Sustainability claims: trendy but tricky

Companies today are under more and more pressure to not only improve their environmental performance but also let the world know about it. However, the risks of both reputational damage and legal consequences stemming from a sustainability claim gone wrong are great. You are therefore well advised to consider unfair competition law before communicating green plans and achievements to consumers.

Applying a strict standard

Environmental advertising is not a new phenomenon. In Austria, the first cases involving potentially misleading suitability claims – also known as "greenwashing" – date back to the early 1990s. Today, it is settled case-law of the Austrian Supreme Court that sustainability claims may only be used in advertising if they are clearly substantiated and cannot mislead the average consumers. Also advertisers are obliged to provide more detailed information if a reference to the environmental friendliness of a product can be misunderstood.

These general principles in mind, sustainability claims must always be assessed based on the following questions:

• How does an averagely informed and reasonably prospective customer for the product, who pays adequate attention to the purchase of such products, understand the sustainability claim?
• Does this understanding correspond with the facts?
• Is a sustainability claim which is incorrect according to the previous criterions capable of causing a consumer to make a transactional decision they would not otherwise have made?

Defining trendy words

But what is an average consumer allowed to expect when reading terms like "organic", "climate-friendly" or "CO2-neutral" and when does the reality live up to these expectations? A look at past decisions makes it apparent that the key point in potential greenwashing cases often lays in the wording. And while well-established terms like "organic" have received significant attention from courts but also lawmakers over the years, there is still a lot of uncertainty surrounding the more recent trends in environmental advertising. In particular, statements about CO2- or climate-neutrality raise complex issues that are still unresolved, like how to deal with compensation payments. For now, we need to exercise an extra amount of caution and have a close look at evolving case law from the courts.

Looking ahead

Sustainability claims are more than just fashionable. Given how consumers increasingly wish to make greener choices, they also bear great potential in fostering a more environmentally friendly economy. Since this promising trend strongly depends on green ads being substantial and reliable, the EU Commission is now proposing several amendments to the Unfair Commercial Practices (UCP) Directive. The objective of the proposal is to ban greenwashing, which in practice means that a variety of new regulations and definitions are on the way.

On the one hand, the EU Commission plans to amend the general prohibition of misleading facts by adding specific provisions on sustainability ads (e.g. regarding statements about future environmental performances or product comparison tools). On the other hand, the proposal introduces several new per se bans into the UCP Directive's "black list", meaning commercial practices considered unfair in all circumstances. Some are very casuistic, while others such as "making an environmental claim about the entire product when it actually concerns only a certain aspect of the product" are more general.  

Overall, navigating the legal waters of environmental advertising will likely remain perilous, so it is essential to keep track of new trends and developments on the national and EU levels. After all, having both good environmental performance and a good environmental image will only become more crucial in the future.

author: Antonia Hirsch