ESG Update: Greenwashing Litigation Filed over Airline’s Carbon Neutrality Claims

Berrin v. Delta Air Lines was filed by a California resident who purchased a Delta flight allegedly under the belief that the airline “has not been responsible for releasing any net additional carbon into the atmosphere since March 2020.” Notwithstanding this claim, the complaint alleges that Delta’s carbon neutrality claim hinges on Delta’s representations that its investments in the voluntary carbon offset market entirely offset its CO2 emissions. The complaint states that these representations are “false” because of “foundational issues with the voluntary carbon offset market.”

“Greenwashing” and Carbon Offsets

“Green” claims fall into a rapidly evolving space in advertising law. (See our discussion here.) The voluntary carbon offset market is a marketplace where organizations can purchase carbon credits or offsets to compensate for their own greenhouse gas emissions (GHGs). These credits are generated by projects that reduce, avoid, or remove greenhouse gas emissions, such as renewable energy projects, reforestation efforts, and energy efficiency improvements. The voluntary carbon offset market faces a number of critiques such as: (1) inaccurate accounting; (2) non-additional effects — meaning the project generating credits would have occurred with or without offset market investment; (3) non-immediate, speculative emissions reductions that will at best occur over decades; and (4) impermanent projects subject to disease, natural disasters, and human intervention.

The class suit claims that they were charged higher prices because there is a “significant market premium for green services.” Berrin asserted that she “purchased Delta flights at a market premium due to her belief that by flying Delta she engaged in more ecologically conscious air travel and participated in a global transition away from carbon emissions.” Berrin also alleged she would have not purchased Delta’s services, if she understood at the time of purchase that Delta’s carbon neutral representations were false.

Navigating Legal Risk

As the carbon market continues to sort out whether it will remain regulated voluntarily or through a government agency, as we discussed here, companies should weigh the risk of relying exclusively on offsets to lower their GHG footprint. Reductions in Scope 1 or 2 emissions are more defensible and acceptable to consumers. Many companies, including Delta Air Lines, rely on the Greenhouse Gas Protocol’s Corporate Accounting and Reporting Standards as the “gold standard” for accounting and reporting GHG emissions. Currently, the GHG Protocol is undergoing a multiyear update process and is considering revisions that would impact how offsets are calculated and verified. Tracking the development of these standards will inform how offsets may be considered towards carbon reduction goals in the future.

If a company chooses to pursue offsetting emissions, be mindful of “phantom credits,” which result from inaccurate carbon reduction projections. The three major voluntary carbon credit vendors from whom Delta purchased offsets have, according to the complaint, “engaged in fraudulent projections that grossly overstate their guarantee of carbon reduction.” Carefully crafting any public facing statements and appropriately providing disclaimers may reduce potential liability. Guaranteeing future performance should be approached cautiously.

The Berrin complaint cites a comment from Delta’s Vice President of Marketing’s that the airline was “carbon neutral” to support its greenwashing allegations. Broad, aspirational claims of improving business practices to support the environment via marketing, rather than claiming specific targets, such as “carbon neutrality” could reduce the ability of potential claimants to bring forth a substantive issue.

“Non-additionality” was another source of the plaintiff’s complaints. Focusing on projects that are in fact “additional” may help mitigate claims.

The complaint claims Delta knew or should have known that the statements they made were false and misleading. Such claims can be avoided or minimized with careful review of marketing materials by sustainability staff and in coordination with legal counsel, as we discussed here.

The firm’s ESG Team advises clients on understanding risks and benefits posed by increased regulatory focus on ESG and greenwashing issues and creating pathways to advance these issues at a corporate level.