SEC Continues to Focus on “Greenwashing”
The SEC continues to go after companies that make inaccurate statements about the sustainability or environmental impact of products or practices — so called “greenwashing.” The most recent example is the hot water in which Keurig Dr Pepper Inc. found itself.
The SEC charged Keurig with making inaccurate statements in its annual reports for fiscal years 2019 and 2020 regarding the “recyclability of its K-Cup single use beverage pods.” Keurig’s annual reports for 2019 and 2020 stated, “The new pods are made of polypropylene #5 plastic, a material that is accepted curbside for recycling by many communities, and we have conducted extensive testing with municipal recycling facilities to validate that they can be effectively recycled.” But, according to the SEC, “Keurig did not disclose that two of the largest recycling companies in the United States had expressed significant concerns to Keurig regarding the commercial feasibility of curbside recycling of K-Cup pods at that time and indicated that they did not presently intend to accept them for recycling.” The SEC Order found that “[b]y not including th[e] additional information, Keurig’s statements about the conclusion to be drawn from the testing concerning recyclability of pods were incomplete and therefore inaccurate,” in violation of Section 13(a) of the Securities Exchange Act of 1934 and Rule 13a-1. Further emphasizing the importance of this information, the SEC Order referenced research by a Keurig subsidiary, which found that “for certain consumers, environmental concerns were a significant factor … considered when deciding whether to purchase a Keurig brewing system.”
Keurig settled the SEC’s charges, agreeing to pay a $1.5 million civil penalty, without admitting or denying the SEC order’s findings.
The SEC’s John T. Dugan, Associate Director of the Boston Regional Office, stressed the importance that public companies provide accurate information in their reports: “When a company speaks to an issue in its annual report, they are required to provide information necessary for investors to get the full picture on that issue so that investors can make educated investment decisions.”
This action against Keurig is broadly consistent with the SEC’s focus on public companies’ disclosures about climate and ESG (Environmental, Social, and Governance) issues. To that end, in 2021, the SEC created its Climate and ESG Task Force in the Division of Enforcement. When the Task Force was announced, Acting Chair Allison Herren Lee emphasized the importance of these issues: “Climate risks and sustainability are critical issues for the investing public and our capital markets.”
If you would like to speak to a member of the Constantine Cannon whistleblower lawyer team to learn more about the SEC Whistleblower Program, or other programs for Environmental Whistleblowers, please do not hesitate to contact us for a free and confidential consultation.