The End of 'Green' Advertising? What Implications Do the Strict Requirements of the EmpCo Directive Have for Companies?

1. Legitimate "green" advertising or unlawful "greenwashing"?

The social importance of environmental and climate protection has grown rapidly in recent years. These issues now also play a significant role in consumers' purchasing decisions. Companies therefore try to appear as green and sustainable as possible with the help of environmental advertising claims (such as "climate neutral", "environmentally friendly" or "organic").

However, such green advertising messages often fail to deliver what they promise. The term "greenwashing" means that companies present themselves better in advertising than they actually are when it comes to environmental and climate protection. Greenwashing can take place both through explicit advertising claims and by suggesting that the advertised products are environmentally friendly. In the latter case companies often use symbols and labels that stand for environmental characteristics or a certain packaging design.

In Germany, the question whether a case of unlawful greenwashing exists must be assessed according to the rules on unfair commercial practices in the Act against Unfair Competition (UWG). In addition, there are also various requirements for environmental advertising at the EU level that companies will have to comply with in future. In this context, the draft directive on the substantiation of explicit environmental claims and related communication (the so-called "Green Claims Directive") has dominated media coverage recently. Furthermore, the directive (EU) 2024/825 which amends the Directives 2005/29/EC¹ and 2011/83/EU² regarding empowering consumers for the green transition ("EmpCo Directive"), which the EU Parliament and Council adopted at the beginning of 2024, is also at the forefront of media interest.

The EmpCo Directive severely limits legally permissible environmental advertising and only allows it under strict conditions. Thereby, the EU intends to combat greenwashing. Another aspect of the directive is the fight against "social washing". In this article, we illustrate the main requirements of the EmpCo Directive and point out what companies must bear in mind if they want to use "green claims" or "social claims" in future.

2. Strict regulation of green claims

On the one hand, the EmpCo Directive stipulates that various commercial practices in connection with environmental advertising are always prohibited. On the other hand, it regulates cases in which commercial practices can be deemed unfair taking into account the circumstances of each individual case.

2.1 Extension of Blacklist

The EmpCo Directive stipulates the extension of the so-called "blacklist" in the Annex of the UPC Directive with regard to environmental advertising. According to the EmpCo Directive, various commercial practices are considered unfair per se, without the need for a case-by-case examination by the competent national courts. The aim of these fully harmonized regulations is to achieve a uniform level of protection throughout the EU. The following commercial practices in particular have been included in the "blacklist" and will therefore always be unfair in future:

• Prohibition of "own" sustainability labels: "Displaying a sustainability label that is not based on a certification scheme or not established by public authorities" is prohibited (new No. 2 a) of the Annex to the UCP Directive). This means that the widespread practice of companies using their own sustainability labels to promote their products is no longer permitted. Instead, sustainability labels may only be used in future if the label provider is a government agency or a third party that has set up a certification scheme for its label. The conditions of such a certification scheme must be publicly available. In addition, the monitoring of the requirements of the scheme must be subject to an objective procedure and be carried out by independent third parties (for the requirements of the certification system, see new Art 2 r) of the UCP Directive).
  
  Based in these conditions, it will become more time-consuming and costly for companies to use sustainability labels in the future. They must consider carefully whether the effort and costs of certification are still worth it. The use of sustainability labels is therefore likely to decline.
• Prohibition of generic environmental claims: So-called "generic environmental claims" are prohibited if the company "is not able to demonstrate recognized excellent environmental performance relevant to the claim" (new No. 4 lit. a) of the Annex to the UCP Directive). A generic environmental claim is a claim "that is not included on a sustainability label and where the specification of the claim is not provided in clear and prominent terms on the same medium" (see new Art. 2 lit. p) of the UCP Directive). As examples of such generic environmental claims, the recitals of the EmpCo Directive list statements such as "environmentally friendly", "eco-friendly", "green", "ecological", "climate friendly", "carbon friendly" and "energy efficient". These claims will be prohibited in future if the company making the claim cannot provide evidence of such recognized outstanding environmental performance.
• Environmental claims with a false point of reference: Environmental claims "about the entire product or the trader’s entire business when it concerns only a certain aspect of the product or a specific activity of the trader’s business" (new No. 4 b of the Annex to the UCP Directive). As an example of this prohibition, the recitals of the EmpCo Directive name the case in which a product is marketed as "made with recycled material" to give the impression that the entire product is made of recycled material, although this only applies to the packaging.
• IMPORTANT: Prohibition of advertising with offsetting of greenhouse gas emissions: In addition, the EmpCo Directive stipulates a per se ban on advertising claims "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" (new No. 4 c) of the Annex to the UCP Directive). According to prohibition, companies will no longer be allowed to advertise the climate neutrality of their goods and services if this characteristic is based solely on the offsetting of greenhouse gases and not on actual greenhouse gas savings. The recitals of the EmpCo Directive state that the EU considers this prohibition to be "particularly important", as actual greenhouse gas savings and offsetting measures are not comparable.
  
  This means that advertising with "climate neutrality" will only be permitted in the future in exceptional cases, as this can only rarely be justified by the actual impact of the product without including offsetting measures. This prohibition of the EmpCo Directive goes far beyond the current case law of German courts on advertising with the claim "climate neutral". German courts recently assumed that the average consumer is aware that climate neutrality can be achieved both by avoiding greenhouse gas emissions and through offsetting measures. They therefore classified advertising with the claim "climate neutral" as generally permissible if the company making the claim informs the public whether they achieved the balanced carbon footprint through compensation measures or through actual greenhouse gas savings. According to this case law, the company must also disclose whether certain climate-relevant emissions were excluded from the carbon footprint and the test criteria on which the measurements are based (see e.g., Higher Regional Court of Düsseldorf decision of 6 July 2023, 20 U 72/22 – klimaneutrale Marmelade; Higher Regional Court of Frankfurt decision of 10 November 2022, 6 U 104/22 – klimaneutral). This case law can no longer be upheld after the implementation of the EmpCo Directive.

2.2 Misleading Commercial practices

According to the EmpCo Directive, the unfairness of advertising messages may also result from the following circumstances in individual cases:

• Misleading statements about social product characteristics: According to the new Art. 6 para. 1 lit. b) of the UCP Directive, the unfairness of an advertising claim can also result from incorrect statements about the social characteristics of a product. This shows that the EU not only wants to act against greenwashing, but also against "social washing". Pursuant to the recitals of the EmpCo Directive, the social characteristics of a product can relate to various circumstances along the value chain. Examples include the quality and fairness of the working conditions of the workers involved, respect for human rights as well as equal treatment and equal opportunities for all. In addition, the recitals of the EmpCo Directive state that generic advertising claims such as "conscious", "sustainable" or "responsible" must not be based exclusively on environmental aspects, as these claims also refer to other characteristics, such as social characteristics.
• Prohibited statements on future environmental performance: Claims about future environmental performance are now only permitted if they refer to "clear, objective, publicly available and verifiable commitments" that are set out in a "detailed and realistic implementation plan" that is "regularly verified by an independent third-party expert" (new Art. 6 (2) (d) of the UCP Directive). Hence, if companies want to use such information in advertising, this will involve a considerable amount of time and money in future.

3. Implementation of the EmpCo Directive

The EU member states must implement the EmpCo Directive until March 27, 2026. To this end, the provisions of the Act against Unfair Competition will be amended in Germany. The amended provisions and the associated restriction on environmentally related advertising must then come into force until September 27, 2026.

Since the provisions of the EmpCo Directive are fully harmonized, the German legislator cannot deviate from the Directive. In view of the far-reaching prohibitions and requirements of the EmpCo Directive, many companies will have to change their advertising strategy. This particularly applies to the requirements for the use of sustainability labels and the obligation to provide evidence when advertising with generic environmental claims. In general, companies should be able to support their green claims with solid, comprehensible, and scientifically sound evidence. This requires careful documentation of the underlying data and facts. In addition, advertising with climate neutrality will only be permitted in exceptional cases if this can be achieved without offsetting measures.

Companies should therefore adapt their advertising strategy to the new requirements as soon as possible in order to be prepared when the new UWG provisions come into force. Companies that manage to make such adjustments within the give time can continue to advertise with environmental claims, which can also be an economic opportunity. However, if companies do not adapt their advertising, they will face the risk of being sued by competitors and consumer protection associations for injunctive relief, information, and damages (see Sections 8, 9 UWG and Section 242 BGB). In addition, in accordance with Section 9 (2) UWG, consumers can now also assert claims for damages against a company making misleading statements.

Dr David Moll

¹ Unfair Commercial Practices Directive ("UCP Directive").
² Consumer Rights Directive.