Companies often sue one another for competitive reasons – when a rival steals a top employee, for instance, or allegedly infringes on patents. Can litigation also be used to make markets more sustainable?

In 2008, Dr. Bronner's Magic Soaps, a family-owned soap company that expects to sell about $64m of products this year, and the Organic Consumer Association sued 13 cosmetics companies for falsely using the label "organic" on their products. At the time, many of these companies were using petrochemicals and other non-organic ingredients, some of which were known carcinogens and allergens.

While a coalition of more than 150 environmental and health groups – the Campaign for Safe Cosmetics – has been pushing companies since 2004 to extract toxins from their products and make them safe and sustainable, toxins still regularly make their way into many products that claim otherwise.

So Dr. Bronner's decided to ramp up the pressure, suing its competitors for "unfair business practices". Rivals that were falsely advertising their products as organic were hurting Dr. Bronner's sales, it claimed.

Four years after Dr. Bronner's suit was filed, the case was dismissed. Courts ruled that the company must instead bring this action against the USDA, the government agency charged with enforcing the organic standards. Because the USDA doesn't currently regulate "organic" claims for personal-care products, cosmetics companies can use the term more loosely (or, some say, falsely).

Dr. Bronner's sent a notice to the USDA in September 2012, inviting the agency to proactively clarify the rules rather than waiting to be sued by Dr. Bronner's, which is where the motion currently stands.

Was it worth it?

While a coalition of more than 150 environmental and health groups has been pushing companies to make their products safe, toxins still regularly make their way into products that claim otherwise. Photograph: Andrew Burton/AP

The company has spent more than $1m – and probably closer to $2m – fighting this legal battle so far, according to its president David Bronner. But while the lawsuit remains unresolved, the strategy has already paid off.

Before the case was thrown out of court, almost all of the companies named in the lawsuit settled with Dr. Bronner's. It didn't hurt that Whole Foods weighed in, giving the defendants a year to either change their ingredients or modify their labels in order to continue selling products to the supermarket chain, in 2010.

"About 80% of these companies simply dropped their claims; the others reformulated," notes Bronner. "We got about 95% of what we were looking for." Many other companies not named in the lawsuit also reformulated their products or dropped green claims, he said, although he complains that the spa segment is "worse than ever".

Since 2012, the company has delayed further work on this issue to focus on other advocacy efforts – particularly fair trade – but plans to prioritize organic once more. As Bronner noted during the interview, "this conversation made me realize we should keep moving this forward".

The next step will be engaging with the USDA to ensure that all cosmetics using the organic label are required to contain 95% organic ingredients, he said.

The lawsuit as a business strategy

Let's look at this strategy purely from a business perspective. This relatively low-cost lawsuit strengthened Dr. Bronner's position considerably, with many competitors exiting the sustainable cosmetics niche (at least partially), and others reformulating to use more organic ingredients and thus having to spend more (and either generate less profit or raise the price of their products).

In either case, Dr. Bronner's benefits. It's now competing with fewer, more expensive products. And it has gained a significant marketing advantage as it draws negative attention to its competitors' sustainability claims and reinforces its own.

From a sustainability perspective, this was a relatively small investment that had a much larger impact on the cosmetics industry than broader activist efforts with that price tag typically do. The total amount of organic ingredients used by the sector has increased and consumers now have clearer information to make the green choice.

Strategic litigation could be a powerful new way for business sustainability leaders across sectors to push their competitors to either ratchet up their practices or bolster their own company's niche. The positive marketing alone might be worth the cost – and success, well, that'd be the icing on the organic, fair-trade, socially responsible cake.

Erik Assadourian is a Senior Fellow at Worldwatch Institute and co-director of State of the World 2013: Is Sustainability Still Possible?