Page 21 - Katten Kattwalk and Kattison Avenue - Winter 2026 - Issue 5

entity (the issue regarding the treatment of RECs is Society must also rely on these mechanisms to ensure
being debated as part of upcoming revisions to the that truthful signals will permeate the market and
Greenhouse Gas Protocol). reward the “right” behaviors. However, there are
many underlying questions that are slowing down
Factor 4: Concerns about offset validity
compliance. For example, many plaintiffs are reaching
That leads us to concerns about offset validity, which for defendants who should not be sued, potentially
Katten has written about before. In a nutshell, the distorting the signals sent to the rest of the industry
gold rush for offsets led to the generation of offsets and leading to the phenomenon of “greenhushing.”
of dubious value. That said, offsets, if real and verifi- Where the costs of defending meritorious claims
able, should be valid. The Biden Administration even outweigh potential sales benefits from making them,
issued an unusual statement saying so. Although this companies may choose to refrain from making the
statement has not been formally rescinded, one won- claims at all.
ders whether the White House would back it today.
All that said, the European Union proposed in 2026
Factor 5: Do carbon claims still move the needle? to ban all “climate neutrality” claims. This directive
has been paused, but uncertainty remains regarding
Greenwashing litigation is on the rise in the
United States, and climate-related claims feature how businesses in the European Union should handle
carbon disclosures. There are legitimate concerns
prominently.
being voiced regarding whether countries with
Much of today’s greenwashing litigation stems smaller emissions should even promote “net zero.”
from societal decisions to employ market-based
forces rather than command-
and-control regulation to achieve
environmental improvements. Market-
based mechanisms are remarkably
successful. However, following them
may occasionally be painful. In a
market-based paradigm, the judicial
branch is important. Moreover, there
are limitations on the messages that
businesses take from, and changes
in behavior, based on ad hoc court
decisions, that vary by jurisdiction.

The market-based solution goes partly
like this: advertisers will truthfully
advertise environmental advantages
of their products when compared
to others. Consumers will vote with
their purchases, rewarding truthful
claims. The most meaningful checks
on malfeasance will come from court decisions, In a world where net-zero claims seem to be less
regulatory false advertising investigations and impactful, is the risk still worth making such a claim?
consequent voluntary discontinuances of challenged Certainly, there are values served besides generating
claims. The hope is that other advertisers will learn bottom-line profits by publicly stating a net-zero
from the hardships of those dragged into court or commitment, but defending that statement against
investigated and adjust their behavior accordingly. questions that can be merited or not, may be costly.

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