Advertising with climate neutrality permissible, but requires explanation

08 July 2024

The Federal Court of Justice (BGH) has commented on advertising with environmental claims and specified the requirements for the term climate neutrality. According to the judgement, such advertising is generally permissible but the basis of the statement must be directly disclosed in the advertising. In other words, it must be made clear whether the statement is based on the reduction of CO2 emissions or their compensation. The reasons for the ruling are now available and provide further guidance for advertisers on how to deal with environmental advertising in the future (judgement of 27 June 2024, case reference: I ZR 98/23).

The decision is based on the advertising of a confectionery manufacturer. The company had been sued by the Centre for Protection against Unfair Competition (Wettbewerbszentrale) because it had used the following advertising relating to sweets:

“Since 2021, [the defendant] has produced all products in a climate-neutral manner”.

In addition, the products used a logo that shows the term “climate neutral” and refers to the website of a “ClimatePartner”. It is undisputed that the manufacturing process of the products is not CO2-neutral. However, the producer supports climate protection projects via the labelled “ClimatePartner”.

Climate-neutral = vague environmental statement

While the lower courts had deemed the advertising to be permissible, the BGH judged that it is misleading within the meaning of ┬ž 5 (1) UWG (Law against Unfair Competition). According to the judges, advertising a product as “climate neutral” is ambiguous, as the term can be understood either in the sense of a reduction of CO2 in the production process or in the sense of compensation of CO2. Unlike the lower court, however, the BGH judges took the view that it must be made clear what the advertising claim is specifically based on. In the area of environment-related advertising, the BGH also sees a high risk of misleading advertising, as is the case with health-related advertising. For this reason, there is an increased need to inform the targeted public about the meaning and content of the statement. For this reason, the meaning must already be explained in the advertising itself. Statements outside the environmental advertising are not sufficient in this respect

Reduction or compensation of CO2 emissions?

An explanation of the term “climate-neutral” was considered necessary in particular because the reduction and offsetting of CO2 emissions are not equivalent measures for achieving climate neutrality, but the reduction takes precedence over offsetting in terms of climate protection. Due to this differentiation, the relevant public must be able to recognise on which case constellation the advertising statement is based. In the opinion of the BGH judges, the misleading statement is also significant in terms of competition, as the advertising of a product with climate neutrality is of considerable importance for the purchasing decision of consumers.

However, the advertising could not fulfil these requirements. The reference to the cooperation partner “ClimatePartner” is not sufficient as such, as it is not clear whether it is a case of reduction or compensation. A visit to the cooperation partner’s website would have provided further information on this. However, according to the assessment of the BGH, this is not sufficient and cannot be demanded by the relevant public. Rather, the information must result directly from the advertising itself.

Explanatory information depends on individual case

The BGH emphasizes that the explanatory information must be decided on a case-by-case basis. What is relevant is the type of product and the degree and extent of its environmental friendliness. In addition, the explanatory statement must be clearly emphasized, which in turn will depend on the type of product, the advertising and also the possibility of providing information. However, the case law on health-related advertising should provide a reliable basis for advertising.

With this decision, the BGH has finally clarified that advertising with environmentally related terms can be permissible in principle on the basis of German competition law – if certain requirements are observed. The concrete implementation of the principles will undoubtedly occupy the courts of appeal, especially as the considerations established for climate neutrality must also be observed for other environmentally related terms, such as environmentally friendly, environmentally compatible or environmentally friendly. However, the upcoming transposition of the Greenwashing Directive into German law will further reduce advertisers’ room for manoeuvre (see our news article on this topic).