Decarbonisation

Greenwashing in advertising: legal requirements in Germany for claims on environmental protection and sustainability

Published on 7th Sep 2021

There are numerous legal pitfalls when companies incorporate sustainability and environmental protection into their advertising claims. What needs to be considered and what needs to be done if a competitor does not play by the rules?

Sustainable

In times when everyone is talking about climate change, sustainability and environmental protection, many companies naturally gravitate towards labelling and advertising themselves, their products or their services accordingly. Attributes such as “climate neutral”, “sustainable” or “environmentally friendly” may often not only be perceived positively, but also have the effect of increasing sales in a society where corresponding attention is given to this topic.

Against this backdrop, it is not surprising that products (from cars to fashion to food) and services (from mobility/transport to financial services to the real estate sector), or even entire companies are labelled and advertised with environment-related slogans in different sectors. These slogans, however, have to stand up to a legal review, but do not always withstand the scrutiny. In early 2021, a study of the European Consumer Protection Cooperation Network (CPC) evaluated 344 sustainability claims and found that 42% of the claims included misleading statements.

This shows that the companies’ communication about their own ecological footprint and their products and services raises some legal pitfalls. It will not be possible in this context to trace all industry and sector-specific peculiarities. However, we highlight a few general aspects which, in one legal form or another, apply to almost all sectors.

Competitors can legally challenge environmental infringements  

Companies, products and services must always comply with regulatory requirements set by the legislator. This also applies to the environment sector. Motor vehicles must not exceed applicable exhaust emission standards. Food for humans and animals must not contain substances dangerous to health and, in agriculture, using numerous substances harmful to the environment is prohibited. Compliance with all of these rules is often monitored by state authorities, which can impose fines and similar sanctions for violations. Under German law, competitors can also legally challenge infringements if the norm in question also serves to regulate market behaviour. This is justified by the fact that those who disregard the regulatory requirements, in contrast to their competitors, gain a competitive advantage by breaking the law, which is considered unfair and thus anti-competitive. In such cases, the competitors concerned can claim injunctive relief and damages from the infringer before the civil courts by invoking the Unfair Competition Act (UWG).

But even beyond the disregard of such fundamental legal requirements, competition law sets limits to the behaviour of competitor companies, especially in the context of advertising and PR.

Greenwashing in advertising claims is justiciable

In this respect, the prohibition of misleading advertising is particularly noteworthy. A well‑developed body of jurisprudence has led to advertising claims and other statements about companies and their products and services becoming justiciable on a broad scale. If, for example, a product violates one of the applicable regulatory requirements, but gives the impression that it does not, this is not only an unfair advantage by breaking the law, but also misleading.

Greenwashing (unjustified statements by a company about the sustainability of its business operations and its contributions to environmental protection) is also covered: if a company claims to comply with certain eco-standards, or eco-standards in its supply chains, but does not in fact do so, this is misleading. If a product is advertised to consist 100% of recycled material without this being the case, this is misleading. If a service is claimed to use less - or even the least - energy or other natural resources compared to competing offers, without this being true, this is misleading. If a company claims that its product has received a certain environmental award or has been labelled as particularly sustainable, when this is not true, this is misleading. If a company advertises special environmental protection activities although it does not provide them, this is misleading. The same applies to false claims of compliance with certain codes of conduct.

The list of examples could be continued almost indefinitely. It is obvious that the relevant cases are extremely diverse and can only be understood by considering all the individual circumstances of the individual case. A company can also get into trouble with regard to statements whose inaccuracy would not be easily recognised by a person outside the industry when its competitors know the market well and closely follow its activities as a market participant. Misleading statements can also result from the concealment of a relevant fact. When assessing a statement aimed at consumers, the courts do not consider whether an expert could understand the statement correctly. Rather, the standard of assessment is the averagely informed consumer who is attentive enough to the situation.

Restrictions on comparative advertising

Environmental aspects can also play a decisive role in competition law outside of misleading advertising. Comparative advertising, in which a competitor or its goods or services become recognisable, is only permissible within narrow limits. In particular, it is unfair if: the comparison does not refer to objective characteristics of the goods or services; leads to a risk of confusion between the advertiser and the competitor (or their products/services); exploits, impairs, disparages or denigrates the reputation of the competitor or its product; or constitutes an unfair imitation overall. However, even outside of such a comparison, it is unlawful to disparage or obstruct a competitor or to unfairly imitate its goods and services.

Strict rules on statements about climate protection by competitors

Especially in direct disputes between competitors on such "hot" topics as sustainability and environmental compatibility, the UWG prohibits the assertion or dissemination of facts that are damaging to business or credit "unless the facts are demonstrably true". This regulation goes beyond the general civil law right of free speech and places the full burden of proof on the person making the statement to prove that it is in fact true. In grey areas where statements are made about competitors that are based on value judgements ("They don't care about environmental protection!"), are based on estimates ("They must need x tonnes of toxic bleach for their production") or are incomplete ("They violate the following regulation" without mentioning that the competitor can invoke an exception), this can quickly lead to legal sanctions.

Osborne Clarke comment

Even beyond the right of free speech, case law has developed groups of cases in which a lightening of the burden of proof occurs in favour of the competitor, who may only have to make plausible an infringement of competition law or provide little evidence thereof, so that it is then up to the advertising company to refute the accusation; this can also amount to a complete reverse onus.

The importance of sustainable action, climate protection and ESG (environmental social governance) also becomes relevant in unfair competition law. Irrespective of whether a greenwashing accusation is legally justified, such an accusation can already lead to reputational damage: a strategy may be needed to deal with such accusations.

In the field of environmental advertising, the following applies in any case: do good and talk about it - but do it in such a way that it cannot be legally challenged.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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