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Greenwashing

04/07/2022

Author

Eva Wariwoda

Associate

Florian Kranebitter

Partner

Flora Petri

Associate

The question of "eco-trick" or actual sustainability

Marketing products as "green", "sustainable", "vegan" or "environmentally friendly" has become a massive trend in recent years. Companies try to present themselves and their products from the "greenest side". When do companies play the "eco or sustainability trick" and when are businesses or products actually sustain-able and what are the legal consequences?

Using the environment in advertising companies as environmentally friendly only for the sake of marketing is a widespread strategy. This ranges from fabric softeners that are chemical-free and vegan to the financial market, where investments are sustainable and climate-neutral. From a legal perspective, caution is required. Such advertising exceeds the limits of what is legally permissible if it is likely to mislead market participants about the characteristics of the product. Environmental terms in particular appeal to consumers on an emotional level, because the purchase of such products gives the consumer the feeling of having "done something good". For this very reason, the judicature takes a closer look at environmental advertising and applies a stricter standard. According to the Austrian Supreme Court, environmental messages may only be used in advertising if they are clearly substantiated and not misleading for the consumers. If there is a possibility that the advertising could be misunderstood, it is the duty of the company to clarify or to structure the advertising clearly. In a decision of the Austrian Supreme Court, a company advertised that its plastic bottles consisted of "50% plastic waste from the sea". However, it was established in the proceedings that the plastic was collected from beaches and bays in Rio de Janeiro after the 2014 World Cup. In this case, the Supreme Court affirmed a misleading statement under the UWG (Austrian Federal Act against Unfair Competition), as it could not be established that the plastic had ever been in the sea. Such violations of the prohibition of misleading statements under the UWG can give rise to claims for injunctive relief and damages by competitors, associations, but also consumers.

On an international level a strict standard is applied to environmental advertising. For example, the British Advertising Standards Authority (ASA) ruled that an airline's advertisement claiming to be "Europe's Lowest Emissions Airline" was unlawful, because, among other things, crucial points for assessing emissions, such as the density of seats, were not taken into account. In Germany, the Düsseldorf Regional Court found the slogan "Die Dose ist grün" (The can is green) to be misleading, as the average consumer considers slogans with terms such as "green" to be environmentally related and thus misled the consumer.  

A package of measures announced by the EU Commission at the end of March 2022 is expected to lead to a tightening of sanctions against greenwashing within the EU. This includes an amendment to the Directive on Unfair Commercial Practices, along with an expansion of the "black list" of prohibited commercial practices. Vague statements such as "green", "en-vironmentally friendly" or "eco" referring to the environmental properties of a product shall be prohibited in the future if they cannot be proven in concrete terms. With the inclusion of such facts in the "black list", they would be prohibited per se and companies would be more motivated to check their advertising claims several times in order to avoid potential law-suits. In addition, the "self-creation" of sustainability seals (prominent cases in this regard were the self-creation of environmental seals by large detergent companies) shall be pre-vented by only allowing advertising with seals if they are awarded by (independent) third parties or authorities.

Moreover, on the financial market "green arguments" are used in advertising, as the sustainable focus is placed on ESG criteria when selecting funds, shares or bonds. Private rat-ing agencies offer the evaluation of investments according to ESG criteria, but the differ-ence in standards and evaluation measures can lead to different or even contradictory results. At EU level, the EU Regulation on Sustainability Disclosure Requirements in the Finan-cial Services Sector (SFDR), put into effect in March 2021, plays a key role in this regard and aims to ensure greater transparency and avoid greenwashing. Financial products are to become more transparent and comparable through a uniform rating system. In combination with the EU Taxonomy Regulation, the potential for an important cornerstone for transpar-ent, comparable and sustainable investments would be given. However, the hopes based on the EU Taxonomy Regulation were already disappointed this year: the EU Commission de-cided to classify natural gas and nuclear energy as sustainable under certain conditions, a case of "legalised greenwashing".

So the question whether there is genuine sustainability or "greenwashing" cannot always be answered unambiguously and without a doubt both from a factual and a legal point of view, and has to be reviewed case by case. Even the EU and its member states do not agree (yet) on such questions. The protection against "greenwashing" in the entire value chain through various legally protected mechanisms is, however, at least as important for entrepreneurs as the protection against the use of raw materials and production conditions that violate internationally recognised standards and principles or interfere with fundamental rights.

fwp also supports leading Austrian and international companies on ESG and sustainability specifically in the adaptation of internal and external processes throughout the value chain.

Author

Eva Wariwoda

Associate

Florian Kranebitter

Partner

Flora Petri

Associate