German Federal Audit Court ruling on the expression “climate neutral” in product advertisements

In fact, the defendant company”s production processes are not emission-free, as it only supports climate protection projects through its “Climate Partner”.

Contrary to the Court of Appeal”s view that readers of the trade magazine understood the term “climate neutral” to mean a balanced CO2 balance and were aware that this could be achieved through both reduction and offsetting measures, the BGH held that the advertisement in question was misleading within the meaning of Section 5 (1) of the German Unfair Competition Act (UWG). 

The appeal was therefore allowed, and the Court ordered the defendant to cease advertising in accordance with paragraphs 8(1), 3(1), 5(1) of the UWG and to reimburse the plaintiff”s pre-litigation costs.

The Federal Court of Review motivated this important decision in particular by referring to the ambiguity of the term “climate neutral”, as the different interpretative options - Co2 reduction or offsetting - do not represent equivalent alternatives to achieve climate neutrality. 

Rather than mere offsetting, it would be preferable to speak of reduction, since the trade of CO2 certificates and other offsetting methods are suspected, at least from the perspective of consumers, to be forms of so-called “green-washing” (the latter expression describing a company”s attempt to build a “green” image through special marketing measures without actually reducing the climate impact of its operations).

Therefore, it would not be sufficient for the consumer to understand the expression as indicating a balanced CO2 balance. The BGH also points out that the risk of misleading advertising is particularly high in connection with advertisements referring to the environment. 

Moreover, according to the Court, misleading advertising is also relevant from the point of view of competition law, since an alleged climate neutrality can have a decisive influence on a consumer”s purchasing decision.

In summary, with this landmark ruling, the German Federal Revision Court lays down strict requirements for advertising with ambiguous labels such as those containing the term “climate neutral” and thus strengthens the position of the consumer, who in future will benefit from greater transparency and clarity with regard to these kinds of terms in product advertising.​​