Greenwashing in Advertising: Legal Aspects and Recent Court Decisions
In today’s world, sustainability and environmental awareness are increasingly important. Companies recognize that they can gain a competitive advantage by portraying their products or services as “green” or environmentally friendly. However, not all companies claiming to be green actually are. This is where the term “greenwashing” comes into play.
The Düsseldorf Higher Regional Court recently ruled in two cases that advertising products as “climate-neutral” does not automatically mislead consumers. These cases involved a fruit gum manufacturer and a jam manufacturer, both of whom were sued by a “Wettbewerbszentrale” (Centre for Combating Unfair Competition) for their “climate-neutral” advertising claims.
The court clarified that the average consumer understands “climate neutral” as a balanced sum of a product's CO2 emissions. Consumers are aware that neutrality can be achieved through both avoidance and compensatory measures, such as allowance trading. Therefore, the advertising of both manufacturing companies was not misleading on its own.
Nonetheless, injunctive relief may arise in individual cases if an advertiser breaches its duty to inform by withholding material information from the consumer. The method by which a product’s climate neutrality is achieved constitutes such essential information. Climate protection is an increasingly vital issue for consumers, significantly influencing purchasing decisions.
In one case, the fruit gum manufacturer provided sufficient information. A QR code in its advertisement directed consumers to the “ClimatePartner.com” website, where detailed information was available. In contrast, the jam manufacturer’s advertisement, neither in a food magazine nor on the product packaging, contained any reference to how its advertised climate neutrality was achieved.
These recent decisions by the Düsseldorf Higher Regional Court inspired this article. We will take a closer look at greenwashing and its legal aspects. It is crucial for consumers to recognize greenwashing practices. Simultaneously, companies committed to environmental protection must comply with applicable laws and regulations to avoid falling into the trap of greenwashing.
What is Greenwashing?
Greenwashing is a marketing strategy where companies portray their products, services, or the entire organization as more environmentally friendly than they truly are. This misleading tactic aims to deceive consumers into believing a company cares about the environment, even if it does little to reduce its actual environmental footprint.
Greenwashing can manifest in various forms. These range from vague, unverifiable claims like “This product is good for the environment” to irrelevant statements such as “This product does not contain CFCs” (which is legally required anyway). It can also involve outright lies about a product’s or service’s environmental friendliness.
Legal Frameworks for Greenwashing Claims
Greenwashing, by presenting products or services as more environmentally friendly than they are, can violate competition law. Such practices can be misleading and deceptive, thereby disrupting fair and honest competition among businesses.
In Germany, greenwashing is regulated by the Unfair Competition Act (UWG). According to § 5 para. 1 sentence 2 no. 1 UWG, it is unlawful to engage in misleading commercial conduct that is likely to induce a consumer to make a transactional decision they would not otherwise have made. This provision is directly applicable to greenwashing practices.
The legal aspects of greenwashing and the use of the term “climate neutral” in advertising are complex and multifaceted. The German Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb – UWG) serves as the governing law, prohibiting misleading commercial acts. This legislation can be effectively applied to counter greenwashing practices.
The European Commission has issued guidance on applying EU competition and consumer protection rules to environmental claims, known as “green claims.” These guidelines assist companies in complying with EU regulations and protect consumers from deceptive environmental claims.
German courts have also addressed the term “climate neutral,” adopting different positions. Some courts demand disclosure of the basic circumstances supporting a company's claim of carbon neutrality. Other courts assume that the average consumer understands carbon neutrality through offsetting, believing the concept promises nothing more than a balanced carbon footprint.
Achieving completely emission-free product production, including transport, is rare in practice. If greenhouse gases are emitted during a product’s production or distribution, climate neutrality can only be achieved if compensation measures are permitted as an offset option.
Inadmissible advertising statements can lead to costly warnings under competition law. Moreover, negative media coverage can severely damage a company’s reputation, particularly for well-known brands or trustworthy organizations.
Several initiatives seek to legally prohibit or more strictly limit advertising with climate neutrality. Notably, the EU Commission has proposed a directive to empower consumers for environmental change through enhanced protection against unfair practices and improved information. These new rules aim to simplify action against greenwashing, which has historically been addressed primarily through general competition law. Until these plans are implemented, advertising with climate neutrality remains permitted in principle.
Greenwashing and the European Green Deal
Climate change and environmental degradation pose existential threats. To combat these, resource-efficient product handling is crucial. Many consumers already make conscious choices, such as avoiding fast fashion. A significant proportion of consumers aspire to consume more sustainably but face current limitations. For instance, an EU Commission survey revealed that 80 percent of EU citizens struggled to find information on product reparability.
To establish sustainable products as the norm in the European Union and promote the circular economy, the EU Commission presented a series of proposals as part of the so-called European Green Deal on March 30, 2022. The primary goal is to empower consumers in the green transition. Individuals who wish to protect the environment through their purchasing behavior should have the right to information regarding product service life at the point of sale. In the future, the EU’s Consumer Rights Directive will ensure that buyers are informed directly at the point of sale about commercial shelf-life guarantees exceeding two years, as well as repair-relevant information.
Combating Greenwashing
Consumers also require better protection from unreliable or false environmental claims. The EU Commission’s proposal directly addresses and combats “greenwashing.” To achieve this, the Unfair Commercial Practices Directive is set to be amended. This involves adding further practices to the existing list of prohibited unfair commercial practices. In the future, these will include:
- General, vague statements about environmental attributes that lack evidence of the product’s or retailer’s environmental excellence. Examples include broad environmental claims such as “eco-friendly,” “eco,” or “green,” which falsely create an impression of superior environmental performance.
- Environmental claims about the entire product, when these claims only apply to specific parts of the product (e.g., only the packaging is 100 percent recyclable, not the product itself).
- Labeling with a voluntary sustainability seal that is neither based on a third-party testing procedure nor originates from official authorities.
- Failure to disclose that a product has limited functionality when using consumables, spare parts, or accessories not supplied by the original manufacturer (e.g., using printer cartridges or chargers from third-party brands).
This updated regulatory framework aims to enable consumers to make informed and environmentally friendly purchasing choices. The EU Commission’s proposal is currently under discussion among member states.
Conclusion
While it is vital for companies to acknowledge their role in promoting sustainability and environmental protection, honesty and transparency in communication are equally important. Greenwashing is not only misleading to consumers but can also erode trust in companies’ legitimate sustainability efforts. Therefore, it is critical for consumers to be informed and capable of distinguishing genuine green practices from greenwashing practices. New EU regulations, guidelines, and national laws like the UWG in Germany aim to combat greenwashing and safeguard consumers from misleading environmental claims.