Delta Airlines is facing a class action lawsuit in California alleging that the company’s “carbon neutral” advertising is misleading to consumers. The Plaintiffs’ concerns stem in part from Delta’s use of carbon credits to offset its emissions. As we’ve written about before, carbon credits come in a variety of flavors, and even those that appear high-quality may not be verifiable. Plaintiffs argue that the voluntary carbon market is too fraught with inaccuracies to be the basis of a “carbon neutral” marketing claim.
Delta advertises that the company is “the world’s first carbon neutral airline.” The complaint alleges that reasonable consumers would take this statement to mean that Delta has not been responsible for releasing any net additional carbon since March 2020, which the lawsuit claims is untrue. The Plaintiffs assert that they wouldn’t have flown with Delta, or would have paid less for their tickets, had they known that Delta’s net-zero claims were based on offsetting practices which the Plaintiffs argue are unsound. (In a different context, Lawrence blogged before about implications of paying less for something that doesn’t meet ESG expectations, but let’s leave that for the moment.)
A bad time for carbon credits
Carbon credits are purchased by companies to “offset” their emissions. The idea is that a company’s net carbon emissions are zero if it pays for carbon emissions to be avoided, captured and/or stored elsewhere in an amount equal to or greater than what the company emits (at least that part it intends to offset). However, carbon capture and storage technologies are nascent and potentially hazardous and nature-based solutions have serious issues with permanence and legitimacy. Emissions avoidance also has uncertainties and ambiguities in many cases.
Plaintiffs and regulators are taking notice of these flaws and litigation poses a risk to any company that markets a net-zero strategy based on the use of carbon offsetting. We wrote here about upcoming changes to EU marketing laws for a blanket ban on the use of such claims. In the UK, the Advertising Standards Authority banned an ad from Etihad Airways promoting that the airline was “taking a louder, bolder approach to sustainable aviation” – a claim based in part on the company’s use of carbon offsets.
What this Means
There is a certain push and pull concerning carbon offsets among those in the sustainability field. Some applaud this lawsuit for cracking down on greenwashing. Others feel that we shouldn’t punish companies for innovating and investing in sustainability solutions, even if those solutions are flawed.
Companies should be rewarded for investing in climate solutions; however, to the extent possible those solutions should be verifiable. Delta has taken admirable steps to make its business sustainable, and that action may be viewed positively by customers and investors granting the brand a certain “halo effect.” But considering new regulatory pressures around green marketing and increased activist attention, low-quality or unverifiable carbon credits may pose more risk than value to companies like Delta.
Delta appears to have recognized this risk. In response to the lawsuit, a Delta spokesperson stated that: “Delta committed to carbon neutrality in March 2020, and since March 31, 2022, has fully transitioned its focus away from carbon offsets toward decarbonization of our operations, focusing our efforts on investing in sustainable aviation fuel, renewing our fleet for more fuel-efficient aircraft and implementing operational efficiencies.” That seems a better way of communicating the reality than saying they are the world’s first carbon neutral airline. Granted, the shorter version is catchier and a better tagline, but that is where the trouble starts.
The litigation landscape surrounding ESG is developing rapidly and even companies who are taking substantial steps to reach net-zero are potential targets in greenwashing litigation. Stay on top of developing trends and guard yourself against litigation risk by visiting our Subject Area: Compliance / Enforcement / Litigation. Additionally, you can consult our Checklist: Avoiding Greenwashing to learn how to implement best practices for mitigating greenwashing risk at your company. If you’re not already a PracticalESG.com member with access to these and other resources, sign up now and take advantage of our no-risk “100-Day Promise” – during the first 100 days as an activated member, you may cancel for any reason and receive a full refund.
