For the majority of consumers, sustainability has become a determining factor in their purchasing decisions. Thus, it comes as no surprise that for many companies, climate friendliness has become an integral part of their marketing concept. Often enough, so-called "greenwashing" is used to suggest environmental awareness although this is not actually implemented in the company or its supply chain. According to an EU Commission study carried out in 2020, more than half of the claims about the sustainability of products were vague, misleading or unfounded.
Current limits for green claims under fairness in trade legislation
Although there are no explicit provisions to support this, it is already possible to sue in cases of greenwashing under current law, and such lawsuits are also becoming more frequent. Fairness in trade legislation as an instrument to protect fair competition in business contains important ground rules for the review of green claims. If advertising restrictions are breached, both competitors and associations with legal standing have the right to sue for injunctive relief, damages and publication of the judgment.
In any case, green claims which violate one of the per se prohibitionsofthe black list (sub-par. 1 to 23 of the Annex to the Austrian Unfair Competition Act ("UWG")) are banned. Among other things, this includes the unqualified use of quality marks and labels.
Green claims must also hold up to scrutiny under the provision prohibiting misleading statements as set forth in sec. 2 UWG and the review of their content for potential misrepresentation. Since statements about the sustainability of products are very much capable of significantly influencing consumers' purchasing decisions, they are held to strict standards. This means such statements must be absolutely true, and also provable in case of dispute. For the company using such claims in advertising, it is a further aggravating factor that it has to accept the most unfavourable interpretation if statements are unclear or ambiguous.
What courts have decided so far
Austrian courts have already dealt with green claims such as "CO2 neutral", "made with 50% plastic waste from the sea" and "natural" and they have been particularly strict in their scrutiny as to whether these claims are suited to mislead purchasers. The term "climate neutral" has also been in the focus of court decisions in Germany. In the absence of a generally valid definition, it is currently assumed that the target audience expects a "climate neutral" product to be manufactured or delivered without causing greenhouse gas emissions. Often enough, such a green claim is merely based on a climate compensation payment (also referred to as “green indulgence trade”), and a more detailed disclosure of what the term actually means would be necessary in the context of advertising in order to avoid misleading the public.
The European Green Deal declares war on greenwashing
As part of the European "Green Deal", the EU Commission wants to put an end to "greenwashing". Apart from a draft directive empowering consumers for the green transition, which was published some time ago, another proposal for a directive on green claims is expected to be presented in the next few months. According to the EU Commission's ideas, the two drafts, taken together, are to establish clear rules for environment-related advertising claims.
Proposal for a directive empowering consumers for the green transition
With its proposal for a directive, the EU Commission aims to protect consumers by imposing stricter obligations to inform on companies, among other things by making selective adjustments to existing provisions. The aim is to make consumers even more aware of environment-related information as a determining factor in purchasing decisions.
First of all, the proposed directive contains a number of new definitions of terms on which the adapted facts constituting violations of fairness in trade are based (in part). For example, terms such as "environmental statement", "sustainability label", "certification system" or "durability" are defined. Following this, the terms "environmental and social impact", "durability" and "reparability" are also added to product features which are essential for the assessment of misleading statements.
Moreover, ten further business practices which are in any event considered unfair and prohibited are added to the per se prohibitions ofthe black list. These include:
- affixing a sustainability label which is not based on an official certification system or was not issued by government bodies,
- making an environmental claim about a product as a whole when such a claim actually only relates to a particular aspect of the product, or
- advertising the self-evident (highlighting as a special feature that a company complies with the legal requirements which actually apply to all providers).
The proposed amendments are thus an important contribution to combating inpermissible greenwashing at European level. From an Austrian perspective, the majority of the proposed innovations can actually be derived from the prohibition of misleading others in competition.
Waiting for the proposal of a directive on green claims
The European Commission's long-awaited proposal of a further directive, i.e. a directive on green claims, aims to provide a standardised framework for assessing the environmental impact of products and the ability to substantiate claims such as "made from natural ingredients". Companies should be able to assess claims of eco-friendliness which they make about their products by scrutinising them by means of the Product Environmental Footprint (PEF) or other alternative methods approved by the EU. In very simplified terms, methods such as the PEF are intended to allow calculating the environmental impact of a product throughout its life cycle.
Member States will also be called upon to set up a system for the verification of evidence for environmental claims by an independent auditor and provide for appropriate sanctions in case of breaches. The proposed directive on green claims has not yet been published officially. Everyone can look forward to its presentation by the EU Commission, which is expected to happen in the next few months, with anticipation.
Our New Technologies and IP Team will keep you up to date and will be happy to support you in the review of green claims.
On 15 February, KWR partner Barbara Kuchar and lawyer Beatrice Blümel held a webinar on this topic. You can access the documents and the recording (in german) of the webinar here.