Allbirds is calling on fashion brands to tag an additional label onto their products. Beyond alerting consumers to where a garment or accessory was made and informing them of the materials content, the sustainable sneaker darling says that companies should adopt “carbon labels to show how much carbon emission went into creating each product – from materials, to manufacturing, to transportation and end of life.” In doing so, itself, and documenting the emissions associated with its oft-copied sneakers and budding apparel offerings, and making its proprietary “Carbon Footprint Calculator” available to others, Allbirds joins a growing number of consumer goods companies that are including carbon emissions disclosures on their products.
In February, consumer goods titan Unilever revealed that “it wants to introduce carbon-footprint details for all 70,000 of its products” – from Dove soap and Toni & Guy haircare to Ben & Jerry’s ice cream and PG Tips tea – “and is exploring how best to gather and present the information,” the Wall Street Journal reported, referring to Unilever’s quest to calculate and share “the total greenhouse gas emissions caused directly and indirectly by [its individual] products.” The Oprah and Jay-Z backed Oatly AB – which filed for an IPO on Tuesday – includes a label on its containers that estimates that one liter of oat milk causes about 0.35 kg of CO2 emissions. (Interestingly, Oatly also made mention of the very real issue of Environmental, Social, and Corporate Governance (“ESG”) risks in its recently-filed S1, noting that the oats at the heart of its products “are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes, hurricanes, pestilence and other shortages and disease, which can adversely impact quantity and quality, leading to reduced oat yields and quality, which in turn could reduce the available supply of, or increase the price of, our raw materials.”)
Meanwhile, in terms of cosmetics and other personal care products, L’Oréal SA announced it will add carbon labels to an array of its products by 2022.
And this growing list appears to just be the beginning. “Over the next decade we will see an explosion of this sort of product labeling,” Dexter Galvin, director at the Carbon Disclosure Project, a U.K. environmental impact disclosure nonprofit, told the WSJ. “It could be hugely positive,” Galvin asserted, particularly if “consumers start tracking carbon the way they count calories,” for instance. On the other hand, he cautions that the push to label products in this way could be used by companies “to completely greenwash and bamboozle people with numbers” – in the same way that many brands currently tout the merits of their “sustainability” initiatives. In other words, carbon emissions labels could be the newest way for companies to create the false impression that their products and practices are environmentally friendly when they are not, or to overstate the extent to which their products/practices are sustainable.
The potential for eco-centric foul play could be compounded by the fact that as of now, “there is no market based, agreed-upon, uniform way to report or measure these various greenhouse gas impacts,” says Duane Morris LLP attorney Brad A. Molotsky. Instead, what we currently have are companies presenting emissions figures alongside individualized “attempts to outline their methodologies and rationales on how they measure and report.” Given increased consumer attention on sustainability and in many cases, pressure from board members on the ESG front, Molotsky says that as more companies make efforts to disclose their endeavors, including their carbon footprints, “quasi-uniform methodologies for monitoring, measuring and reporting” will likely come to light “so that consumers can measure apples to apples rather than apples to oranges or kilograms to pounds.”
A desire to give consumers and investors the ability to make like-for-like comparisons across different companies, after all, seems to driving the U.S. Securities and Exchange Commission (“SEC”)’s recent focus on the adoption of “standards by which corporate issuers [should] disclose material ESG risks.”
Alllbirds’ open-source carbon footprint calculator – which comes in the form of a “life cycle assessment” tool that can be used to “calculate the carbon footprint of products, identify hotspots, and drive emissions reductions” – could be a step in the right direction. Speaking about the launch of the initiative, Allbirds co-founder and co-CEO Joey Zwillinger said in a statement this week, “For too long, many brands have focused on marketing sustainability rather than actually implementing holistic, high-impact solutions, and to an extent, it’s worked.” With that in mind, if the industry “wants to continue pushing fashion toward a more sustainable future, we need brands to take responsibility for what they share with consumers.” Having a “key, universal identifier like Carbon Footprint to evaluate sustainability claims and force accountability from businesses is critical to drowning out the noise.”
While brands roll out voluntary efforts of their own, chances are, regulators will be paying attention, as they have been devoting increased focus on ESG. The National Advertising Division of the BBB National Programs, for instance, has reported its observance of “a substantial increase in the number of greenwashing claims, including claims of biodegradibility, to questionable third-party certifications, to purportedly non-toxic products,” Quinn Emanuel Urquhart & Sullivan, LLP stated in a recent client note. At the same time, the Biden administration’s attention to climate and sustainability issues, which has seen the SEC roll out a Climate and ESG Task Force in order to “develop initiatives to proactively identify ESG-related misconduct,” including analyzing disclosures “relating to investment advisers’ and funds’ ESG strategies,” indicates that there will, in fact, be further emphasis on companies’ eco claims.
Still yet, Quinn Emanuel points to the March 16, 2021 complaint that three environmental groups filed with the Federal Trade Commission, alleging that energy giant Chevron has run “unlawfully deceptive advertisements which overstate its investment in renewable energy and its commitment to reducing fossil fuel pollution.” The firm states that “given the rise in green marketing, the capital flowing into ‘green’ funds, and the increasing focus on detecting greenwashing, we are likely to see more enforcement efforts and civil suits.”
And in addition to a rise in enforcement of what are currently just voluntary disclosures in many cases, Molotsky says that carbon labeling initiatives are worth keeping an eye on, as it is “very likely that regulators like the European Commission, the SEC and/or trade associations like the Sustainability Accounting Standards Board will continue to push for more required and verifiable disclosures,” which could have significant impacts for brands across the board.