Corporate Sustainability Disclosures in American Case Law: Purposeful or Mere “Puffery”?

Recent years have shown an uptick in lawsuits involving sustainability disclosures, or lack thereof, by companies. In the United States, litigation involving sustainability disclosures has primarily arisen in two statutory contexts: securities fraud (federal law) and consumer protection or consumer fraud (state and federal law). Essentially, these cases involve allegations that a company has either provided false and misleading information, or omitted information, about corporate sustainability practices. Misleading or omitted information may occur in the context of formal securities filings or less formal disclosures, such as sustainability or corporate social responsibility reports, human rights documents, employer codes of conduct, or ethics and integrity statements. Plaintiffs in both securities and consumer fraud cases must generally show that the misleading or omitted information at issue was “material” to the plaintiff and that the plaintiff relied upon that information (or lack thereof) when making an investment or purchasing decision.

In cases involving sustainability disclosures, there seems to be a difference in the latitude given to plaintiffs with respect to “materiality” and “reliance” based on at least one of three factors: (1) the statutory scheme and the type of interest the plaintiff seeks to protect (that is, investors’ versus consumers’ interests); (2) the location in which the sustainability-related disclosure occurs or should have occurred (that is, a formal securities filing versus a less formal sustainability statement); or (3) the form in which the sustainability disclosure is presented to the public, for example, whether information appears to be an affirmative statement of fact or an aspirational promise to engage in sustainable practices. Based on a close examination of existing U.S. case law, this Article takes the position that the third factor seems most important to judges when deciding if liability may be imposed in a sustainability case. As sustainability disclosure liability seems to stem from the form in which disclosures are presented, meaningful criteria are needed to help all stakeholders distinguish a “concrete” and “affirmative” sustainability disclosure from one that is merely “prospective” and “aspirational.”