Dr. Ellen Wald is back for her weekly piece.
A trio of environmentalist advocacy groups—Greenpeace, Earthworks and Global Witness—have jointly complained to the Federal Trade Commission (FTC) about advertisements from Chevron that they claim overstate Chevron’s investments in renewable energy and exaggerate its commitment to cutting pollution from fossil fuels. The environmental groups accuse Chevron of unlawfully deceptive advertisements and greenwashing. The complaint was filed a month ago, and has flown under the radar, but could actually turn out to be a much more influential action than anyone has noticed. And it may not work out entirely in the environmentalists’ favor.
It is currently en vogue for companies—particularly energy companies, but all major corporations too—to tout their bona fides in the environmental protection sphere. They want potential customers to know that they are working to protect the environment and the global climate. They advertise these features with the aim of making customers feel good about using their products and services. Public companies also want investors to know about their environmentally friendly and climate conscious efforts, so they feature such things in material targeted to investors, such as annual reports.
But in doing so, these companies are taking a risk by presenting themselves perhaps too positively. The risk is exacerbated, because the image they hope to create is one they don’t traditionally have. For example, Chevron is really an oil and gas company, but it is presenting itself in its advertisements as a renewable energy company. Florida Power and Light is a utility company that provides most of its electricity via natural gas, but its advertisements present it as a solar power provider. The problem is that environmental groups might not just blink, say “Ok, great,” and let these companies off the hook. Instead, they might try to hold them accountable, as Greenpeace and others are now trying to do.
Putting aside the legal analysis, what will happen when companies that have presented themselves in environmentally friendly ways find these claims actually analyzed?
For example, this complaint highlights a major problem with ESG (Environment, Social, Governance) investing and could prompt a change in that very popular new corner of finance. Using ESG criteria to determine investments is all the rage today, but the little secret in ESG is that the designation is based on self-reported aspects of a company either directly to investors (usually funds) or to independent, third-party organizations that are not affiliated with the U.S. government. Corporations do not file their ESG qualifications with the SEC, so they do not immediately face the legal scrutiny of the government. However, If a corporation falsely claims great efforts towards environmental protection in ESG filings to hedge funds or ESG monitoring groups, could that corporation face problems with authorities? At the least, the board and executives would face an angry group of shareholders.
With the new FTC complaint about Chevron, it seems quite possible that major environmental groups are staking out a new tact in trying to hold corporations to their word. Even if the government doesn’t check the validity of these claims made to customers and investors, nonprofits will. And nonprofits won’t sit idly by. They are incentivized to point out dishonesty and hypocrisy. It helps environmentalists raise money to become involved in high-profile cases. Plus, if the Biden administration returns to Obama-era policies, the nonprofits may actually benefit financially from settlements or fines by the government.
Yet, the environmental groups must wonder if this tactic is good for their ultimate goal. If corporations know that their claims of good deeds will be scrutinized and perhaps lead to legal liability, might they not just stop making claims? If corporations stop touting their good deeds, might they not stop doing them at all? After all, for a profit-seeking business, what good is a good deed if it can’t be publicized. Therefore, if Greenpeace and its partners succeed, might they not end up with less environmentally friendly corporations?