In a recent judgment, the German Federal Court of Justice (BGH) held that the claim "climate neutral" is ambiguous and often misleading unless the advertisement itself explains its specific meaning. This sets a trend for Austria, where courts have traditionally followed the standards set by the BGH in relation to environmental advertising when assessing such claims under unfair competition law. On an EU level, the restrictions regarding claims about greenhouse gas emissions are becoming even stricter, leaving advertisers with much to consider before making claims such as "climate neutral".
A glance at the case before the BGH
The German sweets manufacturer Katjes had placed an advertisement in a specialist journal about food, with the statement "Katjes has been producing all products climate-neutrally since 2021". Additionally, the advertisement displayed a logo stating "climate neutral", with the further addition "Produkt climatepartner.com". This logo was placed on an image of the product packaging in the advertisement and sold in the same way. However, the actual manufacturing process of the advertised products was not CO₂-neutral at all. Instead, the manufacturer merely supported climate protection projects via another company to offset CO₂ emissions. This procedure is also known as buying "carbon credits".
The Kleve Regional Court originally dismissed the claim, and the plaintiff's appeal before the Düsseldorf Higher Regional Court was also unsuccessful. With the plaintiff's appeal allowed by the Court of Appeal, the case finally came before the BGH.
The main points of the BGH ruling are:
- The question of whether advertising with environmental terms such as "climate neutral" and labels is misleading is subject to strict requirements regarding the accuracy, unambiguity and clarity of the advertising claims.
- These requirements result from the increased need to inform the relevant public about the meaning and content of environmental claims. If the requirements are not met, advertising with "green claims" constitutes a misleading unfair commercial practice pursuant to Sections 5 (1), 3 (1) UWG (DE).
- The requirements are only met if an advertisement with "green claims" contains a clear explanation of the meaning behind these claims. In addition, this explanation must be clearly perceptible to the target public within the advertisement.
- If the term "climate neutral" is used, an explanation is therefore required within the advertising itself as to how this climate neutrality is achieved. It must be stated whether this is achieved by avoiding or offsetting CO₂ emissions.
The "climate neutral" claim under Austrian unfair competition law
Already back in 2012, a case concerning the claim "first climate neutral stamp" based on the use of carbon credits landed before the Austrian Supreme Court ("OGH"). Back then, the OGH identified the critical issue regarding the term "climate neutral": it could relate to both the avoidance of CO₂ emissions and CO₂ compensation payments. However, the OGH never had to address the requirements for making claims about reducing or neutralising emissions (e.g. "climate neutral" or "CO₂ neutral"), as the plaintiff had decided to drop this line of argument in its appeal (see OGH 28 November 2012, 4 Ob 202/12b).
Now, the BGH has assessed what the OGH already alluded to, namely that the term "climate neutral" is ambiguous and could create a wrong impression. Moreover, the BGH has confirmed that the avoidance of CO₂ emissions is preferable to using carbon credits. Thus, a misconception regarding the real reason for a CO₂ reduction is capable of influencing consumers' purchasing decisions.
Without doubt, one can expect that the OGH would come to the same conclusions as the BGH if confronted with the interpretation of "climate neutral" once again. Besides the assessment of misleading advertising being harmonised in the EU, the BGH's strict principles regarding environmental advertising have also been settled case law of the OGH since the 1990s.
In practice, this means that in Austria advertisers are well advised to communicate openly about CO₂ compensation payments when using them as a basis for environmental claims. But it does not stop there because a variety of even tighter rules on environmental advertising are being introduced at an EU level.
Prohibition on an EU level
The BGH aligns more closely with the EU legislator regarding claims about emissions. Nevertheless, the ruling of the BGH cannot be used as a guideline by companies for advertising with "green claims" for long – or maybe not even at all.
On 26 March 2024, Directive (EU) 2024/825 as regards empowering consumers for the green transition through better protection against unfair practices and through better information ("EmpCo Directive"), which includes several amendments to the UCP Directive, came into force and has to implemented into national laws. The advertising that formed the basis of the BGH case will no longer be permitted under this new regime. The EmpCo Directive states that advertising using the terms "climate neutral" or "CO₂ neutral" should be categorically prohibited if these statements are based solely on compensation measures. This is to become one of several new environment-related points of Annex I of the UCP Directive, which lists commercial practices that are unfair per se, irrespective of a case-by-case examination by the courts.
For now, there is still time before the new regime kicks in. Member States must transpose the EmpCo Directive by 27 March 2026 and apply the new provisions from 27 September 2026. But while this may seem like a long time, courts are already obliged to interpret national law in accordance with the EmpCo Directive. In addition, it may not always be clear for how long a particular campaign will be used in the market. Advertisers are therefore well advised to consider the new provisions (and prohibitions) before making environmental claims.
Looking ahead
Further tightening of environmental advertising is provided for in the Proposal for a Directive on Substantiation and communication of explicit environmental claims ("Green Claims Directive"), which is still being negotiated by the EU Parliament and the Council. The text adopted by the EU Parliament in the first reading includes detailed standards for the substantiation of explicit environmental claims, which also foresee an obligation to separate any financial contributions from the climate or environmental impact of the product or trader (see Art 3 (ja) Green Claims Directive). As a result, the limits on advertisements in relation to compensation measures are likely to become even stricter in the future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.