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04.08.2023 | KPMG Law Insights, KPMG Law Insights

Karlsruhe Regional Court: Forest protection does not make products climate-neutral

CO₂ compensation is not synonymous with the terms “climate neutral” or “environmentally neutral”. A lawsuit filed by Deutsche Umwelthilfe led to a ban on the use of the “climate neutral” and “environmentally neutral” labels.

The Regional Court (LG) of Karlsruhe (Az. 13 O 46/22 KfH) has ruled that a drugstore chain may no longer advertise its own-brand products with labels such as “climate neutral” or “environmentally neutral.” The court justified its ruling in a test case brought by Deutsche Umwelthilfe (DUH) by saying that expectations were being raised that the products concerned did not fulfill.

Karlsruhe Regional Court: Forest protection does not lead to climate neutrality

In addition to the allegation of injunctive relief, active misleading conduct pursuant to Section 5 (1) and (2) UWG was also at issue. The court based its decision on the grounds that the promise of a climate-neutral product had not been kept. A specialized service provider had certified the products as climate neutral because payments had been made to tree protection projects. This became the drugstore chain’s undoing. It had intended to compensate for the greenhouse gases generated in the production of the products concerned by contributing financial aid to projects that support climate protection, such as forest conservation. Projects of this kind are essential instruments for climate protection, but: “The claim of climate neutrality of the product goes […] in principle beyond what can be achieved by means of CO₂ certificates from forest protection,” ruled the district court.

CO₂ lingers in the atmosphere significantly longer than such forest protection projects last

According to the Federal Environment Agency, the decomposition of greenhouse gases takes several hundred thousand years. The specific forest protection project is only planned until 2040, he said. According to the district court, consumers who are “normally informed, reasonable, attentive and interested in environmental protection” are misled by the label “climate neutral” or “environmentally neutral.” The labels suggested not merely a delay in climate pollution, but a final, permanent offset. In addition, the label lacked a reference to an Internet site that would have provided clarity to the average consumer.

Fruit gum manufacturer allowed to advertise with “climate neutrality

The Düsseldorf Higher Regional Court (OLG) had to decide a similar case. However, this one took a different outcome. In Düsseldorf, a fruit gum manufacturer and the Central Office for Combating Unfair Competition (Zentrale zur Bekämpfung unlauteren Wettbewerbs) disputed whether consumers would conclude from the claim “climate neutral” that on balance no CO₂ is emitted during production manufacture. According to the OLG judges, the average consumer can understand the term “climate neutral” in the sense of a balanced balance of the company’s CO₂ emissions, knowing that neutrality can be achieved both through avoidance and through compensation measures.

Contradiction of the courts?

The case of the fruit gum manufacturer was based on different facts. The advertisement placed in fact contained a reference to the website of the certifying company. To the newspaper reader, respectively. According to the OLG judges, it is reasonable to expect the newspaper reader to visit a website that is readily available for more detailed information. In addition, the OLG Düsseldorf did not have to decide whether sufficient compensation was actually provided by the fruit gum manufacturer and whether consumers were thus misled, since the Wettbewerbszentrale failed to submit a substantiated argument. This ultimately led to the Higher Regional Court of Düsseldorf rejecting the objection.

The decision of the Karlsruhe Regional Court is therefore not in conflict with the case law of the Düsseldorf Higher Regional Court. There was no deviation in the relevant consumer circle or in the established case law of § 5a UWG.

Outlook and liability avoidance in practice

Deutsche Umwelthilfe sees the ruling as a “milestone for consumer protection.” Legislators have a duty to set clear guidelines to avoid greenwashing, he said. More than 20 other companies were sued by DUH for using the “climate neutrality” label.

Even though the ruling is not yet legally binding, companies should scrutinize their environmental claims. Because there are other reasons that speak against “Green Claims”:

On March 23, 2023, the EU Commission presented a proposal for a directive on environmental claims (“Green Claims”). The directive contains far-reaching obligations for companies that advertise their products using environmental claims. New minimum standards are introduced for environmental claims about products or services. The goal, he said, is to create common criteria against greenwashing and misleading environmental claims.

The liability risk of companies is intensifying immensely as a result of the transformation of business life towards sustainability. Given the extensive obligations, caution should be exercised when companies advertise ESG-related efforts. In addition to general claims for damages, greenwashing also threatens violations of unfair competition. Companies should identify the relevant ESG obligations for themselves and establish measures and processes at an early stage to avoid violations and thus minimize liability risks due to greenwashing from the outset.

 

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