The end of the claim ‘climate neutral’?

‘Do good and talk about it’ is an important principle for companies, which try to reduce the emissions caused by the production of their goods. Doing that in a way that complies with unfair competition rules can be nevertheless challenging, as the decision of the German Supreme Court on the claim ‘climate neutral’ shows (klimaneutral, case I ZR 98/23).

Background

Katjes Fassin GmbH + Co. KG (‘Katjes Fassin’) produced fruit gums and liquorice, which were offered to end-consumers through food retailers, kiosks and gas stations under the trade mark ‘Katjes’. The production caused CO2 emissions. Katjes Fassin supported climate protection projects of ClimatePartner and advertised its products in a German newspaper for professionals in the food industry (Lebensmittel Zeitung) as follows:

The ad above the packaging reads:

Our climate also likes Katjes.

Since 2021 Katjes produces all its products climate neutrally.

Now also clearly visible on each pouch.

The contested claim is the following:

It says ‘Climate neutral’ and ‘product’ followed by the website of ClimatePartner and a QR code to that website, which contains details as to compensation projects of ClimatePartner supported by Katjes Fassin.

The claimant, a private consumer protection association (Zentrale zur Bekämpfung unlauteren Wettbewerbs e.V.), attacked Katjes Fassin’s advertising as being misleading under the German implementation of Art. 6 Unfair Business-to-Consumer Commercial Practices Directive (‘UCPD’). The relevant professional public would believe that the production process itself is emission-free while, in fact, the emissions are only compensated.

The first and second instance courts rejected the action. The claimant appealed to the German Supreme Court.

The German Supreme Court’s decision

The German Supreme Court found that Katjes Fassin’s advertising was misleading.

The fact that the contested advertising was published in a specialized newspaper was deemed not decisive because the newspaper catered to a wide audience. This public’s understanding of the term ‘climate neutral’ would not be materially different from that of the average consumer.

According to settled case law of the German Supreme Court, a claim is misleading if the perception of the relevant public created by the claim does not correspond with reality. In order to determine the meaning of a claim, the circumstances surrounding its perception and the significance of the goods and services for the relevant public are decisive.

As regards the latter point, the Court referred to its consistent case law, which applies strict standards to health-related claims with respect to their accuracy, unambiguousness and clarity. This is because misleading health-related claims can have serious consequences for the individual or society as a whole. Further, consumers pay particular attention to their health, which is why health-related claims could be very effective for the marketing of products.

The judges applied this case law to environment-related claims. As a result of the general recognition of the environment as a valuable asset in need of protection, an increasing environmental awareness has developed and consumers often prefer goods and services which are promoted as environmental-friendly. Advertising measures linked to environmental protection prove to be particularly suitable for creating emotions, which range from concerns for one’s health to a sense of responsibility for future generations.

The judges also found that it is not uncommon for environment-related claims to be ambiguous. Moreover, products are usually not environmentally friendly overall but only in certain respects. Additionally, the general public usually has only a low level of knowledge about the scientific background.

As a consequence, the risk of deception is particularly high for such claims and there is an increased need for information of consumers with respect to the claims’ meaning.

On that basis, the judges confirmed the lower court’s finding that the term ‘climate neutral’ could be perceived as a reference to the avoidance/reduction or the compensation of CO2 emissions. This vagueness resulted in an increased need for information about the meaning of the claim, which will, in principle, only be satisfied if the meaning of the term is explained in a sufficiently clear and precise way in the advertising itself. This is particular important for the claim ‘climate neutral’ because reduction and compensatory measures were not deemed comparable. Rather, the Supreme Court stipulated the principle of avoidance/reduction over compensation.

The reference to ClimatePartner did not, in the judges’ opinion, alter the fact that consumers could believe that measures to avoid/reduce CO2 emissions have been taken. ClimatePartner could, e.g., have advised Katjes Fassin about reduction measures, such as installing filters.

The fact that the website referred to in the advertising explains that the emissions have been compensated was not deemed sufficient because it required an action by the consumer.

For these reasons, consumers could believe that ‘climate neutrality’ was achieved by avoiding emissions in the production process. This is not in line with reality, which is why the advertising was found to be misleading.

This misleading character of the claim was also considered to cause consumers to take a transactional decision that they would not have taken otherwise. Climate protection is an important issue for consumers and can influence their decision significantly.

Comment

The German Supreme Court’s decision is the end of the isolated use of the popular claim ‘climate neutral’ in Germany. It would be possible to explain what is meant by that term, e.g. by way of an asterisk. However, this is not particularly appealing on a package or in advertising.

More importantly, the level of detail of the explanation is unclear. Is it sufficient to communicate the fact that the CO2 emissions have been offset? Or is it necessary to explain also what compensatory measures have been taken, where, by whom and when? And if so, how detailed? And are the standards different for claiming climate neutrality of the company as a whole, the production process in general or the production of this particular product?
 

Most of these questions will become redundant in 2026 when the EU Member States have to implement Directive (EU) 2024/825 into national law. The Directive amends the UCPD and introduces a new no. 4c. to Annex I of the UCPD, which prohibits: 

Claiming, based on the offsetting of greenhouse gas emissions, that a product has a neutral, reduced or positive impact on the environment in terms of greenhouse gas emissions.

The rationale of this prohibition is explained in Recital 12 of the Directive:

It is particularly important to prohibit the making of claims, based on the offsetting of greenhouse gas emissions, that a product, either a good or service has a neutral, reduced, or positive impact on the environment in terms of greenhouse gas emissions. Such claims should be prohibited in all circumstances and added to the list in Annex I to Directive 2005/29/EC as they mislead consumers by making them believe that such claims relate to the product itself or to the supply and production of that product, or as they give the false impression to consumers that the consumption of that product does not have an environmental impact. Examples of such claims are ‘climate neutral’, ‘CO2 neutral certified’, ‘carbon positive’, ‘climate net zero’, ‘climate compensated’, ‘reduced climate impact’ and ‘limited CO2 footprint’. Such claims should only be allowed when they are based on the actual lifecycle impact of the product in question, and not based on the offsetting of greenhouse gas emissions outside the product’s value chain, as the former and the latter are not equivalent. Such a prohibition should not prevent companies from advertising their investments in environmental initiatives, including carbon credit projects, as long as they provide such information in a way that is not misleading and that complies with the requirements laid down in Union law.