In response to an egg company's lawsuit, the company said its products "value animals", which raises the question: What standards can investors and consumers use?

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Vital Farms stated on its website that its eggs and butter are “delicious and ethical foods that you don’t need to question.”

But the lawsuit filed against the company on May 20 alleges that Vital Farms' marketing misled consumers and investors into believing that they are supporting a company that is more ethical and humane than it actually is. Vital Farms responded that it operates in an ethical and humane manner and has always been transparent about its practice of raising hens to lay eggs.

But the lawsuit filed on behalf of a group of consumers who believe they were deceived by Vital Farms offers a broader view for investors in companies seeking to invest money in environmentally conscious business practices. What criteria does an investment need to meet to meet the environmental, social and governance screening called ESG?

Any company that claims to be operating in an ethical manner should be able to prove that its claims are true or face charges of greenwashing, a term that implies deception.

But it is not always clear. Can a fossil fuel company that has made progress in investing in renewable energy and has done more than its competitors can advance? Are there problems with the human resource practices of solar companies? Should investors require a company that claims to be ethical to be pure and consistent in everything it does, or is a growth company just becoming too complex to be completely consistent?

"Investors are responsible for our work and research," said Cheryl Smith, an economist and portfolio manager at Trillium Asset Management, which manages $4.3 billion in assets and focuses on companies that are socially responsible. "When it comes to seeking investments that are sustainable, responsible, and consistent with whatever principles you are trying to express, the real key is to conduct due diligence on the investment."

Attorney Richard Stone of Jupiter Island, Florida, and the Pet Friendly Litigation Department argued in their lawsuit that Vital Farms’s treatment of chickens is inconsistent with the company’s advertising, giving the impression that its chickens are in Wander around freely and live a comfortable life. The lawsuit argued that the image allowed the company to charge a premium for its eggs, and the company went public in August at a valuation of US$1.3 billion (it has since fallen to approximately US$845 million).

"Our goal is to make advertising and marketing correct," Mr. Stone said. "Vital Farms are the darlings of the ESG movement. The only difference between them and Costco eggs is that they allow chickens to eat grass. There are still too many chickens and too few aisles outside."

The lawsuit outlines Vital Farms' practices, which are common among other egg producers, but it says it is unethical. The lawsuit alleges that the company cuts the beaks of the chickens so that they do not peck at each other and obtain chicks from the hatchery that kill inedible male chicks that do not lay eggs and sell the hens for slaughter when they appear. Already 18 months old.

Vital Farms said in a statement that it intends to defend itself against these allegations and that its practices have been independently audited.

The statement said: "We are transparent about what happens to the male chicks and what happens after the hens lay their eggs." "As for the industry standard practice of inactivating the tips of the hens' beaks, this is not done to harm the birds, but to protect them. "It added: "We are happy to provide products that value animals, including providing hens with a more meaningful life than the confinement faced in the industrialized food system."

Vital Farms spokeswoman Nisha Devarajan refused to go beyond the scope of the statement on the grounds of the lawsuit, and also refused to allow the executives mentioned in the lawsuit to talk.

What investors can do involves the same type of due diligence they do on any investment, just through a sustainable perspective. Doug Heske, CEO of Newday Impact, who manages a $250 million sustainability strategy, said that the company not only looks at how the company treats its shareholders, but also looks at everyone who contributes to everything the company does.

"For us as an organization, most companies that act in a responsible manner have a common thread that is rooted in long-term decisions and strategies," he said. "This is the driving force for returns. There is no perfect listed company."

Investors can also look for any shareholder actions.

Timothy Smith, head of ESG shareholder engagement at the wealth management company Boston Trust Walden, said: “Look at the scope of the shareholder resolutions submitted and urge changes in policies or disclosures.”

Victor Zhang, chief investment officer of American Century Investments, an asset management company, said that after investing, investors need to check regularly to ensure that the company's ESG practices remain unchanged. He said that it is usually easier to monitor and supervise the green washing actions of large companies than smaller niche companies.

"For many years, we have always believed that ESG investment should not only be solved by creating ESG products. This has always been our strategy," Mr. Zhang said. "The longest, feasible, and sustainable way to influence ESG change is through integration. This helps solve the problem of green bleaching."

Mr. Zhang said that investors need to be more involved in the companies they invest in, and if problems arise, they do not necessarily have to sell their positions. "Excluding the company achieved its goal very early," he said. "But as more and more companies want to improve, it is our responsibility as investors to have a deep understanding of the internal situation."

David Kirkpatrick, managing director of SJF Ventures, was one of Vital Farms' early investors, when the company was still a private company. He would not comment specifically on the allegations in the lawsuit, but disputed the claim that Vital Farms was guilty of green washing.

"It's ironic because there are a lot of egg companies out there that are doing terrible things," he said. "When you buy Vital Farms, you can enter a code to see where the hens are. It's a bit like attacking solar companies instead of ExxonMobil because they are doing things you don't like."

Mr. Kirkpatrick said that his company takes a pragmatic view of socially responsible investment, focusing on supporting companies that can have a greater impact beyond niche markets.

"We work in the existing economy," he said. "Some groups say you must be completely pure. We are more practical. We asked, how do you build a big business that is moving in the right direction?"

Usually this is a comparative exercise to understand which companies adhere to the standards they claim and which do not.

Anthony Eames, head of responsible investment strategy at Calvert Research & Management, one of the earliest ESG investment companies, said that part of his analysis was to compare a company with its peers. He said it is relatively easy to pick out stars with strategies, missions and values. Likewise, it is easy to spot laggards. The middle ground is more challenging.

"You have to pay attention to companies that claim to be leaders, for example, in terms of environmental performance, but they may underperform in the transition to a low-carbon future," he said. "If you look at what they are saying on the surface, it might sound good. But you need to compare the company with its peers."

When something goes wrong, several steps need to be taken. Mr. Ames said that his company submitted a resolution to force the company to resolve their practices. He said that although these resolutions are not binding, they are difficult to dismiss from the perspective of marketing and public relations.

They do not always work immediately. He said that Calvert has submitted the same resolution to Amazon for three consecutive years, prompting the company to track its greenhouse gas emissions and develop plans to reduce emissions.

"The company is not required by law to do anything, but given the expectations of investors, they have to do something," he said. "In the field of public opinion, companies do respond to these things."