Greenwashing in the spotlight - recent developments in the Netherlands

On 20 March 2024, the Amsterdam District Court rendered its judgment in a class action case brought by the Foundation Fossil Free (Fossielvrij) against Royal Dutch Airlines (KLM). It ruled that certain sustainability claims made by KLM were misleading and thus unlawful. Around the same time, the Netherlands Authority for Consumers and Markets (ACM) took action in relation to greenwashing in the retail sector. These developments should be placed in the broader context of an increase in scrutiny of sustainability (and other ESG) claims.

Greenwashing

Cases concerned with mis- and disinformation on sustainability are far from new, but the last few years have seen an explosion of ‘greenwashing’ cases filed before both courts and administrative bodies such as consumer protection agencies. Generally, the following categories can be distinguished:

• product attributes – the largest group of greenwashing cases identified so far involves challenges to statements about the environmental impact of particular product lines
• corporate climate commitments – one of the most significant groups of greenwashing cases to emerge in recent years have been cases challenging the truthfulness of corporate climate commitments, particularly where these are not backed up by adequate plans and policies’
• overstating investments in or support for climate action – cases challenging advertising campaigns that overstate a company’s investment in, for example, renewables.

This blog focuses on the first category of cases: product attributes. 

Regulatory scrutiny on the rise

Over the past years, the ACM has been a thought leader in relation to all things sustainability, including misleading consumers by way of sustainability or ‘green’ claims. The ACM has published various iterations of its continued thinking on sustainability claims, which has culminated in the most recent Guidelines on Sustainability Claims (the Guidelines), published in June 2023.

In the Guidelines, the ACM identifies five rules of thumb to which companies must adhere when advertising with green claims:

1. correct, clear, specific and complete sustainability claims – overall impression of the advertisement/claim needs to be factually correct, clear and precise
2. substantiate your claims with facts and keep them up to date – use specific claims, explain those claims and corroborate those claims with verifiable and independent evidence
3. make fair comparisons with other products or competitors – comparative claims can be of use to consumers by making clear what benefits the product / company has in comparison with other products or competitors; they should not lead to confusion
4. describe future sustainability ambitions in concrete and verifiable terms – use a claim about future ambitions only for marketing purposes if there is a clear plan for realising these sustainability ambitions
5. visual claims and labels must be useful to consumers, not confusing – visual claims must support your claim; there needs to be a direct and verifiable link between the illustration and the sustainability benefit, with independent labels preferred over private labels.

At the same time, the ACM has been actively enforcing against companies engaged in greenwashing. This has resulted in a number of commitment decisions regarding fashion retailers (Decathlon and H&M) and energy companies (Vattenfall and Greenchoice). The ACM essentially found that these companies used various advertisements (claims, labels and other type of information) to advertise their sustainability efforts whereas in reality it was unclear what evidence those claims were based on or that in reality their sustainability efforts were much less prevalent than advertised. For instance, H&M used a label “conscious choice” without specifying why that particular item was more conscionable/what the sustainability benefits were.

Most recently, around the same time that the KLM judgment was rendered, the ACM announced that it had taken action in the retail space. One of the largest Dutch retailers, Albert Heijn, used a number of green claims including stating that it was “the most sustainable supermarket in the Netherlands” while not providing sufficient evidence to corroborate and underpin that statement. The ACM engaged with Albert Heijn on these claims, which ultimately resulted in the latter withdrawing its advertisement campaign and taking all of the misleading claims out of the running.

Self regulation

While the ACM has been engaged in public enforcement in relation to greenwashing, the Netherlands Advertisement Code Committee (Reclame Code Commissie – RCC) has been ruling in disputes between companies and customers on the basis of its self-regulatory framework (see our previous blog on RCC developments here). The ACM and RCC have a cooperation protocol meaning that, in principle, consumers should lodge complaints relating to greenwashing/misleading sustainability advertisement at the RCC before the ACM will investigate. If companies fail to adhere to an RCC ruling (or if there are extenuating circumstances), the ACM will enforce against those companies having a number of regulatory tools at its disposal, including the possibility of fines, orders subject to penalty payments and various investigatory tools. 

In past years, we have seen a major uptick in cases that appear before the RCC. Companies appear to be struggling to find the right tone in advertising their sustainability goals or product impacts without greenwashing. Most rulings that find for greenwashing revolve around the lack of substantiation and evidence for advertising claims made.

Class actions

Dutch law provides for a well-established statutory regime for class actions and collective redress. As of 1 January 2020, this statutory regime saw an overhaul with the entry into force of the Dutch Act on redress for mass damages in a Collective Action (WAMCA). This introduced the possibility of claimants’ organisations seeking monetary compensation (where previously only declaratory and injunctive relief had been available on a collective basis), and also explicitly allows for cases which are in the ‘public interest’. These are claims with a principled purpose (ideëel doel) where there may be no recovery of damages. In these circumstances, the court may waive some of the usual admissibility requirements. The action brought by NGO Fossielvrij against KLM falls under this category of 'public interest' actions. More on the implications of WAMCA for class actions can be found here.

According to Fossielvrij, KLM had engaged in greenwashing: its claims make flying with KLM appear more environmentally friendly than in reality it is, and was therefore misleading to consumers. For instance, KLM used sustainability claims such as “be a hero, fly CO2ZERO” and “CO2 neutral” in its “Fly responsibly” campaign. The same campaign was previously already considered as misleading by the RCC, which ruled on 8 April 2022, that KLM’s advertisements were misleading.

The Court considered that while companies such as KLM are free to advertise in any shape and form they like, they must adhere to the rules around unfair commercial practices, which includes misleading consumers. When using vague terms with certain social connotations such as “sustainable”, KLM needs to set out the specific meaning of that claim to the consumer. The Court ultimately found that 15 out of 19 of the contested advertisements were misleading and thus unlawful under Dutch consumer protection laws. KLM exaggerated the positive impact of sustainability measures like sustainable aviation fuels and reforestation programmes. Because KLM had already stopped using the advertisements, the Court did not grant Fossielvrij’s claim for an injunction and rectification. It did state, however, that KLM must communicate in a truthful, substantiated and accurate way in future sustainability claims.

Key takeaways

Developments in relation to greenwashing (and sustainability more generally) show that this topic is front and centre in regulators, consumers’ and NGOs minds. Whereas initially, action was more limited to public enforcement by the ACM (following lengthy investigations and submissions), a fertile field for class actions has now been created. Consumers and NGOs will not hesitate to either commence proceedings at the RCC or in civil court, as the KLM case demonstrates.

It is therefore imperative that companies making sustainability claims ensure they are factually correct and not misleading. In this respect, both the ACM Guidelines and the practices of the RCC serve should be studied carefully. The Court explicitly held that the Guidelines serve as inspiration when interpreting the civil law framework and that the advertising codes of the RCC – and the decisions of the Advertising Code Committee and the Board of Appeal based on them – shape this interpretation in more detail.

While greenwashing actions have focused mostly on the environmental dimensions of claims to date, we are seeing an increase in misleading claims in other areas, for instance those that relate to social and ethical standards. We expect these practices, and both public and private enforcement, to see an uptick in the coming years.