As regulatory and reputational pressures mount, in-house legal teams are finding themselves at the centre of a growing storm around green claims. What was once the remit of marketing or sustainability teams is now a material legal risk—with consequences that span enforcement, litigation, and investor confidence. For in-house counsel, the challenge lies not only in ensuring compliance but also in shaping internal governance frameworks that align environmental messaging with legal and ethical obligations.
Regulators Are Watching—And They Want Evidence
UK and EU regulators have significantly sharpened their focus on environmental claims. The Competition and Markets Authority (CMA) continues to enforce its Green Claims Code, investigating sectors including fashion, travel, and fast-moving consumer goods. The EU’s forthcoming Green Claims Directive will introduce mandatory third-party verification for certain claims, forcing businesses to rethink how they substantiate eco-statements.
In the US, the Federal Trade Commission (FTC) is revising its Green Guides to reflect modern environmental terminology and address ambiguous claims like “carbon neutral” and “net zero.” State-level enforcement is also accelerating, particularly in industries where claims of sustainability are often contradicted by practice.
In-house counsel must now treat environmental claims with the same legal caution as financial statements. Boilerplate language in marketing, packaging, and investor disclosures may no longer be defensible. The legal team’s role is to ensure that any green claim—whether made on a website, in a supplier agreement, or in an ESG report—is evidence-based, verifiable, and consistent across channels.
AI Is a Double-Edged Sword in ESG Compliance
As businesses digitise their ESG efforts, artificial intelligence is emerging as both a risk and a resource. In-house legal teams are starting to rely on AI tools for contract analysis, supply chain audits, and marketing review. Natural language processing (NLP) can scan for non-compliant language or flag unsubstantiated claims, while ESG data platforms use machine learning to identify misalignments between public commitments and operational data.
However, AI can also generate content—including environmental claims—without full context or legal oversight. If your marketing or ESG function uses generative AI to draft copy or sustainability reports, the legal department must assess and sign off on those claims just as they would any traditional communication. Establishing clear controls over AI-generated materials is now part of legal’s risk management mandate.
From Risk Awareness to Risk Exposure: Greenwashing Litigation
The litigation landscape around greenwashing is evolving rapidly. Shareholder activism, class actions, and regulatory investigations are becoming more common, particularly in the US. In Europe, NGOs and consumer groups are increasingly using legal mechanisms to challenge misleading environmental claims.
For in-house counsel, the risk is no longer theoretical. A single poorly worded statement about recyclability, emissions, or product sourcing can trigger an investigation or a lawsuit. This is especially true in industries under ESG scrutiny, such as energy, fashion, finance, and food production.
The reputational fallout is equally critical. Accusations of greenwashing can lead to lost customer trust, increased scrutiny from institutional investors, and internal morale issues—particularly if employees believe corporate values are being undermined. A proactive legal approach is not just about compliance; it’s about maintaining the integrity of the company’s brand and governance culture.
Building Internal Structures for Legal Oversight
In-house legal teams should lead the effort to embed structured ESG oversight across the organisation. This means establishing clear sign-off processes for environmental claims, working closely with marketing and sustainability teams, and ensuring that supply chain agreements include enforceable provisions on sustainability data and verification.
Where AI tools are used, legal must implement a “human-in-the-loop” model to oversee outputs and flag potentially non-compliant statements. Training programs can also help frontline teams understand where legal thresholds lie and when to escalate.
Finally, legal departments should stay ahead of fast-moving regulatory developments. Both UK and US regimes are evolving, and in-house teams will increasingly be expected to advise on how these rules interact with global ESG strategies. Greenwashing is no longer a marginal issue—it’s a headline risk, and legal counsel are key to managing it.
