Green Claims and Greenwashing - navigating the upcoming EU Directive from both German and Swedish legal and business perspectives

18 juni 2024 Immaterialrätt

Green claims and greenwashing were the subject of a breakfast seminar at Vinge on 11 June 2024, organised in cooperation with the German law firm SKW Schwarz. Speakers at the seminar were Dr Daniel Kendziur, partner at SKW Schwarz and Malin Malm Waerme, partner and Åsa Hellstadius, IP Expert, both at Vinge. Below follows a summary of the key take-aways from the seminar.

The green transition fuels the need for reliable consumer information

Today's market is experiencing a green transition, driven by increased environmental awareness. For many companies, climate change and the green transition are priorities. As environmental and climate work accelerates, combined with increased consumer interest, many companies also want to express their climate ambitions and the environmental benefits of their products or services. This has led to a proliferation of green claims, eco-labels and environmentally themed marketing campaigns. However, there is a risk of a disconnect between a company's actual sustainability efforts and customers' perceptions of those efforts. The EU has taken a strong regulatory and administrative stance on green claims to prevent so called “greenwashing”. Greenwashing in short can be explained by the practice of misleading consumers, for example by misrepresenting the environmental impact of a product or service.

What is a green claim?

A green claim gives the impression that a product or service:

  • has a positive environmental impact
  • has no environmental impact; or
  • is less harmful to the environment than competing products or services.

According to the ICC guidelines, a green claim is any statement, symbol, image or graphic in marketing communication that conveys an environmental aspect of a product or service. Images and the overall presentation of the product should be truthful and accurate in relation to the environmental benefits, according to the Commission's guidelines. In addition, a green claim can be both explicit and implicit.

The burden of proof is on the trader to ensure that all claims made in marketing are true, and the standard of proof is generally high.

Critical risks with greenwashing from a business perspective

The risks of a company engaging in greenwashing are not only regulatory or civil liability, but also reputational risks. Greenwashing is difficult to undo - so it is much easier to address it before it happens than to undo it afterwards. This can be illustrated by the "Six Sins of Greenwashing" identified by the organisation TerraChoice: the Hidden Trade-Off, No Proof, Vagueness, Irrelevance, Fibbing and Lesser of Two Evils. For example, the sin of the hidden trade-off is committed by claiming that a product is "green" on the basis of a single environmental attribute (such as the recycled content of the paper) or an unreasonably narrow set of attributes (recycled content and chlorine-free bleaching), without considering other important or perhaps more important environmental issues (such as the energy required for production, impact on global warming, water and forestry impacts of paper). Such claims are not usually false, but are used to paint a "greener" picture of the product than a more complete environmental analysis would support. Companies are therefore advised to adopt a precautionary approach when communicating green claims to consumers, as reputational damage is one of the most critical risks to avoid. 

Current status of green claim legislation and case law in Germany and Sweden

Recent case law from both German and Swedish courts shows similarly strict standards for advertising using environmental terms and symbols. Environmental claims must be accurate, relevant, substantiated and verifiable. In principle, strict requirements must be imposed on the information required in order to avoid misleading information.

The level of protection afforded to the average consumer also appears to be generally high in both jurisdictions, although recent cases from German Higher Regional Courts may indicate that a company's duty to inform may vary depending on the specific target group of the recipient of the marketing. Remedies in Germany include injunctions and claims for damages by competitors and, from 28 May 2022 under new rules, by consumers subject to certain conditions. The new rules also include the possibility of administrative fines of up to 4% of a company's turnover, with an EU-wide dimension requiring cooperation between different authorities.

In the Swedish system, the remedies available through court decisions are, for example, prohibitions (with a fine), damages and market disruption charges of between SEK 5,000 and SEK 5,000,000, with a maximum of 10% of the company's turnover. The Consumer Ombudsman is an important actor in the Swedish marketing system because he has special standing to litigate marketing cases and can issue prohibitions and other orders in minor cases. Another aspect of the Swedish system is the self-regulatory measures created by business scrutinizers such as the Swedish Advertising Ombudsman and the Alcohol Scrutineer.  

The new EU Directives on environmental marketing

The EU is in the process of establishing harmonised standards for information requirements and the verifiability of environmental claims in marketing. The much-discussed proposal for a Green Claims Directive is currently in the legislative process and is expected to be adopted later this year. However, the provisions of the EmpCo Directive (Directive (EU) 2024/825 as regards empowering consumers for the green transition) came into force on 27 March 2024, which amends the Consumer Rights Directive (2011/83/EU) and the Unfair Commercial Practices Directive (2005/29/EU), The EmpCo Directive introduces, among other things, bans on general environmental claims without specific verifiable content and on sustainability claims relating to environmental and/or social characteristics that are not based on a certification scheme (in a tripartite relationship) or have not been approved by a government agency. Thus, the EmpCo Directive already requires stricter standards for environmental claims to be introduced into national law.

Key aspects of the proposed Green Claims Directive

The proposal for a Green Claims Directive (COM(2023) 166 final 2023/0085(COD) introduces several other measures to combat greenwashing. Some of the key measures in the proposal include:

  • Setting clear criteria for how companies should substantiate their environmental claims and labels
  • Requiring these claims and labels to be subject to prior approval by an independent and accredited third party verifier.
  • New official eco-labelling schemes will only be allowed if they are developed at EU level.
  • Infringements should be penalised by public authorities rather than by competitors.

The obligations set out in the Directive are expected to enter into force two years after the final adoption of the Directive. The Directive is expected to be adopted later this year.

Among other things, the proposal requires traders to obtain prior authorisation from a verifier before making green claims. In order to obtain such prior authorisation, a number of criteria must be met. Micro-enterprises (with fewer than 10 employees and a turnover of less than EUR 2 million) are exempted from the obligations, unless they apply the provisions voluntarily.

Points of criticism

The aim of the Directive is to ensure that customers are protected and empowered to actively contribute to the green transition. It also represents a significant effort to harmonise the rules on environmental claims across the EU, encompassing both national legislation and self-regulation. However, the prior authorisation requirement can be seen as impractical, time-consuming and expensive. It can cost up to €40-50,000 per claim and can also take 2-3 months to be approved. The process of getting environmental claims approved risks encouraging companies to make more abstract claims, which is contrary to the purpose of the Directive. The requirement for prior third party certification of environmental claims, particularly if there are no exceptions, has been criticised as disproportionate and impractical. In the light of this criticism, a simplified procedure is proposed for certain explicit environmental claims. The Council has also proposed the introduction of a third party 'certification scheme' to certify that a product, process or company complies with certain requirements and, if so, to allow the use of an appropriate sustainability label. However, the prevailing view in legal and business circles is that it would be better to verify explicit environmental claims using the presumption of conformity procedure and self-assessment based on recognised methods and standards, analogous to product safety.

A look into the crystal ball: Exclusions and consequences

It is clear that the proposed Directive introduces very strict requirements for the use of environmental claims and the possibility to use eco-labels in the future and it remains to be seen how the final proposal will be drafted and whether simplified procedures will be adopted. It is interesting to note that existing environmental claims will not be exempted from the new rules and no transition periods are foreseen. Environmental claims covered by existing EU legislation, such as the EU Ecolabel or the EU logo for organic food, are also excluded from the scope of the proposed Green Claims Directive. Sustainability claims for financial services based on existing legislation are also excluded. The Directive does not apply to B2B, but it remains to be seen whether national legislation will extend the scope of the Directive in line with the scope of the existing legislation. For example, the Swedish Marketing Practices Act covers both B2C and B2B marketing.  

Needless to say, the green transition has forced legal initiatives driven by consumer concerns. The question, however, is whether the proposed legislation hits the mark and achieves the goals of more informative marketing without the risk of greenwashing. The main criticism is of the announced prior authorisation procedure, which critics say risks leading to internal censorship by reducing the number of environmental claims reaching consumers. There is talk of a risk of green hushing, where companies and organisations choose to keep quiet about their climate strategies for fear of being accused of greenwashing or being named and shamed if they fall short. The stricter rules may also lead to the use of more abstract claims, with the risk of increasing consumer confusion, contrary to the purpose of the Directive.

Constitutional aspects from a Swedish Perspective

The need for a third party prior authorisation procedure for green claims, as envisaged in the proposed Green Claims Directive, may conflict with Swedish constitutional rules. Two of Sweden's four constitutional laws, the Freedom of the Press Act (Sw. Tryckfrihetsförordningen) and the Fundamental Law on Freedom of Expression (Sw. Yttrandefrihetsgrundlagen), contain provisions that, among other things, guarantee freedom of expression. One such safeguard is the constitutional prohibition of censorship, which is likely to include commercial speech. The ban on censorship prohibits prior public scrutiny of the content of publications or other expressions of opinion before they are published. Sanctions and other measures relating to their content can only be taken afterwards. However, the proposed third party prior authorisation procedure for green claims introduces just such a prior public scrutiny. This potential conflict between the Directive and the Swedish Constitution implies the need for a government inquiry into the matter, not least because, if a constitutional amendment proves necessary, it risks delaying the transposition of the Directive into Swedish law.  

Authors and contact information

Åsa Hellstadius, asa.hellstadius@vinge.se
Malin Malm Waerme, malin.malmwaerme@vinge.se
Daniel Kendziur, d.kendziur@skwschwarz.de