Oat milk company Oatly recently agreed to pay $9.3 million to settle an investor lawsuit alleging the company artificially inflated its stock price with false sustainability claims. The lawsuit, originally filed in July 2021, went through several dismissals and refilings before the final iteration persuaded the company to settle. JustFood describes the lawsuit stating:
“Kai Jochims, an investor in Oatly, first filed the suit and alleged the trading price for the company’s US shares fell by around 9% after a short-seller accused the group of greenwashing months after its $1.4bn initial public offering (IPO). Jochims accused Oatly of fraud due to certain claims included in the business’ IPO registration statement and an investor presentation on its website. According to the investor, Oatly’s misleading claims include assertions about its finances, general ‘greenwashing’ and falsehoods about its growth in China.”
This case is a good example of how one set of events or bad practices can result in multiple legal troubles. The UK’s Advertising Standards Authority previously banned Oatly ads after ruling that the company’s sustainability claims were misleading. By greenwashing in its advertising, Oatly opened itself up to both regulatory scrutiny and a shareholder lawsuit. This isn’t the first time a company’s IPO was targeted by greenwashing or ESG claims: Allbirds was hit in 2021, as was Deliveroo (once described “the worst IPO in London’s history”).
All external communications making sustainability claims should be scrutinized, including those coming from marketing departments.
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Photo credit: ColleenMichaels – stock.adobe.com
