How to Avoid Litigation Risks from Greening Your Products

How to Avoid Litigation Risks from Greening Your Products

[Editor's Note: This article appeared in a slightly longer form in Environment Law360, and is available for download as a PDF here.]

Although everyone has his or her own favorite color of the rainbow, it's indisputable that, in the business world at least, green has certainly claimed the top spot, and there are no pots of gold or leprechauns involved. Rather, it seems that all businesses must move toward making their products greener just to stay competitive in the marketplace.

The good news is that this green wave is leading to the production of new products made from natural materials, products with fewer chemical emissions, and products that conserve natural resources. In fact, the number of green products on the market has increased steadily in recent years, leading 43 percent of companies to increase spending on green marketing in 2009, according to a study [PDF] from SustainCommWorld.

How a company makes the leap into green though can either lead to great success and an increased presence in this environmentally conscious marketplace, or it can lead to additional problems and more liability. Thus, it is essential to understand what it means to green your product and consider the risks of going green up front in order to avoid ending up in the courtroom down the road.

The Five Kinds of Green Products

There are almost as many definitions of green products out there as there are colors in the rainbow. There is no single standard for determining whether a product qualifies as green. Rather, the analysis focuses on the materials used to produce a product and where those materials originated, with special consideration given to the manufacturing, use, and disposal of the product. Additionally, products may be considered green based on multiple characteristics or overall environmental performance.

There are roughly five main categories of green products:

  1. Made with salvaged, recycled, or agricultural waste content;
  2. Conserve natural resources -- these products do not need to be distinctively green on their own as long as they reduce the materials needed for a project;
  3. Avoid certain chemical emissions. These products are not always "good" for the environment, but they are superior to like products on the market (e.g. a sealant with less volatile organic compounds (VOCs) than its competitors).
  4. Contribute to a safe, healthy building environment, such as reducing or blocking the spread of indoor air pollutants;
  5. Save energy or water

Although products can be considered green for more than one reason, once you define your product as green, the challenge becomes determining the best way to communicate this fact to the marketplace in a way that accurately represents its characteristics and potential benefits, and for that, green labels and certifications are an important consideration.

Whether it is Green Seal, Eco Logo, Green Guard or some other certification, overall, the goal is to identify those products with the highest level of protectiveness of human health and the environment. In order to obtain the certification, the manufacturer actually tests its product to see if it meets the applicable scientific criteria. In the case of the strongest, most reliable certifications, the organization providing the certification independently verifies that the requirements have been met. Otherwise, the validity of the representations are left to the competition to evaluate.

It is essential to understand the scope and impact of each of these certifications before identifying which one best fits your product. Some of these certifications require an audit of the applicable manufacturing facility, and all certifications require payment of a fee, ranging on average from $1,500 to $10,000 per product, with a yearly cost for renewal of the certification.

Since there is no general consensus regarding the best third-party certification program, companies should to talk to relevant trade associations, consumers, and business partners to determine what type of label or certification will have the most impact in their green corner of the market.

The Legislative Landscape for Green Product Manufacturers

{related_content}Confusion regarding how to define a product as green and how best to market it as green is further confounded by the fact that legislation pertaining to green products varies significantly, on the local, state and national levels, and seems to be changing daily. It is, therefore, imperative up front to consider all legislation and regulations that could affect the manufacture, sale, or distribution of the green products in order to best minimize potential liabilities.

The majority of laws and regulations in place focus on requiring federal, state and local agencies to purchase "environmentally preferable products" and services, or requiring the use of green products in government projects. The complication with implementing these requirements circles back to how green products are defined and whether obtaining a certification is sufficient. Most of the remainder of the legislation that is not marketing-focused, provides tax abatements or incentives to promote green building or for using green products in government projects.

Perhaps, one of the most significant areas of the legislative landscape to consider is the Federal Trade Commission's (FTC) Green Guides, which regulate the marketing of green products by defining acceptable green advertising. The Green Guides currently require advertisers to be clear about environmental attributes and not overstate their green claims, however, they are under review to address emerging technology and changing consumer expectations. It is anticipated that there will be significant FTC enforcement actions through the Green Guides in the near future.

Avoiding Colorful Green Litigation

As with any emerging area of law, claims arising from green products did not appear until some time after the introduction of the products themselves. Nonetheless, as consumer expectations rise, courts across the country are beginning to see claims pertaining to whether green means a product is safe, and what sustainable means in terms of useful life and required maintenance.

Most claimants in this area are adapting traditional legal theories to this new market, and manufacturers are finding that the green certifications discussed above do not provide immunity against these claims. Green products manufacturers are likely to face the traditional product liability claims, such as breach of warranty, failure to warn, negligence, and strict liability, from plaintiffs ranging from consumers to builders to developers to distributors.

Does marketing a product as green create a warranty? Can a manufacturer be liable for failure to warn or for providing a product claimed to provide certain benefits that does not live up to these representations? What if a manufacturer is selling its product for use in a green building and represents it will obtain a certain certification, but is unable to do so? Many of these questions may end up being resolved in the courtroom.

Perhaps the biggest risk to green product manufacturers is the consumer class action, which may provide for punitive damages and attorneys' fees in addition to traditional litigation costs. Class actions also increase the scope and complexity of litigation, ratcheting up discovery costs and complicating the settlement evaluation process.

Companies already have seen this issue emerge in connection with greenwashing claims, where the suit alleges that a manufacturer provided misleading, inaccurate, unsubstantiated or deceptive advertisements, usually pursuant to federal or state laws or regulations that prohibit such deceptive marketing practices. Such claims provide a good incentive to exercise caution in advertising practices. Phrases such as "environmentally friendly" or "good for the environment" should be avoided and marketing campaigns should be narrowly-tailored to the particular environmental benefit that is accurately attributable to the product in question.

The issue of greenwashing is compounded by the fact that manufacturers may expedite the process to get a green product to market, and although some testing may be done, the consequences of all of these new product formulations over their entire lifecycle remain an unknown. For example, a new formulation of an adhesive may mean less VOC emissions right now, but will it hold together the roof on a building twenty years from now just like the old VOC-filled adhesive did?

Manufacturers should consider these green claims as traditional product liability claims with a twist, and those that have defended such claims recognize that they are expensive and often lengthy propositions. The choice to look at all aspects of going green up front and to fully evaluate the risks and benefits of greening a product, whether it is by manufacturing, selling or distribution, can lead to a tremendous savings at the end of the rainbow.

Heidi Goldstein is a partner with Thompson Hine in the firm’s Cleveland office and chair of the firm's green products group. Emily Huggins Jones is an associate with the firm in the Cleveland office.

Photo CC-licensed by Flickr user steakpinball.