Companies Claiming “Carbon Neutral” Status While Using Carbon Offsets Seeing Rise in Lawsuits


You hear about it a lot these days. Global warming. Climate change. We are turning up the heat on the planet. If we do not address and take steps to resolve the problem, future generations will suffer greatly. The response has been a massive effort worldwide to reduce the carbon emissions released into the atmosphere.

Companies are given a carbon emissions score known as a footprint and are required or encouraged to work toward reducing it. Being ‘carbon neutral’ is a status that companies like to be able to assert. It is good for business to be green, and companies are quick to leverage their compliance.

As officially recognized, carbon neutral status is a numbers game. You achieve the numbers, and you get the status. But recent lawsuits allege that companies are misleading the public into thinking the they have reduced their own carbon emissions when that may not be the case.

What it Means to be Carbon Neutral

A carbon-neutral company is one that is technically removing as much CO2 from the atmosphere as it is emitting CO2 into it. Achieving carbon neutrality does not necessarily mean a company has reduced its own carbon emissions. A company need only reduce equivalent carbon emissions somewhere else in the world in order to neutralize the effect of its own emissions.

Carbon neutral is a subset of net zero. Net zero is the same concept but applies on a larger scale to the neutralizing of all greenhouse gases emitted into the atmosphere. Greenhouse gases also include methane, nitrous oxide, and other hydrofluorocarbons.

How Companies Can Reduce Carbon Footprints

A company’s carbon footprint is measured in terms of tons of CO2 output. Companies can reduce carbon emissions directly by committing to business practices that produce less CO2 emissions. They can also purchase offset credits for effectively reducing emissions by investing in projects and practices promoting the reduction of carbon emissions.

Offset credits can be purchased from either voluntary or compliance marketplaces. Carbon offset projects must meet certain standards and be verified or certified by independent third-party organizations. Two important aspects of determining the validity of a carbon offset are whether it provides additional carbon reduction that would not otherwise occur and whether the reduction is permanent and cannot be released back into the atmosphere upon the occurrence of some event.

Allegations of False Claims of Carbon Neutrality

The Federal Trade Commission (FTC) does not want companies making green claims that are false or could be misleading to consumers. Greenwashing is the term used to describe a company’s practice of representing itself as being more environmentally friendly or compliant than it actually is.

The FTC’s Green Guides provide guidance to companies that want to make environmental claims in their advertising. A company cannot imply an offset reduces current CO2 emissions when the reduction will not take place within two years. It must be ‘clearly and prominently’ disclosed when a carbon offset will reduce a company’s carbon emissions two or more years in the future. It is also deceptive to claim or imply reduced CO2 emissions using offsets when the reductions are required by law.

The problem with companies claiming to be carbon neutral is that consumers may interpret the term to mean all carbon emissions associated with a product have been eliminated. Two recently filed class action lawsuits indicate there may be a consumer misperception of what it means when a company claims to be carbon neutral.

In October of 2022, a class action lawsuit was brought against Danone Waters of America – the makers of Evian bottled water – which is distributed with the claim ‘carbon neutral’ on the label. The lawsuit alleges that ‘reasonable consumers’ would construe carbon neutral to mean the product is manufactured sustainably. The company is accused of misleading consumers because the manufacturing process does generate CO2 emissions, and the carbon offsets purchased to attain neutrality are not actively reducing carbon emissions.

In May of 2023, a class action lawsuit was brought against Delta Airlines, accusing the airliner of grossly misrepresenting the environmental impact of its business operations by proclaiming itself as the ‘world’s first carbon-neutral airline’. The complaint specifically challenges the quality of the offsets purchased by Delta and says the company misstated the carbon reduction provided by the offsets, all the while continuing to release significant CO2 into the atmosphere. For more information on emissions litigation and environmental law, contact MehaffyWeber.