New landmark decision on greenwashing in Germany

As European legislators commence the regulation of environment-related advertising, the German courts are doing their part to progress case law in the same direction. A key step forward has now been taken by the German Federal Court of Justice (FCJ) in its decision dated 27 June 2024 (ref. no. I ZR 98/23) on the topic of advertising climate neutrality based on emission offsetting. 

According to the FCJ, advertising with an ambiguous environmental term (here: “climate neutral”) is generally only permissible if the specific meaning of this term is explained in the advertisement itself. Solely linking to a website via a QR code is deemed insufficient to exclude the risk of misleading consumers. 

Facts of the case

The Defendant is a company that manufactures fruit gum and liquorice products. The Defendant had placed an advertisement in a food industry trade magazine with the statement: “Since 2021, [the Defendant] has been producing all products in a climate-neutral manner” (in German: “Seit 2021 produziert [die Beklagte] alle Produkte klimaneutral”). Additionally, the advertisement contained a logo showing the term “climate neutral” with a referral to the web site of a “ClimatePartner”. Though the manufacturing process of the Defendant's products is not carbon neutral, the Defendant participates in emission offsetting programms of the “ClimatePartner”. The plaintiff, an NGO, found the advertising claim to be misleading, arguing that the public understands it to mean that the manufacturing process itself is climate neutral. 

Decision of the FCJ

The FCJ came to the conclusion that the advertisement was misleading and ordered the Defendant to cease and desist from the advertising practice. The FCJ reasoned as follows:

• The term “climate neutral” is ambiguous since it can be understood by the readers of the trade journal both in the sense of a reduction of carbon dioxide emissions in the production process and in the sense of a participation in offsetting programmes. 
• The risk of misleading consumers in the field of environment-related advertising was deemed particularly high by the FCJ, requiring that the specific meanings of the terms used are explained in the advertising itself in order to avoid misleading consumers. Informative references outside the environmental advertising, e.g. including a QR code leading to a separate web site, are not sufficient in this respect. 
• The claim must be substantiated further because the compensation of carbon dioxide emissions is not equivalent to the actual reduction of emissions in the Defendant’s production process. 

Outlook 

This decision is especially notable against the background of the Empowering Consumers Directive (EU) 2024/825, which came into force in March 2024. The Directive provides that claims advertising a product or service as climate neutral as a consequence of the advertiser’s participation in emission offsetting programmes are per se misleading. This general prohibition will have to be implemented into national law by March 2026. Hence, the requirements established by the FCJ in the decision at-hand will be relevant for two years, until the stricter regulation enters into force, fully banning the claim that the respective product is environmentally friendly due to the participation in offsetting programmes. For these two years, advertisers will have to carefully evidence such claims and include substantial information within their advertising.