German top court forces companies to explain ‘climate neutral’ claims in adverts

Companies are no longer allowed to label their products ‘climate neutral’ in Germany without adding a detailed explanation to back up the claim, the country’s highest court has ruled. In a lawsuit filed by the competition watchdog Wettbewerbszentrale against sweets producer Katjes, the Federal Court of Justice (BGH) ruled that the company had misled consumers in a trade journal by claiming that its carbon offsetting efforts had made the product climate neutral even though the production process still released emissions. “The claim ‘climate neutral’ is ambiguous because it can be understood both as referring to a reduction of CO2 in the production process and to a mere compensation of CO2,” the judges argued. Customers could therefore not be sure of the validity of the claim, according to the court, which ordered that products labelled "climate neutral" must contain a detailed explanation. Similar to boasts about the health benefits of some products, claims about environmental credentials are subject “to an especially high risk of deception” and “require a heightened degree of clarification” due to their potentially large effect on purchase decisions, the court said. Any advertisement, therefore, must directly spell out how the product is made more environmentally friendly. Directing the customer to seek further information elsewhere, for example through a scannable QR code on the label, is not sufficient, it added.

The competition watchdog’s head, Reiner Münker, said the BGH’s ruling will lead to greater transparency in advertising. “For a long time, it was contested and unclear whether there should still be tight rules regarding environmental claims in advertisements,” Münker said, adding that the court now confirmed this position. According to the Wettbewerbszentrale, the ruling will improve competition by preventing companies from merely claiming to act sustainable to compete with or gain an advantage over those which genuinely invest in the sustainability of their products, leading to “a competition of innovation for the most sustainable offer”. Sweets producer Katjes said it had acted in accordance with legal requirements at the time when it introduced its 'climate neutral' label, underlining that it had paid out “substantial” compensation to offset its emissions, newspaper Frankfurter Allgemeine Zeitung reported.

Environmental consultancy ClimatePartner, which certified "climate neutral" labels until last year, said the ruling wasn't a surprise given pending EU regulation to ban misleading environmental claims. In the face of growing criticism, the consultancy introduced a "ClimatePartner certified" label to indicate a product's emissions reductions and further reduction targets by the producing company, as well as a "Financial climate contribution" label for companies that finance climate projects. In recent years, companies launched a wave of products labelled "climate neutral," but the claims overwhelmingly relied on questionable commitments to compensate continued emissions elsewhere on the planet, inviting accusations that this trend is nothing but greenwashing.