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True environmental protection or “greenwashing”? What companies need to observe when making Green Claims

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published on 11 November 2020 | Reading time approx. 10 minutes


“Environmentally-friendly”, “recyclable”, “100 per cent recycled”, “biodegradable”, “conserves nature”, “eco-friendly”, “resource-friendly” are only a selection of environmental claims, so-called “Green Claims”, that are omnipresent today on food products and other consumer goods and/or their packaging. Moreover, companies are increasingly investing in PR methods that give them an environmentally-friendly and responsible image in the eyes of the public. Information is, e.g provided via the company’s website, in social media, in the annual report, in a publication created specifically for this purpose or through in-company symbols such as the ‘Eco Audit’.


Environmental characteristics of products and business activities as such are playing an increasingly important role in advertising and marketing due to an increased environmental awareness of consumers and companies alike. However, numerous legal requirements have to be observed and their interpretation and application in legal practice is sometimes very complex. The following article is intended to provide an overview.



Initial situation: Green Economy and Environmental Due Diligence Obligations

An increasing number of companies are interested in communicating their ecological and ethical behaviour and the environmentally-friendly properties of their products in their marketing. One of the reasons for the growing number of such Green Claims is that consumers are showing a growing desire for environmentally-friendly goods and services, i.e. they have developed a “green conscience”. Surveys show that the importance attached to environmental and climate protection is constantly increasing among the population. On the other hand, an industry geared solely to progressive economic growth is increasingly destroying nature and the environment, causing pollution and climate change. To counteract this, the United Nations Conference on Sustainable Development in Rio in June 2012 (Rio 2012) agreed on the model of the Green Economy, which combines ecology and economy. Such an economy must be internationally competitive, but also environmentally and socially compatible. The aim is to develop different, sustainable methods of production and consuming in order to enable environmentally sound qualitative growth that is thus sustainable. In order to implement these goals, the Federal Ministry of Education and Research in Germany has developed a “Green Economy” agenda in cooperation with other ministries and associations. Factors pertaining to an environmentally compatible economy include the sustainable design of consumer goods, including their packaging. The Life Sciences Industry is also given a particular mention, regarding e.g.the need to use finite resources sparingly in the manufacture of their products, and to identify and minimise environmental risks along the supply and value-added chains. In the new Action Plan for Recycling, adopted in March 2020 on the basis of the European Green Deal, the EU Commission has now also announced that it will propose legislation on sustainable product policy to ensure that products marketed in the EU are designed in such a way that they have a longer service life, can be reused, repaired and recycled more easily, and contain the greatest possible proportion of recycled materials rather than primary raw materials.

Companies are therefore increasingly expected to take responsibility for the (global) impact of their operations and in that way contribute towards sustainable development objectives. Environmental and climate protection as well as sustainability are becoming corporate obligations to a certain extent in the course of this development. In the meantime, the term “environmental due diligence obligations” is used indeed. This applies across all industries. In some areas, such as the food industry, an implementation process is already underway. E.g., in its “From farm to fork” strategy, the EU Commission announced that it is preparing an initiative to improve the corporate governance framework, which will include a commitment to integrate the sustainability aspect into corporate strategy. These environmental due diligence obligations can also be implemented using internal Environmental Management Systems (EMS), either freely or according to a specification (e.g. the international environmental management standard ISO 14001 or the “Eco Audit” or the EMAS system based on Regulation (EC) No. 1221/2009). Certifications and labels also play an important role in the context of corporate due diligence obligations, especially for consumer goods. This is because they are based on catalogues of criteria by which products are evaluated. Those that meet the specified environmental performance requirements within certain product categories can receive a label. There is by now an almost unmanageable quantity of environmental labels in almost all public and private industries and consumer goods industries: The Blue Angel eco-friendly label, the Naturland label, the V label for vegan and vegetarian products, the Green Button label for textiles, the EU Organic logo for food, the EU Eco-friendly label, which is used in particular for environmentally-friendly detergents and cleaning products, the ‘Rabbit with a protecting hand ’ logo for non-animal-tested cosmetics, and the Fair Trade label , to name but a few. In addition to that, there are that seals and quality assurance marks used by independent institutions to distinguish environmentally sustainable companies and brands (e.g. GREEN BRANDS). Awarded in that way, these companies may then use such quality assurance seals in their advertising.


Use of the environmental due diligence obligations as an opportunity for environment-focused advertising

The industry has recognised its environmental obligations also as an opportunity, and is using Green Claims in product advertising as well as promotion of the company itself (so-called “image advertising”). The aim is to use environmental slogans, e.g. to highlight product quality in relation to the complete product life cycle. Certifications and labels thus not only serve the entrepreneur as a measure and verification that specific environmental requirements are met within economic value chains, but they can also communicate these to the general public, e.g. by affixing the relevant labels to product packaging and by displaying them in other advertising materials. In the same way, reference to participation in environmental management systems can be made in corporate communications, for example on letterheads, company reports, websites or invitations and in general corporate advertising. Coca-Cola, e.g., emphasises on its website that: “We have analysed our climate impact across the entire value chain and have developed and implemented measures in all areas to further reduce our greenhouse gas emissions on an ongoing basis”. In fact, corporate advertising, which aims to create an image of a company's environmental friendliness beyond specific product features, is playing an increasingly important role, e.g,through environmental sponsoring, the offer of environmentally-friendly disposal of waste, and advertising with appeals to buyers to contribute to environmental protection by donating part of the proceeds directly to this cause.

Finally, certain environmental, product or company promotion aspects can be communicated to the public using voluntary claims on product packaging or in presentation and advertising in general, in a variety of ways, such as literal claims about environmentally-friendly aspects as well as through images, visual elements or symbols. These also include the well-known recycling symbol with which plastics and other materials can be marked – three (often green) arrows, intended to reflect the recycling cycle, and a number that identifies the material. Indicating recycling marks is voluntary, but is often used in connection with Green Claims, e.g. by indicating the recyclability of a product or packaging (“recyclable”) or by stating the percentage of recycled material (“100 per cent recycled plastic bottle”). In fact, many companies, especially in the food and consumer goods industry, are promoting their commitment to the use of sustainable packaging, such as Danone for its Volvic mineral water bottles with PET of plant origin or Tetra Pak for the ecologically beneficial beverage packaging made of cardboard packaging. Other examples include information on the quantified carbon footprint of a product, particularly in regard to the advertising for the purchase of regional, organic and/or vegan products. An example is the Demeter bakery Märkisches Landbrot, which e.g. offers a calculation tool on its website that allows customers to determine their personal “Product Carbon Footprint” when buying bread.

Environmental advertising thus has a very wide range, the types of appearance are diverse. However, manufacturers and retailers who advertise with environmental claims are increasingly required by regulatory authorities to prove sustainability and environmental compatibility of their products and their business activities in general. A general legal framework for such voluntary claims has been in existence at the EU and national level for some time, but with the increasing importance and use of Green Claims, guidelines on the interpretation and practical application of the law have been established (e.g. section on environmental claims in the Guidelines on the Implementation/Application of Directive 2005/29/EC regarding Unfair Business Practices ). In addition, there is an increasing density of administrative and judicial controls, which requires a delicate balancing act. Indeed, environmental information on products and companies – if relevant and clearly worded – is considered to be very useful as it enables consumers to make informed and knowledge-based purchasing decisions. Advertising bans in this respect would therefore result in the loss of important information in the service of environmental protection. However, if environmental claims made are incorrect, unclear or ambiguous, then there is no justification for creating the false impression that a company and its products are environmentally-friendly. This type of communication is called “greenwashing”, against which the EU now intends to take even more targeted action (see European Green Deal).


Legislation: Prohibition of Unfair Commercial Practices

From a legal point of view, this includes the field of unfair commercial practices, in particular “misleading advertising”, which, in addition to special legal provisions (e.g. the use of the EU Organic logo, Regulation (EC) No. 834/2007, from 1 January 2021 Regulation (EU) 2018/848) are regulated at EU level by Directive 2005/29/EC (so called Unfair Commercial Practices – UCP Directive) and in Germany by the Unfair Competition Act (UWG). On the one hand, a ‘misleading statement’ is said to have been made if false and therefore untrue environmental statements are issued. This is the case, e.g. if a packaging material is advertised as “biodegradable” or “recyclable” when this is not the case. It is also prohibited to make a false percentage statement regarding recycled material content (e.g. “100 per cent recycled”). Only source material that has been verifiably recycled may be included in the calculation. However, it is often difficult for packaging manufacturers or packaged product manufacturers (e.g. food and consumer goods) to prove this. After all, what exactly does “recycled” mean and what does the advertising target audience understand by it? A complex legal interpretation is necessary here, which ultimately requires knowledge of both advertising and waste disposal law , since terms such as “recycled” have their origin in waste disposal law and are regulated there. Advice by an expert is therefore often required.

A further legal uncertainty results from the fact that even factually correct environmental information can mislead the advertising target audience. What is meant here is the way in which the communication is formulated and presented in order to suggest an environmental benefit which, upon closer inspection, however, does not exist at all as presented. This type of advertising is not permitted if it is likely to influence market behavior, i.e. usually the consumer's decision to buy. This may be the case, e.g., if a product is advertised as environmentally-friendly because of a single characteristic, which is factually correct, but the product has other characteristics that are environmentally harmful and which are not pointed out. Or when a product is compared with an even less environmentally-friendly product to make it appear in a better light. Even vague environmental claims such as “environmentally-friendly", “green”, “nature-friendly”, “ecological” or “sustainable” can easily be misunderstood and therefore be misleading. Highlighting environmentally-friendly properties of a product that are in fact required by law and therefore apply to all products in that category is also prohibited (so-called “ban on advertising with self-evident features”), because it is misleading. This has to be taken into account, e.g., in the “non-animal-tested” advertising statement used for cosmetics, because animal testing of this kind has been banned in the EU since 2013. That claim is therefore only permissible if a specific cosmetic product has never been tested on animals, not even in preliminary stages, anywhere in the world, or by anyone for any purpose whatsoever.


Legal issues regarding the assessment of the misleading feature of a claim

Whether a prohibited, misleading advertisement is actually present is always a decision on a case-by-case basis, unless it is a commercial practice on the so-called “black list” in Annex I of the UCP Directive or in the Annex to Section 3 (3) of the German UWG (Unfair Competition Act). According to these provisions, certain misleading commercial practices, including environmental claims, are prohibited in any case, regardless of their effects on consumer behaviour. These include claims that a product has been approved by a public or private authority (e.g. environmental agency, standards organisation) if this is not the case or if the conditions for such an approval have not been met. Another example is the unauthorised use of quality assurance marks, quality assurance labels or similar (e.g. “Blue Angel”, “Naturland"). Cases not covered by the “black list” on the other hand, require a finding of untruth or deception. Only in certain legally standardised cases is it assumed that a certain conduct is likely to mislead. These include, e.g., violations of codes of conduct regarding the environmental protection obligations by a company that has signed up to such a code, whereby here too it must always be examined on a case-by-case basis whether the consumer actually makes his commercial decision on the basis that the products comply with the code. In all other cases it must be determined what meaning an advertising statement has according to the understanding of the targeted public and whether this diverges with reality. The courts generally determine the perception of the target audience based on their own expertise and judgement; expert opinions and opinion polls are only necessary in exceptional cases (ECJ, judgement of 13 January 2000, Case C-220/98). It goes without saying that the need to assess how the average consumer would typically react in a given case causes legal uncertainty for the advertiser, because the decision is left at the discretion of the administrative authorities and the courts themselves, even if they do take national and ECJ case law into account. Knowing this or obtaining expert legal advice is therefore also indispensable for the advertising company, in order to carry out a legally justifiable examination of its environmental advertising and its classification as “permissible”.
 
Finally, it should be pointed out that technical standards are also becoming increasingly important in determining whether environmental claims are false or misleading. Standards such as DIN EN ISO 14021:2016-07 on Environmental Labels and Declarations regulates general requirements for environmental claims as well as specific claims (e.g. compostable, recyclable, recycled content, sustainable, claims relating to greenhouse gas emissions, so-called “product carbon footprint”). In principle the application of such standards is voluntary. However, they can simplify direct legislative application. This is especially true if, as in the present case, all environmentally significant aspects of the product's life cycle have to be taken into account when developing and testing such statements, i.e. including numerous technical aspects and expertise. This has also been recognised by the legislator, who has mandated the application of this Standard to claims made, e.g., in regard to the recycled content of food contact materials made from recycled plastics (e.g. PET beverage bottles) by means of a legal reference (see 11 Regulation (EC) No. 282/2008). The Commission had already used this international Standard previously when drawing up its Guidelines for the Use and Assessment of Environmental Claims.

It can be held on with it: The legal assessment of green claims is complex. It is particularly important to note that they must be clear, precise, verifiable and accurate; they must not be misleading. Environmental claims that are vague or unspecific or that generally imply that a product is environmentally friendly or beneficial to the environment should not be used. Such claims have a high potential to be misunderstood by consumers. Therefore, case law requires clearly formulated statements that indicate why and to what extent a product is environmentally friendly. If an environmental statement alone can lead to misunderstandings, it must be accompanied by a supplementary explanation. However, the obligation to provide information in the context of Green Claims is not unlimited. According to recent case law, there is no misleading information if the respective facts are generally known to the enlightened average consumer and are therefore self-evident. In any case, environmental claims must be based on scientifically verifiable methods that are as widely accepted and accessible as possible. Strict criteria must also be observed when comparing products in connection with environmental claims (see Directive 2006/114/EC) and Section 6 UWG (Unfair Competition Act)).


Prospects: Individual consumer legal remedies, increased fines, and standardised environmental impact assessment method

In order not to undermine consumer confidence in Green Claims, strict requirements are imposed on them that must be observed by advertising companies. This does not only serve consumer protection. Rather, the use of truthful environmental claims is also important in order to protect traders who design their products and activities in an environmentally sound manner and who make honest statements, from unfair competition by those whose environmental claims lack a factual basis. Infringements can therefore lead not only to penalties as an administrative offence or a criminal offence, but also to injunctions and claims for damages under competition law. Furthermore, under Directive (EU) 2019/2161, cross-border infringements of the prohibition on unfair commercial practices, including those relating to environmental claims, will in future be subject to heavy fines (at least four per cent of the entrepreneur's annual turnover). This Directive also requires Member States to provide adequate and effective remedies for consumers who have been harmed by unfair commercial practices, including compensation, price reductions or termination of the contract. To date, consumers in Germany do not have individual recourse under Competition law to file a claim against misleading advertising, only through an association or a qualified institution (e.g. consumer protection association) or intervention by the relevant regulatory and law enforcement authorities which, however, is at the discretion of the authorities. It remains to be seen whether EU requirements will actually lead to the introduction of new means of legal enforcement in German law and whether a paradigm shift is necessary in this respect.

The need to counteract the “greenwashing” and that the requirements for environmental advertisement will become stricter, was announced not least also by the European Commission in the European Green Deal. This also because such “greenwashing” creates the risk of a less “green” economy. Therefore, the European Commission now calls for companies to substantiate their environmental advertising using methods to measure the environmental footprint of products and organisations (see action plan for the circular economy of March 2020). It remains to be seen what concrete legislative measures will actually be implemented in the future. However, the companies concerned should follow developments closely and give appropriate importance to the legal verification of product- and company related environmental advertising, e.g. by addressing the associated risks in internal compliance programmes.

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