Managing greenwashing risk

Should Polish entrepreneurs be concerned about regulatory focus on greenwashing?

Published on 18th Apr 2024

Regulatory attention on the making of misleading green claims is growing tighter, with new EU regulation imminent
Greenwashing - ESG briefing

Recent weeks have seen changes in the communication of green claims made by British fashion companies and an accommodation booking platform resulting from the actions of the British and Dutch regulator, respectively. A recent judgment by the Amsterdam court that confirmed greenwashing allegations against KLM airlines has also been widely discussed (see our Insight).

This raises the question whether Polish entrepreneurs should be concerned about greenwashing risks in relation to sustainability claims they may be making. 

Greenwashing on the international radar

As a result of action by the Dutch regulator (Autoriteit Consument & Markt), an accommodation booking platform has been forced to withdraw from its "sustainable travel" programme of rating accommodations on their sustainability efforts (and marking them with the appropriate number of green leaf symbols).

The Dutch regulator's allegations concerned unclear rules for awarding ratings, creating a false impression about the sustainability character of travelling as well as a false impression that the accommodations not included in the programme had not taken any steps towards being sustainable. The regulator has also alleged that a regulatory requirement (eliminating of single-use plastic products) was used as one of reasons to mark an accommodation as a sustainable one.

Following the UK regulator's (Competition and Markets Authority) investigations, three fashion industry businesses have pledged to change their sustainability communications and use only claims that are clear and understandable to the viewer, visible and sufficiently detailed.

The above reports coincided with the announcement of a Dutch court ruling against KLM. The case was initiated by a non-governmental organisation. In its judgment, the court confirmed that KLM's claims under review were in violation of Dutch unfair commercial practices laws.

Reading about these proceedings, Polish businesses may wonder what the risk is of making green claims on products, services or operations under Polish regulations.

Polish greenwashing regulations

Making unsubstantiated green claims can lead to certain liability under Polish law, currently in force.

Claims about the pro-environmental or sustainable nature of products, services or operations that mislead consumers may be considered a violation of the collective interests of consumers. This can lead to the initiation of investigation against the company by the President of the Office of Competition and Consumer Protection (UOKiK) and the imposition of a fine of up to 10% of the turnover achieved in the fiscal year preceding the year in which the fine is imposed.

Board members may be subject to individual fines of up to PLN 2 million imposed by the UOKiK for intentional greenwashing.

Businesses' green claims are already on the UOKiK's radar. Last year, UOKiK requested eight companies from the cosmetics and fashion industry, as well as an online market platform, to provide explanations for their green claims. The aim of this was to collect material for UOKiK to review whether there are grounds to investigate the possible violation of the collective interests of consumers resulting from making these claims.

The use of greenwashing practices may lead to legal proceedings against the entrepreneur under the Polish Combating Unfair Competition Act. A lawsuit can be brought by a competitor of the entrepreneur or an organisation of entrepreneurs and, as a result of the proceedings, the entrepreneur may be obliged to cease the unfair practice, compensate damage, make a declaration of appropriate content and form or make a payment towards the social purpose, among others.

In other EU countries, regulators (for example, in the UK or Netherlands) or professional associations (such as in Switzerland) have issued guidelines to help assess practices that may qualify as a greenwashing. In Poland, unofficial guidelines derive from the Code of Advertising Ethics issued by an industry organisation, the Council of Advertising Ethics (Rada Etyki Reklamy).

Consumer organisations can also demand the business cease a violation, make a specific statement or pay money for a social purpose under the Unfair Commercial Practices Directive.

Commercial impact of greenwashing

Accusations of greenwashing can also lead to serious reputational damage, consumer boycotts and loss of business.

Companies that have adopted a sustainability strategy and goals may not be interested in starting or continuing cooperation with a partner accused of misrepresenting the environmental impact of its products, services or its operations.

In addition, new sustainability reporting rules resulting from the implementation of the Corporate Sustainability Reporting Directive (CSRD) will oblige entrepreneurs to provide detailed information about their impact on sustainability-related matters (including the environment). Based on this information, not only authorities, but also environmental organisations, consumers and competitors will be able to analyse to what extent the green claims of businesses correspond to their actual activities.

Impact of activists

The growing global activity of environmental organisations is also worth noting. They are expected to scrutinise the green claims of entrepreneurs more and more thoroughly and reach for legally available instruments if they identify green claims as greenwashing, once provided with information on the actual impact of businesses on sustainability issues (including their environmental impact) in sustainability reports prepared under the CSRD. They could sue Polish entrepreneurs who use misleading or unsubstantiated green claims on the grounds of the combating unfair competition regulations, demanding that they stop using these deceptive claims, or file reports to the UOKiK to start investigations.

Such organisations may be more be eager to take action as the burden of proof that a particular market practice does not constitute an unfair and deceptive practice is on the business that uses it. Thus, it will be the businesses that will have to demonstrate the evidence for the correctness and accuracy of their claims.

Osborne Clarke comment

Polish regulations already provide authorities (such as the UOKiK) with the instruments to combat claims that constitute greenwashing. Greenwashing is already on the UOKiK's radar (as seen from last year's investigations).

Based on the experience of the implementation of the Omnibus Directive,  UOKiK is expected to begin to combat misleading green claims more actively after the implementation of EU directives on greenwashing in Poland (the recently adopted Consumer Empowerment Directive and the Green Claims Directive, which is on its way – see our Insight).

Therefore it is worthwhile for businesses to implement appropriate anti-greenwashing compliance measures now. Under these procedures, any claim made by a business relating to its sustainability impact, or that of its products and services, should be checked to ensure that it will not be misleading for consumers. Such a review should take into account the communication as a whole, including the symbols and colours used. 

Before publishing claims, it is important for businesses to check whether adequate evidence or material to substantiate the claims is in place. Once public, claims should be reviewed regularly to check whether they are still up-to-date and that the environmental benefit claimed has not became a legal requirement.

Training managers (whose statements may also fall under scrutiny) and people in charge of marketing and communication is strongly recommended. The adoption of an ESG strategy and defined sustainability goals by a business should be followed by preparing and implementing an action plan on how to achieve these goals. Otherwise, businesses may be exposed to accusations that these goals and strategies are merely empty statements.

If you would like to discuss any of the issues raised in this Insight, please get in touch with your usual Osborne Clarke contact, or one of our experts listed below

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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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