Consumer protection class actions: the rise of the ESG claim

Class action plaintiffs are becoming more creative in their search for credible damages claims in relation to consumer products they believe have been manufactured, designed, or sold in a manner inconsistent with environmental, social, and governance (ESG) obligations or expectations. Recent cases in the U.S. and Canada paint a picture of an emerging and evolving landscape of consumer protection class actions which focus on ESG issues. 

Consumer protection class actions in the U.S.

The United States is a hotbed for consumer class actions involving ESG claims. A popular flavour of these cases involves “greenwashing” claims, which use consumer protection prohibitions on false and misleading statements as a vehicle for seeking damages for inflated statements about corporations’ sustainability practices.

For instance, in Earth Island Institute v. The Coca-Cola Company, the D.C. Court of Appeals recently overturned a lower court decision which had dismissed at the pleadings stage a proposed class action alleging that public statements made online by Coca-Cola about its sustainability initiatives constituted false and deceptive marketing because it uses single-use, non-recyclable plastics in its packaging¹. The appellate court reinstated the case, holding that aspirational statements alleged to be misleading in the aggregate (even ambiguous ones which are not contained within a single statement) can be plausibly actionable under D.C.'s consumer protection law. Coca-Cola provides the latest example of industry groups and consumers seeking redress for allegedly misleading ESG statements.

The trend arrives in Canada

ESG-focused consumer protection class actions are relatively novel in Canada despite a more plaintiff-friendly class action landscape.

Cases similar to Coca-Cola have only recently started to crop up in Canadian courts. The Superior Court of Québec recently authorized a class action against Dollarama on the basis that the reusable bags sold at checkout are labelled “recyclable”, when it is alleged that they are not, in fact, recyclable anywhere in Québec². In another example, proposed class actions are also pending against Keurig before the Federal Court and in Ontario and British Columbia, alleging its K-Cup coffee pods are not recyclable despite being marketed to consumers as though they are (for more on the Matter of Keurig Dr. Pepper Inc., read “Greenwashing” and disclosure liability under securities law: two views)³.

Scrutiny of international labour practices has also been targeted by ESG-centred class action litigation in Canada. In a proposed B.C. class action, Leaf v. Hershey Canada Inc., plaintiffs are seeking to certify a claim that various Hershey companies are misrepresenting their opposition to the use of child labour and slavery in the cocoa supply chain, despite allegedly facilitating and profiting from those activities⁴. Although the claim against the U.S.-based Hershey Company was dismissed on a jurisdictional challenge—and due to the plaintiff’s failure to plead that the U.S. entity made misrepresentations to Canadian consumers⁵—the claim is continuing against the other Hershey defendants.

Implications for advancing consumer claims

Framing ESG claims as misrepresentation class actions under consumer protection statutes is an attractive option for plaintiffs given (1) the broad interpretation of merchants’ obligations under those statutes; and (2) the low bar for class action certification and authorization in many Canadian jurisdictions. Compounding this problem for businesses, Hershey shows that in some cases Canadian entities can be sued in misrepresentation claims in Canada for misconduct carried out by their foreign affiliates. However, there are serious questions as to whether these kinds of cases lead to actual consumer redress, or serve only to draw attention to the plaintiffs’ issues of concern.

While we anticipate an uptick in the number of ESG-related consumer claims in Canada, it is not clear how plaintiffs would ultimately prove causation or the quantum of damages allegedly suffered by Canadian consumers in this type of claim. This lack of clarity can make settlement discussions difficult. In the coming years, we expect to see more substantive consideration of damages relating to ESG claims, which will provide valuable insight into the lasting impact these claims will have. Businesses should evaluate for risk pertaining to ESG-related representations made in manufacturing, packaging, marketing and throughout the sales process, as well as their disclosure and reporting practices.