German Federal Court of Justice Significantly Increases Standard for Legitimate Environmental Benefit Claims

German companies must clarify the meaning of a "climate neutral" claim directly in advertisements.

For the first time, the German Federal Court of Justice ("FCJ") has established a standard for the legitimacy of environmental benefit claims¹, thereby contributing significantly to the debate around what constitutes "Greenwashing."

In the case at issue, the defendant had advertised the production of fruit gum products as being "climate neutral" in a food industry trade magazine. According to facts established by the courts, the manufacturing process of the defendant is not carbon-neutral. The production, however involved a compensation mechanism via a system provided by an external environment consulting company, which was not mentioned directly in the ad, only a QR code for the website of the consulting company was provided. The plaintiff—a consumer protection association—considered the ad misleading as the targeted audience can only understand the ad as meaning that the entire manufacturing process itself is climate neutral.

Both the first and the second instance court² dismissed the action; arguing that the targeted public understands "climate neutral" as focusing on the net result and that the process may hence involve both measures to avoid and to compensate for CO2-emissions. While they agreed that it was key that the ad provided information regarding the specifics of how climate neutrality was achieved, they found that the provided QR code was sufficient.

By contrast, the FCJ found the advertisement to be misleading. Even though the term "climate neutral" could be understood by the audience either in the sense of a reduction of CO2 in the production process or in the sense of a mere compensation of CO2, the risk of deception is particularly high in environment-related advertising, which increased the need to fully inform the target audience. By providing only references not included in the advertisement itself, the defendant failed to comply with this increased information obligation. In particular, the Court emphasized the importance of alleged climate neutrality for a consumer's purchasing decision.

This decision significantly increases the legal requirements of including climate neutrality claims in advertisements. The referral to explanatory information outside of the specific advertisements—even via direct QR code links—is now considered insufficient and renders the entire advertisement therefore unlawful, allowing for claims for injunctive relief, as well as damage claims.

_{1 The grounds for the judgement (case reference I ZR 98/23) have not yet been published; however, an overview was provided in an official press release, published June 27th, 2024.
2 Regional Court Kleve, case reference 8 O 44/21, June 22nd, 2022; Court of Appeals Düsseldorf, case refence I-20 U 152/22, July 6th, 2023.}

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

_{© 2024 White & Case LLP}