Greenwashing Risks in Brazil's Carbon Market: Legal Protection

Key Takeaway

Greenwashing liability for carbon credit buyers is rapidly expanding across multiple jurisdictions. In Brazil, the Consumer Defense Code (CDC, Law 8.078/1990), the Environmental Crimes Law (Law 9.605/1998), and CVM securities regulation expose buyers and sellers to civil, administrative, and criminal penalties for misleading environmental claims. Internationally, the EU’s Green Claims Directive, SEC climate disclosure rules, and private litigation create additional risk for companies making offset-based carbon neutrality claims. The defense: rigorous due diligence, conservative claim language, and high-integrity project selection.

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What Constitutes Greenwashing in Carbon Markets

Greenwashing in the carbon context encompasses several categories:

Category	Example	Legal Risk
Inflated credit quality	Claiming credits represent “permanent removal” when they are avoidance-based	Consumer protection, securities fraud
False carbon neutrality	Claiming “carbon neutral” based on credits that lack additionality	Consumer protection, advertising law
Double counting	Claiming the same emission reduction for both corporate target and voluntary retirement	Regulatory sanctions, contractual breach
Misleading marketing	Marketing products as “green” or “sustainable” based solely on offset purchases	Consumer protection (CDC), EU UCPD
Non-disclosure of risks	Omitting permanence, reversal, or integrity risks in investor communications	Securities regulation (CVM, SEC)
Cherry-picking	Reporting only scope 1/2 offsets while ignoring scope 3 emissions	ESG reporting standards, auditor liability

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Brazilian Legal Framework for Greenwashing

Consumer Defense Code (CDC — Law 8.078/1990)

The CDC is Brazil’s primary consumer protection statute. Art. 37 prohibits misleading advertising (publicidade enganosa) — defined as any advertising that is entirely or partially false, or that by omission misleads the consumer about the nature, characteristics, quality, quantity, properties, origin, price, or any other aspect of a product or service.

Provision	Application to Carbon
Art. 37 (1)	False claims about carbon credit quality, additionality, or impact
Art. 37 (3)	Omissions that mislead — e.g., failing to disclose reversal risk
Art. 38	Burden of proof on the advertiser to demonstrate claim accuracy
Art. 56-60	Penalties: fines, product recall (analogous: claim retraction), suspension of advertising
Art. 12-14	Strict liability for defective products/services — no fault required

Key point: Under Art. 38, the burden of proof falls on the company making the environmental claim. If challenged, the company must prove its carbon neutrality or sustainability claim is accurate and substantiated.

Environmental Crimes Law (Law 9.605/1998)

Art. 69-A criminalizes the presentation of false or misleading environmental information to government authorities. While primarily aimed at environmental licensing fraud, it extends to environmental claims made in official corporate filings.

Provision	Penalty
Art. 69-A	Detention of 1-3 years + fine for presenting false environmental data to authorities
Art. 69-A (1)	Detention of 3-6 years if the false information causes environmental damage or impedes regulatory action

CVM Regulation (Securities)

For publicly traded companies or companies accessing Brazilian capital markets, CVM requires accurate disclosure of material environmental risks and claims. CVM Resolution 59/2021 requires disclosure of ESG-relevant information that may materially affect investment decisions.

False or misleading environmental claims in CVM-regulated disclosures expose the company to:

• Administrative sanctions (fines, trading suspensions)
• Civil liability to investors
• Criminal liability for market manipulation (Law 6.385/1976, Art. 27-C)

Procon and SENACON Enforcement

State-level consumer protection agencies (Procon) and the national consumer protection secretariat (SENACON) actively investigate greenwashing complaints. Recent enforcement actions have targeted companies in the cosmetics, food, and energy sectors for unsubstantiated environmental claims.

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International Greenwashing Liability

Brazilian carbon credit buyers face greenwashing risk not only under Brazilian law but under the laws of the jurisdictions where they market their products:

European Union

Regulation	Requirement
Green Claims Directive (proposed, expected 2025-2026)	Environmental claims must be substantiated by scientific evidence; carbon offset claims face specific restrictions
CSRD (Corporate Sustainability Reporting Directive)	Mandatory disclosure of offset use, quality, and limitations
Unfair Commercial Practices Directive	Existing prohibition on misleading environmental claims
Empowering Consumers Directive (2024/825)	Prohibits generic environmental claims without evidence; “carbon neutral” claims based on offsets banned unless substantiated

United States

Risk	Detail
FTC Green Guides	Provide guidance on environmental marketing claims; offset claims must be substantiated
SEC Climate Disclosure	Requires disclosure of offsets used in climate targets
State AG enforcement	California, New York AG offices actively investigating greenwashing
Private litigation	Class action risk for consumer-facing companies making offset-based claims

ICVCM and VCMI Standards

The Integrity Council for the Voluntary Carbon Market (ICVCM) Core Carbon Principles (CCPs) and the Voluntary Carbon Markets Integrity Initiative (VCMI) Claims Code provide non-binding but increasingly influential standards:

• CCP-labeled credits: Meeting additionality, permanence, and co-benefit standards
• VCMI Silver/Gold/Platinum claims: Tiered system for corporate offset claims based on decarbonization progress + offset quality

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Risk Scenarios for Carbon Investors

Scenario 1: REDD+ Integrity Challenge

An international company purchases 500,000 REDD+ credits from a Brazilian Amazon project and claims “carbon neutrality” in its annual report.

Risk: Media investigation reveals the project’s deforestation baseline was inflated — the protected forest was not under credible threat. The credits lack genuine additionality.

Consequences:

• Reputational damage (media coverage)
• Consumer protection complaints (CDC Art. 37)
• Securities regulation scrutiny (CVM, SEC) if publicly disclosed
• Potential class action in home jurisdiction
• Credit write-down (financial loss)

Prevention: Conduct independent due diligence beyond certification standard compliance. Verify deforestation baseline against INPE PRODES/DETER satellite data. Obtain third-party credit rating (BeZero, Sylvera). Use conservative claim language (“contributes to our climate goals” rather than “carbon neutral”). See REDD+ due diligence checklist.

Scenario 2: Double Counting Under Article 6

A company purchases credits from a Brazilian project for voluntary retirement. Brazil also counts the same emission reduction toward its NDC without applying a corresponding adjustment.

Risk: The same emission reduction is claimed twice — by the company and by Brazil. This constitutes double counting under Paris Agreement rules.

Consequences:

• ESG audit flags double counting
• VCMI Claims Code non-compliance
• Reputational risk if reported

Prevention: Clarify in the ERPA contract whether credits are for voluntary use (no corresponding adjustment needed) or for Article 6 compliance (corresponding adjustment required). For voluntary use, document that the company’s claim does not overlap with Brazil’s NDC accounting.

Scenario 3: Reversal Event

A company purchases REDD+ credits, retires them, and claims the emission reductions in its GHG inventory. Subsequently, the protected forest is destroyed by fire.

Risk: The emission reductions have been reversed. The company’s historical claims are now invalid unless replacement credits are sourced.

Consequences:

• GHG inventory restatement
• ESG reporting correction
• Buffer pool exhaustion (credits may not be replaced)
• Financial loss if replacement credits must be purchased at higher price

Prevention: Purchase credits with adequate buffer pool provisions. Include reversal event provisions in the ERPA. Consider credit replacement insurance. Diversify credit portfolio across multiple projects and biomes.

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Due Diligence Framework for Greenwashing Protection

Level	Check	Purpose
Project level	Independent additionality assessment	Verify credits represent real emission reductions
Project level	Satellite imagery analysis (PRODES/DETER)	Verify deforestation baseline
Project level	Third-party rating (BeZero, Sylvera)	Independent quality assessment
Project level	Community consultation verification	Confirm FPIC and benefit sharing
Contract level	ERPA review	Ensure quality warranties and delivery guarantees
Corporate level	Claim language review	Ensure marketing claims are defensible
Corporate level	VCMI Claims Code alignment	Follow best-practice claim framework
Corporate level	Legal jurisdiction analysis	Assess exposure under all applicable laws

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Defensive Claim Language

Avoid	Use Instead
”Carbon neutral"	"We have invested in high-quality carbon projects equivalent to our measured emissions"
"Zero emissions"	"Net-zero aligned: reducing emissions X% and investing in verified removals for the remainder"
"This product offsets its footprint"	"Purchase of this product supports [specific project] reducing [specific volume] of emissions"
"100% green"	"This product meets [specific standard/certification]"
"Offsetting our impact"	"Contributing to emission reductions through verified carbon projects while pursuing absolute reductions in our operations”

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Building a Defensible Offset Strategy

Step 1: Prioritize Absolute Emission Reductions

The strongest defense against greenwashing claims is demonstrating that offsets supplement — not replace — genuine decarbonization efforts. Companies should:

• Set science-based targets (SBTi) for scope 1, 2, and 3 reductions
• Document annual emission reduction progress
• Use offsets only for residual emissions that cannot be eliminated through operational changes
• Follow the VCMI Claims Code hierarchy: reduce first, then offset

Step 2: Select High-Integrity Credits

Quality Indicator	Minimum Standard
Certification	Verra VCS or Gold Standard (minimum)
Third-party rating	BeZero BBB+ or Sylvera equivalent
Co-benefits	CCBS certification or SDG labeling
Additionality	Demonstrated under current (not legacy) methodology
Permanence	Buffer pool adequate; monitoring active
Community engagement	FPIC documented; benefit-sharing in place

Step 3: Document Everything

Maintain a defensible record including:

• Due diligence reports for every project from which credits are purchased
• ERPA contracts with quality specifications and delivery warranties
• Third-party ratings and verification reports
• Satellite monitoring data (for nature-based credits)
• Community consultation records
• Annual inventory of credits purchased, retired, and claimed

Step 4: Use Conservative Language

See the defensive claim language table above. Have all public communications reviewed by legal counsel before publication.

Step 5: Engage Proactively with Standards

Align corporate claims with recognized frameworks:

• VCMI Claims Code: Tiered system (Silver, Gold, Platinum) based on decarbonization progress
• ICVCM Core Carbon Principles: Project-level quality standard
• GHG Protocol: Inventory methodology
• SBTi: Science-based target setting
• CSRD/ESRS: EU reporting standards (if applicable)

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Case Examples: Greenwashing Enforcement Actions

Example 1: EU — Airline Carbon Neutrality Claims

Multiple European airlines were challenged by consumer groups for advertising “carbon neutral” flights based on voluntary offset purchases. The Dutch Advertising Standards Authority (RCC) ruled that the claims were misleading because: (a) offsets do not eliminate emissions; (b) consumers were not informed about offset quality limitations; (c) the “carbon neutral” label implied zero environmental impact.

Lesson: Avoid absolute claims (“carbon neutral,” “zero emissions”) when using offsets. Use qualified language specifying what the offset achieves.

Example 2: Brazil — Consumer Protection Investigation

SENACON opened an investigation into a Brazilian consumer goods company’s “green” product line, alleging that the company’s environmental claims were not adequately substantiated. The investigation was triggered by a consumer complaint, and the company was required to provide evidence supporting every environmental claim on its packaging.

Lesson: The burden of proof falls on the company making the claim (CDC Art. 38). Maintain documentation that can be produced within 30 days of a regulatory request.

Example 3: US — Class Action Against Offset Claims

A US class action targeted a major consumer brand for marketing products as “sustainably sourced” based partly on carbon offset purchases. The plaintiffs alleged that the offsets did not deliver the claimed emission reductions (based on academic studies questioning the project’s baseline). The case settled for undisclosed terms.

Lesson: Private litigation risk is real. US class action plaintiffs’ firms actively seek greenwashing targets. The cost of settlement often exceeds the cost of implementing a strong due diligence program.

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Frequently Asked Questions

Can I be sued in Brazil for greenwashing if my company is based abroad? Yes, if your products or services are marketed to Brazilian consumers. The CDC applies to any advertising directed at the Brazilian market, regardless of the advertiser’s domicile.

Does carbon credit certification (Verra, Gold Standard) protect against greenwashing claims? Certification reduces risk but does not eliminate it. Certification standards verify project-level compliance but do not validate the buyer’s marketing claims. A company can hold legitimate credits and still make misleading claims about what those credits achieve.

What is the penalty for greenwashing in Brazil? Under the CDC: fines up to BRL 10 million (SENACON), advertising suspensions, and mandatory corrective advertising. Under Law 9.605/1998: detention of 1-6 years. Under CVM: administrative sanctions and potential criminal prosecution.

Should I stop buying carbon credits because of greenwashing risk? No — carbon credits from high-integrity projects are a legitimate and important tool for climate action. The risk lies not in purchasing credits but in making unsubstantiated claims about what they achieve. Buy good credits, make conservative claims, document everything.

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Why ZS Advogados

Greenwashing risk mitigation requires legal counsel at the intersection of Brazilian environmental law, consumer protection, and international ESG regulation. ZS Advogados — founded by the first American admitted to the Brazilian Bar (OAB/SP 351.356) — advises on project-level due diligence, ERPA contract protections, and corporate claim compliance across Brazilian and international frameworks.

See our REDD+ legal guide for project-level due diligence requirements, and our foreign investment guide for the full regulatory picture.

“The strongest defense against greenwashing is not better marketing — it is better due diligence and conservative claims.” — ZS Advogados

Schedule a consultation to discuss greenwashing risk management for your carbon portfolio.