Companies like to highlight their commitments to combat climate change, support social justice, and produce more earth-friendly products. And this is for a good reason: consumers want to reward businesses that do good. A recent survey conducted by Porter Novelli/Cone found that 72 percent of consumers want to buy from companies that share their values, and 86% are more likely to purchase from a brand-driven company.
Environmentally conscious, consumers expect the brands they support to back up platitudes with action. And it can be hard to tell if the commitments and products touted during Earth Day are greenwashing, or exaggerating, a company's commitment to the environment. An ongoing benchmarking study by Engage for good 40 percent of Americans do not know where to find socially responsible products and services. Coincidentally, a recent study from consumer protection group ICEPN found that up to 40% of green claims may mislead or overstate their impact on the environment.
Becoming green
Like other global fossil fuel companies, Chevron has been working hard to update its image to better align with the public’s perception of the climate crisis. In 2007, it launched a multi-million dollar “Human Energy” campaign to portray itself as striving to solve the world’s energy crises through the power of human creative force.
The company has been investing in strengthening this earth-advocate persona ever since. Last month, the company announced a new “Climate Change Resilience” report highlighting its commitment to improving the environment. In response, Earthworks, Global Witness, and Greenpeace USA filed an FTC complaint against Chevron for unlawful, deceptive advertisements.
The complaint claims that Chevron is misleading consumers on the climate and environmental impacts of its operations. The complaint outlines direct violations of the FTC’s Green Guides, including advertising across TV and digital platforms that imply that:
Chevron’s business operations do not harm (and may help) the environment, ignoring numerous environmental disasters;
Chevron produces “ever-cleaner” or “clean” energy while spending less than 0.2% of its capital expenditures on renewable energy sources;
The complaint also addresses deceptive language used to mislead consumers. Examples including:
“Reducing emissions intensity” while continuing to increase overall oil and gas extraction and production.
Misrepresenting the benefits of biomethane, “renewable natural gas,” or “renewable diesel.”
As of now, Chevron does not detail how—or whether—it will transition its business away from fossil fuels. This is probably why it has not set targets to facilitate such a transition. In fact, Chevron had established a renewables business previously, from 2000, but cut its renewables operations back in 2014. The company was reported to have shelved biofuels work in 2010. Currently, Chevron does not have a ‘net-zero’ commitment or a commitment to align its activities with the temperature goals of the Paris Agreement.
Chevron in Ecuador: A toxic mess
Chevron has a history of causing environmental disasters around the world. Lately, the Texaco, which Chevron acquired, operations that polluted the Ecuadorian Amazon rainforest has been getting the spotlight. The company has yet to clean up the 16 billion gallons of toxic waste that Texaco dumped into local lakes and rivers of the Lago Agrio region from 1964 to 1990, poisoning the lands and waters of Indigenous and rural Ecuadorians.
In 2011, Ecuador courts ordered Chevron to pay $9.5 billion in damages to the Indigenous and rural Ecuadorians whose health suffered after decades of polluted air and water. Chevron abandoned the offending drilling outpost—and its waste pits of oil—that freely pollute their drinking water. Cancers of the stomach, liver, and throat became more common in the region, as did childhood leukemia. The Ecuadorian government was left to clean up the toxic mess on its own. Chevron took its assets and left the country.
To this date, Chevron has not paid the damages. In anticipation of an adverse ruling from the Ecuador courts, Chevron stripped its assets from the country. This forced the victims of the company's pollution to pursue Chevron around the world for restitution. It filed court actions in Argentina, Brazil, Canada, and the United States.
In 2018, the Ecuadorian government agreed to arbitration with an international tribunal in The Hague after not receiving payment. Chevron is claimed fraud by the environmental lawyer, Steven Donziger, and the Ecuadorian judiciary. The company also argued that Texaco spent $40 million cleaning up the area during the 1990s and signed an agreement with Ecuador in 1998, absolving any further responsibility. The court ruled in favor of Chevron, saying that the 2011 Ecuador Supreme Court ruling had been obtained through fraud, bribery, and corruption.
The oil giant now stands to be awarded hundreds of millions of dollars in costs by The Hague's Permanent Court of Arbitration.
An environmental law expert at Indiana University, Christiana Ochoa, was recently quoted as saying, “Certainly it’s very important to corporations like Chevron to protect themselves from liability from ecological harms. They’ve refused to apologize to the victims. They don’t want to show any vulnerability.”
Today, Donzinger has been temporarily stripped of his law license, lost his income, his passport, and is on house arrest, awaiting trial on criminal intent to invoke the attorney-client privilege to refuse to hand his computer cellphone over to the court in 2019. For this misdemeanor, the environmental lawyer has been confined for 20 months.
Chevron is invested in punishing Donziger. It has hired private investigators to track him, created a publication to smear him, and created a team of hundreds of lawyers to fight him. This winner-takes-all approach may backfire. “Millions of people are now learning about this case and Chevron’s abuse of the Ecuadorians who otherwise would not have known about it,” says Donziger.
The word has spread. Fifty-five Nobel laureates have demanded his release from home detention and that all charges against him be dropped. A coalition of 13 human rights and environmental watchdogs called on then-nominee attorney general Merrick Garland to investigate “disturbing legal attacks” on Donziger. Danziger himself has urged the DOJ to investigate allegations that Chevron and its lead lawyer Randy Mastro used witness bribery, false testimony, and fraud to target himself and the Indigenous communities of Ecuador. Even Greta Thunberg has tweeted about Donziger.
Chevron has denied any involvement in the criminal charges or the court’s decisions. It also denied withdrawing its assets from Ecuador.
In addition to Ecuador, people are also calling on Chevron to clean up pollution left behind in the Niger Delta, Nigeria. As recently as February 2021, Chevron spilled oil in Richmond, California—where nearby residents have suffered from health impacts due to air and water pollution.
Delaying action on climate change
Environmental groups say that they are using the FTC complaints against Chevron because greenwashing only delays action on improving our environment. In fact, the uncertainty of the long-term unit economics of Chevron’s core business makes innovation a key to its long-term success. Yet, the company has focused on streamlining its legacy business to make it less capital-intensive by cutting CAPEX and focusing on higher-margin oil & gas assets.
All the while, the world is changing. Demands from the transportation sector on the world's oil are decreasing, and the automotive industry is slowly transitioning towards electrification. Green energy and alternatives to fossil fuels, like hydrogen, are becoming increasingly competitive against oil & gas. If it does not act soon, Chevron may find itself playing catch-up.
Why has Chevron focused on maintaining the status quo? Chevron's generous dividend makes it attractive to income investors in today’s low-interest-rate environment. To maintain this image, the company borrowed heavily to pay its dividends after the collapse in oil prices last year led to tight refining margins.
Greenwashing may also give investors a skewed view of the long-term value of the company’s investments. Especially as Environment, Social, and Governance (ESG) investment strategies are becoming more popular, with Blackrock and Morgan Stanley entering the arena in a major way. Proponents tout that ESG investments delivering similar returns as, if not outperform, traditional ones with less risk.
In the end, a combination of regulatory and investor pressures may force Chevron and its oil and gas brethren to start diversifying to keep its investors happy. The Biden administration is considering creating new climate change units at financial agencies like the Treasury Department, Federal Reserve, Commodity Futures Trading Commission, and the Securities and Exchange Commission.
Moving on and spotting it
So, how can we spot greenwashing? Luckily, multiple environmental watchdogs have created programs to do just that. ClientEarth has compiled the results of its greenwashing investigations into some of the world's biggest fossil fuel companies in its Greenwashing Files. Here, consumers can see ads that do not match up to reality. Consumers can also check Climate Action 100+ to see their Net-Zero Company Benchmark assessments that measure how they drive the global net-zero emissions transition. If you are not sure, check.
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Sources:
Carrington, Damian. ‘A great deception’: oil giants taken to task over ‘greenwash’ ads, April 19, 2021. https://www.theguardian.com/business/2021/apr/19/a-great-deception-oil-giants-taken-to-task-over-greenwash-ads (@dpcarrington)
Dominguez, Raquel. Why we’re holding Chevron accountable for its greenwashing campaigns. EarthWorks blog, March 22, 2021
Ebbs, Stephanie & Schulze, Elizabeth. Biden administration faces increasing calls to stop companies from 'greenwashing'’ ABCNews April 8, 2021. https://abcnews.go.com/Politics/biden-administration-faces-increasing-calls-stop-companies-greenwashing/story?id=76907048 (@stephebbs @eschulze)
Lerner, Sharon. Law Students Denounce Chevron’s Law Firm Over Steven Donziger Case. The Intercept. April 7, 2021. https://theintercept.com/2021/04/07/chevron-steven-donziger-law-gibson-dunn-boycott/ (@fastlerner)
Lieber, Ron. A New Way to Invest for the Vengeful and the High-Minded. New York Times, December 4, 2020. https://www.nytimes.com/2020/12/04/your-money/esg-investing-direct-index-blackrock-morgan-stanley.html (@ronlieber)
Milman, Oliver. This Lawyer Went After Chevron. Now He’s 600 Days Into House Arrest. Mother Jones, March 31, 2021. https://www.motherjones.com/environment/2021/03/lawyer-steven-donziger-went-after-chevron-now-600-days-house-arrest/ (@olliemilman)
Company Assessment: Chevron Corporation. Climate Action 100 website. As of January 22, 2021. https://www.climateaction100.org/company/chevron-corporation/
Sawyer, S. Human energy. Dialect Anthropol 34, 67–75 (2010). https://doi.org/10.1007/s10624-009-9122-9
Wealth Insights, Chevron: Sacrificing Its Future For Its Dividend. Seeking Alpha, April 17, 2021. https://seekingalpha.com/article/4419572-chevron-sacrificing-future-for-dividend
[PRESS RELEASE] Accountability groups file first of its kind FTC complaint against Chevron for misleading consumers on climate action, EarthWorks, March 16, 2021