German Supreme Court’s first decision on “Climate neutral” claims in advertising

What happened?

A German sweets company had advertised that the production of all of its products was climate neutral. However, the production process itself was not climate neutral, but the company supported CO2 compensation projects. The details of the claim to climate neutrality could be accessed via a website link and a QR code, but were not explained in the advertising itself.

The claim “climate neutral” is too vague

The Federal Supreme Court held that it is too vague when the production is simply advertised as “climate neutral”. This claim is unclear, as it could mean a reduction of CO2 during the production or a mere compensation through CO2 certificates. At the same time, the interest of the consumer in the reasons behind the climate neutral claim is particularly high, meaning that also the requirements of transparency for the advertisement are high. The company would have had to explain directly in the advertisement what the alleged climate neutral production is based on – reduction or compensation. Providing a link to a webste where further information could be accessed was not sufficient.

In addition, the court noted that reduction and compensation are not equally suitable to obtain the desired result of a climate neutral production. Reduction is better than compensation. This must be made transparent to the consumer.

Outlook

So far, only the press statement from the court is available, so the details of what the Supreme Court will eventually require from companies in their advertising is not yet fully spelled out in detail. Yet, it is clear that the requirements for “green claims” are getting increasingly strict, in particular when it comes to compensation of CO2 emissions.

In this context, it should also be noted that advertising with CO2 compensation will also be heavily restricted in the future due to the recent Directive on the Empowerment of the Consumer for the Green Transition (“EmpCo”, Directive 2024/825). This Directive includes an amendment of the “black list” of the Directive on Unfair Trade Practices, thus prohibiting claims alleging that a product has a neutral, reduced or positive impact on the environment due to a compensation of carbon and other green house gas emissions. [See Engage article on the EmpCo Directive of 6 March 2024]. Once this has been transposed into national law, advertising based on climate compensation projects will only be possible in very limited scenarios.

Authored by Mareike Hunfeld