German court cracks down on greenwashing

Companies must clarify the term “climate neutral” in their advertising and packaging following a German court order on Thursday in the latest European ruling to crack down on greenwashing tactics as companies seek to woo the eco-conscious consumer. 

Germany’s Federal Court of Justice said the term “climate neutral,” used in a magazine advertisement by fruit gum and candy company Katjes, was not clear and that such terminology must be explained to avoid duping shoppers. 

The ad said: "Since 2021, Katjes has been producing all products in a climate-neutral manner."

The Frankfurt-based Central Office for Combating Unfair Competition brought the case against the confectionery manufacturer over suspicions that production of the fruit gums themselves was not climate-neutral. However, Katjes said it offset the emissions by supporting climate protection projects, which the competition authority considered misleading.

Climate neutrality is generally defined as reaching a point where the emissions created by a company or other organization are offset by bringing down emissions elsewhere, such as by investing in renewable energy. 

However, the term remains too vague for consumers to properly understand, the court ruled Thursday. It argued that readers could interpret this to mean that emissions have been reduced during the production process when it could simply refer to offsetting measures. 

Regulators tighten restrictions on “green” claims

The ruling comes as companies adjust to tightening rules around what ecological credentials they can and cannot claim. The European Union proposed regulations last year that would force companies to back up their sustainability claims amid realizations that green icons and slogans too often mask a lack of proper emissions reductions and pollution. 

Across the pond, the U.S. Federal Trade Commission is reviewing its Green Guide framework on environmental marketing. The updated guide  is likely to include clearer standards on the use of terms like “sustainable,” “carbon neutral,” and “net zero.” 

Private sector attempts to hold itself accountable

Large companies such as consumer goods giant Nestlé and telecommunications group Vodaphone have set up panels to vet green claims. And last year, Deutsche Bank’s investment arm paid $25 million to settle claims that it exaggerated the use of sustainability factors in its funds.