Labelling products as “climate neutral” has many pitfalls in Germany. Given there is no general regulation on climate neutrality claims or “green claims” in general, it is up to the courts to carve out the requirements for the information to be provided to the consumer under the rules of unfair competition law on a case by case basis.

Courts not only look at information requirements, but also assess the underlying compensation project

Guidance by the courts is sometimes unclear or inconsistent, but as an overall tendency, the courts have been establishing information requirements that have become ever more granular over the recent years. Two courts in Karlsruhe (decision of 26.07.2023, 13 O 46/22) and Berlin (decision of 19.09.2023 – 102 O 15/23) have now taken this one step further: They looked at the compensation projects underlying the claim for climate neutrality and assessed whether those projects were actually sufficiently efficient in compensating carbon emissions. The courts held in particular that forest conversation projects were not. As a result, labelling the products as “climate neutral” was held to be misleading and thus unlawful.

Forest conservation projects do not satisfy consumer expectations of a “permanent” compensation

In the cases at hand, the products had been labelled as “climate neutral due to compensation”. The companies had bought certificates for carbon compensation based on conservation projects for forest e.g. in Peru.

The courts now argued: When a product is advertised as “climate neutral” on the basis of compensation efforts, the consumer expects such compensation to be permanent. However, forest conservation projects do not lead to such permanent compensation of carbon emissions. Even though forests are an important element for protecting the climate, there are serious doubts whether a forest conservation project will permanently compensate emissions. On the one hand, the project was only valid for a limited number of years. And on the other hand, the trees can be felled after the end of the project ends, so that the CO2 would be released again. Hence, the promised permanent compensation of emissions was not certain so that the expectation of the consumer was not fulfilled.

Company responsible to check which certificate they buy

The courts also made it very clear that it was the responsibility of the company who wants to label its product as climate neutral to make sure that the project they choose to buy certificates from actually lives up to the promise. The company cannot simply point to the fact that they have bought compensation certificates. They must examine whether such certificates are for projects that are able to permanently reduce emissions.

Takeaways

Companies should be aware that any climate neutrality claim is under close scrutiny by German courts. It will not be sufficient to rely on buying compensation certificates and to meet all the detailed information requirements, but the underlying compensation project should be carefully examined as well. Greenwashing claims are often not only brought by competitors but also by environmental protection associations or consumer protection associations, claiming to protect the consumer against overarching green claims. The risk for bad press is high.