Advertising “climate neutral” products: Latest German case law

While non-profits such as the German Agency to Combat Unfair Competition (Wettbewerbszentrale) continue to challenge product advertisements with sustainability claims, for instance with a public warning letter campaign kicked-off in 2021, more and more courts hand down decisions. Most recently, advertising with the term “climate neutral” was subject of several decisions.

Background

Sustainable products have become an enormous business driver, with public awareness of climate protection increasing constantly. Advertising and highlighting the sustainability of one’s products is therefore more relevant than ever as a marketing tool. As there is still a lack of clear legal guidance for advertising with green claims such as “climate neutral”, the risk of greenwashing remains ever-present.

Most severely, there is no general legal concept or even definition of “climate neutrality”. According to a strict view, a product is only “climate neutral” if it is “emission-free”. If zero emissions were required for climate neutrality, advertising products as “climate neutral” would be misleading if their production does cause emissions even if such emissions are compensated through other measures. However, only very few to zero products can be produced emission-free in reality. Instead, the carbon footprint of the products is in most cases neutralised by subsequent compensation measures such as the purchase of climate certificates.

Currently, German courts tend to conclude that consumers do not understand the term “climate neutral” to be equivalent to “emission-free”. Therefore, companies that advertise products as climate neutral although this is “only” achieved through compensation measures would not be liable for misleading consumers through untrue statements about product features. In the absence of decisions by the Federal Court of Justice, however, it cannot be excluded in practice that courts will hold that the relevant public may also understand the term “climate neutral” in the sense of non-existent or negligible CO2 emissions.

Current case law

Some recent decisions of the lower instance courts focused on whether products that are not produced emission-free but where such emissions have been neutralised through compensation measures can be advertised as “climate neutral” without further explanation. From those decisions, a clear trend emerges that the specific product and the targeted audience are crucial for determining what type of information is necessary:

• References: According to a decision of the Regional Court Konstanz, consumers using heating oil to heat their houses and flats are interested in the circumstances behind the advertised climate neutrality of heating oil. Not least because of the emotionally influenced assessment of the term “climate neutral”, the court found that the oil trader must clarify the background of the advertised climate neutrality (case docket 7 O 6/21 KfH). Likewise, the Regional Court Oldenburg decided in a case relating to meat products that there was an obligation to provide further information on the compensation of emissions by way of donations and/or support for climate protection projects (case docket 15 O 1469/21).
• Completeness: In the most recent decision, the Higher Regional Court Frankfurt held that the term “climate neutral” on the detergents and cleaning agents in dispute refer to the advertising company as a whole as the basis for assessing the climate neutrality and that the label is not misleading in that regard (case docket 6 U 104/22). It found, however, that the advertising misleads about the scope of this basis for the assessment. Without further explanation, consumers would expect that all of the company's emissions, including those generated in the production process, are, at least, compensated. If certain production emissions, including those relating to processed raw materials and semi-finished products, are excluded from compensation, the court held that a disclosure of the exclusion is required. Without such disclosure, claiming climate neutrality misleads the consumer about the scope of the environmental efforts according to the court, because climate neutrality has a considerable influence on consumers’ decisions. Manufacturers must therefore provide information on the fundamental circumstances and emissions taken into account for the claimed climate neutrality. Otherwise, the public would assume that all significant emissions were avoided or compensated. However, it is not necessary to provide information on the ratio between the reduction measures and the calculated CO2 emissions, in particular with regard to lower-priced everyday goods.
• Layout: In the case of advertising for climate neutral fruit gums and liquorice online, the Regional Court Kleve decided that it is sufficient to provide a hyperlink under which information on the compensation of emissions can be found (case docket 8 O 44/21). The corresponding advertisement was, however, directed at professionals for whom it is generally acceptable to gather further information about products online. The Regional Court Oldenburg held that essential information in relation to climate neutrality of meat products can be listed on a separate website of the advertising company, provided that the targeted consumer is able to make an informed commercial decision in light of the chosen product design (case docket 15 O 1469/21). The Regional Court Kiel initially held that the mere reference to support of “gold standard”-certified climate protection projects is not sufficient to provide consumers with necessary information on achieving climate neutrality of bin liners (case docket 14 HKO 99/20). According to this decision, the respective bin liner packaging must contain a QR code or corresponding information on a website on which a consumer can obtain the relevant information. This decision was, however, overruled by the Higher Regional Court Schleswig in the summer of 2022 (case docket 6 U 46/21). The appeal court pointed out that the explanatory information relating to the climate neutrality particularly depends on the type of product and the degree and extent of the advertised climate neutrality. In the present case, it denied the misleading character since it found that the information on how climate neutrality is achieved was not essential to the customers and that the eye-catching reference to a website with further information was sufficient.

Practical implications

German case law does not yet provide clear guidance as to when advertising with the term “climate neutral” is misleading and whether there is a further obligation to provide clarifying information. Companies should therefore be careful how they phrase their advertising. To avoid accusations of greenwashing, the information on the achieved climate neutrality by means of compensation should ideally be placed directly on the product packaging.

The further handling of sustainability-related advertising deserves close monitoring. In particular, the second part of the EU Commission’s Circular Economy Package did not contain the eagerly awaited, but highly controversial proposal for a regulation on substantiating environmental and green claims (read more). It therefore remains to be seen if and when the EU Commission will publish further guidelines. Following the first part of the EU Commission’s Circular Economy Package, including its proposal to tackle greenwashing (read more), companies should closely follow the further progress in this fast-moving sector.