On April 18, the Federal Court of Justice will decide whether "Katjes" may advertise its fruit gums as "climate-neutral." The German Centre for Prevention against Unfair Competition accused the manufacturer of deceiving consumers and filed a lawsuit for injunction. However, the Higher Regional Court of Düsseldorf ruled that the company is allowed to advertise in this manner. In a similar case, a jam manufacturer lost against the Centre for Prevention against Unfair Competition.

The main point of contention usually revolves around the definition of "climate-neutral," specifically whether climate neutrality is achieved through emission reduction measures or through the purchase of carbon offsets. Furthermore, there is the question of how this additional information is disclosed in advertisements and whether a reference to a further website is sufficient.

Greenwashing, the misleading advertising of environmental attributes, is not only found in the food industry but increasingly also in the financial sector. Companies advertise sustainability in various ways to position themselves and generate interest in their products.

"Greenwashing has increased significantly in recent years, and there are more and more lawsuits against it," says attorney Daja Apetz-Dreier from the law firm Reed Smith. Currently, false advertising claims can be sanctioned under the Unfair Competition Act. The Act covers all legal areas and, in principle, leaves no legal loopholes.

"When advertising with the term 'climate-neutral,' transparency is already required to enable consumers to make an informed decision. In our opinion, a mere reference to a website is not sufficient," explains lawyer Ulrike Gillner, lawyer at the Centre for Prevention against Unfair Competition – an organization that represents a form of self-regulation within the economy.

Just like the Centre for Prevention against Unfair Competition, the Consumer Association Verbraucherzentrale Baden-Württemberg (VZ) frequently takes action against unfair advertising. The VZ, for example, issued a warning to the DekaBank for the wording "Investing with a positive impact" because it was not clearly indicated that this was based only on estimates. The sustainable banking service provider Tomorrow had to retract an advertisement stating "first climate-neutral checking account."

"Thus far, we have been quite successful in addressing greenwashing. However, it has been less satisfactory that we often only had the option of requesting the advertising providers to cease what we considered misleading advertising," says Gabriele Bernhardt from the Legal Affairs Office of the VZ, which expects more effectiveness from the new EU law.

On January 17, 2024, the European Parliament approved the draft directive COM 2022 (143) to update consumer protection regulations. This primarily involves adapting the Unfair Commercial Practices Directive (UCP Directive).

The Council must still approve the law, after which it will be published and considered passed. Member states must implement the directive into national law within 24 months.

With the planned implementation of the directive, one of the most common environmental claims will also be prohibited. This concerns the assertion of the climate neutrality of a product or a company, especially when this climate neutrality is at least partially based on compensation measures.

The new directive primarily prohibits the use of environmental claims such as "environmentally friendly," "natural," "biodegradable," "climate-neutral," or "ecological." Such statements will only be permissible if they can be substantiated by facts. "This applies not only to advertising slogans or verbal statements but also to images, symbols, or similar elements that create the impression of 'environmental friendliness'", notes Fabian Klein, an expert in competition law at the law firm Pinsent Masons.

For instance, if a product is depicted in a rainforest or together with a polar bear, it could be affected by the new rules. "To make such claims, traders must provide evidence of 'recognized outstanding environmental performance', either through certification according to ISO 14024 Type I or through compliance with the EU Ecolabel," writes Klein in a specialist article.

The new European directive on competition law not only prohibits the general use of certain terms but also the use of private sustainability seals if they do not have a certification system; in particular, sustainability seals created by a company itself are no longer permitted.

Ulrike Gillner from the Association for the Protection of Competition sees the new regulations for amending the UCP Directive in the EU as another approach to more detailed regulation of the area, introducing a "per se ban" on the use of certain terms. "In our opinion, even now, with the existing provisions of the Unfair Competition Act in the area of environmentally related advertising, violations can be addressed," is the lawyer's assessment.

Gabriele Bernhardt, a consumer protection advocate from VZ Baden-Württemberg, welcomes the tightening measures from Brussels. "With the new regulations in Directive COM 2022 (143), we now have additional tools to prevent greenwashing. Clarifying explanations no longer assist providers engaging in misleading advertising if the purported environmental claim cannot be substantiated positively."

With the amendment to the UCP Directive, it is legally stipulated that green claims without substantiation, meaning without scientific validation of the accuracy of the claims, are prohibited. "Therefore, we expect that with our procedures, we can successfully challenge misleading and thus consumer-rights-infringing environmental advertising claims," says Bernhardt.

According to Apetz-Dreier from the law firm Reed Smith, the current directive on advertising and marketing with sustainability terms could have significant consequences for companies. "Marketing in the ESG sector will become more challenging in the future. Companies will become more cautious and pay closer attention to their wording," believes the lawyer.

In this context, Klein from Pinsent Masons states that the planned changes would impose a significant burden on companies. "It could even lead to companies completely abandoning environmental measures if the effort to advertise them becomes too great," says the lawyer. "The leeway for both deceptive greenwashing claims and well-meaning and true ecological statements will therefore become increasingly limited."

The recently adopted Greenwashing Directive on unfair commercial practices is intended, according to political intent, to be supplemented by further EU legislation such as the Green Claims Directive. This directive is expected to more precisely define the conditions for the use of environmental protection statements.

In its current form, it imposes strict requirements on the information provided by companies about the ecological qualities of their businesses or products. For example, every environmental claim must be approved and certified in advance by an external auditor. The planned Green Claims Directive would make the situation quite complex, notes Apetz-Dreier.