Retailers beware, the Lululemon greenwashing lawsuit could be just the start

Retailers beware: the legal hit job on Lululemon, the world’s leading athleisure brand, because of alleged deceit regarding its environmental practices could well be the tip of the iceberg. No one is safe.

As reported by Inside Retail on July 19, Lululemon is being taken to court in a class action lawsuit in Florida, following a complaint lodged by environmental activist group Stand.earth with the Canada Competition Bureau. The Florida legal action was not an isolated strike: it was followed up on July 24 by a filing in Paris by Stand.earth with support from law firm Hausfeld & Co LLP, alleging that Lululemon’s ‘Be Planet’ campaign is, in a word, a sham.

Both the timing and the target of the legal actions are no accident: Lululemon is the official kit provider for the Canadian Olympic squad, which places it squarely in the limelight for the wrong reason at the wrong time.

Good at sermons

Stand.earth, among whose core planks is the elimination of fossil fuels and their replacement with renewables, is uncompromising in its attacks on successful companies that depend heavily on fossil fuels to manufacture and distribute their products, Lululemon among them.

Its rants against profitable corporations are epic, for example accusing fossil fuel companies on its website of “a colonizing worldview that leads them to drill, dig, and frack for oil, gas, and coal, devastate ecosystems, poison waters and people, subject frontline communities to violence, and speed up climate change.”

Among the heinous environmental crimes that Lululemon is alleged to have committed is a more than doubling of its greenhouse gas emissions since ‘Be Planet’ was introduced in 2020. Actually, in the Paris filing, it appears to refer to emissions data only through 2022 that showing an increase over the three-year period of 104 per cent. Meanwhile, Lululemon’s sales increased by 84 per cent, so emissions per unit of revenue through 2022 certainly looked to have increased.

That’s not a good look for a company like Lululemon, with its roots in yoga and healthy living. It was Lululemon, after all, that pioneered athleisure, a trend that has taken off spectacularly since the company was founded back in 1998. People like what Lululemon sells. It’s on the verge of becoming a US$10 billion annual revenue company, with sales having grown by 118 per cent since 2020, to US$9.6 billion by the end of last year.

In a sense then, Lululemon has become a victim of its own success. The ESG ‘rating’ system is set up so that greenwashing can flourish among companies that make things or that help move people and things around; it gives an advantage to technology companies that by their nature tend to have low carbon footprints. Woe betide you if you produce and sell something useful. Companies with the kind of involvement with health and wellbeing that Lululemon has should theoretically be ESG showpieces. Instead, it is being hoisted on its own petard.

‘Be Planet’ is inextricably tied to this ESG/DEI movement, which has taken on a life of its own and no one seems to know how to stop it. As one writer, Professor Paul Frijters, of the London School of Economics, remarked in a recent essay on ESG, “ESG originated at the level of the international and intellectual stratosphere and then grew, unchecked by tedious real-world constraints like scarcity and tradeoffs, as a kind of malignant joint venture between large government bureaucracies and large corporations.” That joint venture, Frijters continues, is a flourishing industry, “offering lucrative money-making opportunities for consulting companies, fund managers and assorted professionals who ‘help’ companies comply.”

ESG originated in a 2006 United Nations report and has steadily mushroomed with the voluntary adoption by private companies, formalised by the annual production of voluminous ESG reports. Governments first encouraged the voluntary steps taken by companies to report on their environmental compliance, and of course, this inevitably turned into regulations that have been steadily tightened, making compliance more expensive, and greenwashing more inevitable. Inevitable because measurement and verification are so difficult, so the system can be gamed easily.

Corporations in the EU are now compelled to report on ESG, as are many US companies with the Asia-Pacific region dutifully revving up. The increasingly onerous reporting costs are more easily absorbed by large companies, which is why they don’t make too much noise about it. Of course, that might change once the greenwashing lawsuits start to multiply.

Who else is in the firing line?

If Lululemon can be picked on so easily, the leadership of many other companies should be trembling in their boots.

Many Asian companies are piling into ESG reporting, partly because of more stringent mandating in countries such as Singapore and countries where the company has a presence. A good example is the Singapore-based ‘superapp’ Grab Holdings, which is listed on the Nasdaq.

There is a lot that is good about Grab and its competitors in the same industry. Grab and its competitors are highly visible from an ESG standpoint because they operate in the food delivery and ride-hailing businesses, which potentially cause significant environmental and human harm in the countries where they operate.

Grab’s green-helmeted motorcycle riders and big green boxes are as familiar on Asian roads as red double-decker buses are in London. But they are many times more dangerous than London buses and it’s a problem no one likes to talk about: the company’s business model, like those of other companies in the same industry, exposes its drivers and everyone else who shares the road with them to disproportionate risks.

This is because it uses technological solutions, rather than humans, to route drivers and schedule deliveries. This has the honorable intention of speeding up delivery times to customers. But commissions per delivery are thin, delivery times tight, and the need to make as many trips as possible to maximise income all provide drivers with an obvious incentive to drive riskily.

Yet Grab dodges the issue in its 60-page-long ESG report for 2023. The report also contains metrics on a variety of things, from greenhouse gas emissions to food packaging waste, that are hardly either measurable or verifiable.

On the road safety issue, Grab boasts about its excellent record of road incident prevention, which is completely at odds with the perception of anyone who goes out on the road in countries like Thailand, Vietnam, or Cambodia. It is also at odds with independent driver surveys, which document an astonishing number of accident involvements. That doesn’t even include moving violations (illegal stopping, running red lights, talking on the phone while riding, riding in the wrong direction, and making illegal U-turns).

The drivers are at risk of losing their jobs if they report the scrapes they get into, since Grab, in its official Code of Conduct, says that it has a zero-tolerance policy toward those who fail to follow road rules. This means that the company data on the number of accidents per ride, and the number of moving violations are shaky, to say the least.

The same is true with regard to measuring emissions and most other metrics, which lack the kind of precision and uniformity that disincentives making up numbers. But all companies must now play the game, to conform with regulations that don’t necessarily lead to desirable outcomes.

So Lululemon is by no means alone but now finds itself singled out for punishment for playing the same game that everyone else does. Should it find itself on the wrong side of the verdicts in this current spate of lawsuits, there may be no end to it. Retailers beware.

The post Retailers beware, the Lululemon greenwashing lawsuit could be just the start appeared first on Inside Retail Australia.