Briefing: January 27, 2023
The world’s largest provider of carbon offsets is coming under fire & bringing its big-name clients – which include Gucci, Disney, Netflix, Shell & Salesforce, among others – with it. According to a joint investigation and subsequent report from the Guardian, Die Zeit, and nonprofit org. SourceMaterial, more than 90% of Verra’s popular rainforest offset credits are likely to be “phantom credits” that do not represent genuine carbon reductions.
The allegedly inaccurate estimated impact of the projects tied to Verra’s “Verified Carbon Units” stands to set up the companies relying on them for PR & legal issues. Lavazza, for example, has marketed its coffee pods as “carbon neutral” using one Verra-linked project in Peru that “stopped no deforestation,” according to the new report. At the same time, companies, such as Gucci, BHP, and Salesforce.com, have all used Verra offsets from another Peruvian scheme that allegedly “only avoided around one-tenth of the emissions it claimed.”
The Bigger Picture: While Verra “strongly disputes the findings” and argues that the researchers’ methodology has led to “incorrect” results, the situation is, nonetheless, the latest indication of the risks associated with an array of third-party initiatives and corresponding credentials in the sustainability/ESG segment.
Advertising in this realm, including claims about companies’ carbon footprints, in particular, has been complicated by increasing skepticism over – and in some cases, lawsuits centering on – heavily-relied-upon sustainability indexes and certifications.The HIGG Index, which fashion industry entities have used to measure and score their sustainability performance and the sustainability profile of their offerings, comes to mind, as it was at the heart of a lawsuit filed against Allbirds in 2021, in which the footwear brand was accused of peddling “false, deceptive and misleading” information, including about the carbon footprint of its products, which it used HIGG data to measure.
A Takeaway: There are risks that come with relying on industry programs, ratings, and rankings for sustainability attributes, ESG management expert Lawrence Heim says. “Companies should consider doing their own due diligence into industry ESG programs/solutions, make determinations about potential risks, and find ways to address any concerns/manage the risks.”
In Litigation Updates …
Deckers v. Walmart – Deckers has lodged a trade dress & patent infringement suit against Walmart with the C.D. Cal. court for allegedly co-opting the designs of its Hoka Recovery slide, Teva Hurricane sandal, and UGG furry Oh Yeah sandal (which it is selling under the “Kendall + Kylie” Jenner brand name) and Classic Ultra Mini boot.
Hermès v. Rothschild – Ahead of trial, the parties lodged motions in limine and submitted their proposed voir dire questions (and in Rothschild’s case objections to Hermès’ questions) and jury instructions. (They are all right here.)
Puma v. Brooks – An Indiana federal district court has granted Brooks’ request to change venue to the W.D. of Washington in Seattle, where the co. is headquartered. Puma lodged trademark & patent claims against Brooks in the S.D. of Indiana last year, alleging that Brooks sneakers infringe its “nitro” word mark & that Brooks’ “Aurora BL” shoe infringes one of its patents.
An Earnings Snapshot
LVMH – LVMH reported €79.2 billion ($85.9B) in revenue during 2022 and profits from recurring operations reached €21.1 billion, both up 23% YOY. One of the biggest takeaways: Louis Vuitton reached the €20 billion sales mark for the first time.
Ferragamo – The Italian fashion house reported revenue of €1.25 billion ($1.36B) for FY 2022, up 10.2% from €1.14 billion in 2021, despite a notable impact in Q4 by the Covid-19 resurgence in China.
And in a bit of deal-making news this week … Money keeps flowing into web3/metaverse and resale-centric ventures.
– Spatial Labs raised $10 million in seed funding. The web3 infrastructure & hardware company offers up digital twins to track physical items’ authenticity, origin, ownership history & real-time value.
– Emperia has raised $10 million to scale its effort to bring brands into the metaverse. The London-based company – which has already worked with brands like Dior, Ralph Lauren, Lacoste, etc. to create virtual stores – is looking to accelerate the adoption of “metaverse e-commerce.”
The Secondary Market …
– Cudoni has raised 7.5 million pounds ($9.3M) from eBay’s venture arm & existing investors to expand the services offered up by way of its London-based resale platform.
– Barcelona-based resale platform Wallapop has raised €81 million ($87.4M) in an extended Series G round, bringing its total funding over 8 rounds to €239.6 million.