Nike Faces Lawsuit Over Greenwashing Claims. It Won’t Be The Last.
According to our latest Q2 2023 B2C Marketing CMO Pulse Survey, 84% of US marketers would like to communicate more on their green initiatives but fear greenwashing. This is up from 76% last year. It’s easy to see where that fear comes from.
Last week, a Missourian filed a complaint against Nike in federal court, alleging it “falsely and misleadingly markets” products as sustainable and environmentally friendly. The plaintiff, who is asking for the lawsuit to be certified as a federal and state class action, also said that of the 2,452 products Nike lists in its sustainability collection, “only 239 products are actually made with any recycled materials,” or about 10%. As per the lawsuit, some of the products are predominantly made with virgin synthetic materials, including plastic-based materials, that even if recycled aren’t biodegradable.
As awareness around the major environmental impact of plastics increases, similar lawsuits may become more common, and regulatory agencies may eventually seek to impose stricter rules. Indeed, for now the Federal Trade Commission guidance is not a set of enforceable rules or regulations. It simply aims at educating companies on what could constitute deceptive advertising around sustainability claims.
In a recent blog post, Jay Milliken, senior partner at Prophet, evaluated the environmental, social, and governance (ESG) gap between customer perception and ESG commitments and initiatives. Interestingly, Nike had clearly been identified as a brand at risk. In this analysis, Adidas appears as a leader. However, it is worth noting that this perception may differ significantly by geography depending on customer perception and tighter regulation. For example, in France, an Adidas campaign for its iconic Stan Smith was deemed to be misleading by France’s Jury de Déontologie Publicitaire, as it suggested 50% of the total product was made from recycled materials when it is not.
Sustainability Regulations Are Tightening, But Fines Are The Tip Of The Iceberg
In Europe, legislation already governs how you can market sustainable products. In January 2023 France introduced new legislation against greenwashing — specifically clamping down on terminology like “carbon neutral.” Under the Climate and Resilience Law, France now prohibits companies from claiming their products or services are carbon neutral (or similar equivalents such as zero carbon or fully offset) unless they provide very specific information. The European Commission announced in March 2023 a new Proposal for a Directive on Green Claims.
While Forrester predicts at least 10 companies to incur $5 million or more in greenwashing fines in 2023, the fines are still limited and relative. But fines are just a harbinger of more critical business risks such as market valuation loss and employee and customer disengagement. Regulation often comes second and only as a consequence of consumer pressure. The reality is that consumers are increasingly aware of environmental issues and increasingly distrustful.
To avoid paralysis, CMOs need to seriously rethink their sustainability approach and actively create sustainability communications with integrity. To find out more, clients can access our research on best practices on sustainability communications as well as Forrester’s CMO sustainability blueprint.
Do not hesitate to contact me if you want to discuss this and set up a guidance session if you are a client.