April, Allbirds is accused of

  • excluding the carbon footprint of shipping materials around the world
  • excluding the carbon and water use footprint of wool production
  • mistreatment of sheep producing their wool
  • sourcing discarded crab shells (a material used in the shoe) from the Canadian snow crab industry, which harms endangered whales.

It is important to emphasize these are just allegations at this point. But allegations can be damaging and prompt responses even when they’re unproven. Three days ago the company updated the prospectus and, according to the Financial Times, reduced the number of references to the SPO framework to 33, from 65 in the original filing. Other revisions include deleting the statement that the company is “conducting this offering while following the SPO framework.”

A class action lawsuit also has been filed claiming that buyers of Allbirds shoes in New York were misled by the company’s claims, with the company subsequently filing a motion to dismiss.

What This Means To You

Even if you are not in the process of developing a prospectus, there are lessons to be learned. I’ve said them before in other articles so I’ll just quickly summarize:

  • Always assume every word your company publishes related to ESG/sustainability will be read and scrutinized by a wide audience.
  • ESG is hot right now. Investors want to be told a good story and companies are excited to share their vision. It can be challenging for lawyers and other advisors to get backup for statements being made. Sometimes it takes public questioning to prompt a reassessment of what exactly is being claimed.
  • That audience may have more information than you assume.
  • It is better to be upfront in tackling ESG issues than avoiding them. You have the chance to control the narrative and will probably be given credit for being transparent and honest. I wrote about a good example of this earlier this week.

It’s best to stay on your toes.

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