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Sylvie Gallage-Alwis discusses how corporates can navigate ‘eco credentials’

By Sylvie Gallage-Alwis

Partner Sylvie Gallage-Alwis explores how corporates can make environmental claims without risking greenwashing allegations in the ThoughtLeaders4 Disputes Magazine.

Sylvie’s article was published by ThoughtLeaders4 Disputes in the June 2024 edition of its Magazine, and can be found here.

News of claims being filed against companies on the ground of greenwashing are flooding the media. The latest industry which has been targeted is the airline industry. The Olympics to be held in Paris this summer are not immune to accusations. The company ArcelorMittal which manufactured the torch is being accused by some of greenwashing, having said that the steel used would be low-carbon steel [1].

Banks, apparel, insurers, food, electronic products, airlines, automotive, packaging, marketplaces, these are some of the many industries which are under scrutiny by NGOs. How do they operate?

There is first a scrutiny of the websites and any claims placed on the products when they are goods. There is a then an analysis of the annual reports and any sustainability reports published by the company. Each word is analysed, each objective assessed. Third, the services around the delivering of the products are analysed (type of transport chosen, storage, quality of servers, are contracts sent through attachments, links, etc.). Some NGOs go as far as testing products or testing the water/ soil/air/population around manufacturing sites to assess the environmental and health impact of industrial activities. Finally, NGOs will investigate the company’s suppliers. Indeed, a company can be “green” but its suppliers may not. In that case, exposure to litigation remains.

This explains why Directive (EU) 2024/825 of 28 February 2024 “as regards empowering consumers for the green transition through better protection against unfair practices and through better information” has been passed.

This texts notably prohibits “Making a generic environmental claim for which the trader is not able to demonstrate recognised excellent environmental performance relevant to the claim”, “Making an environmental claim 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”, “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 following practices are also expressly inserted in the Annex of the Directive as prohibitions for products which include a software, showing the will of the European legislator to address new types of products: “Withholding information from the consumer about the fact that a software update will negatively impact the functioning of goods with digital elements or the use of digital content or digital services”, “Presenting a software update as necessary when it only enhances functionality features”, “Falsely claiming that under normal conditions of use a good has a certain durability in terms of usage time or intensity”.

Member States are asked to implement sanctions against companies which would not comply with such rules when advertising their services and products.

French law has several legal tools to combat greenwashing. Misleading commercial practices are the ideal ground used to punish professionals who use environmental claims that are misleading to consumers regarding the true impact of the product or company on the environment. Article L. 121-2 of the French Consumer Code thus prohibits commercial practices that mislead consumers regarding the ecological characteristics of a product, a service or more generally a company. The penalties incurred can be a fine of no more than €300,000 for a natural person (or €1,500,000 for a legal entity). These amounts may be increased to 10% of the annual average turnover calculated over the last three years, or 50% of the amount of the expenses incurred to communicate on the misleading claim, when the profit generated from the misleading practice exceeds the amount of the initial fine. The amount of this fine can be increased to 80% when it is a misleading environmental claim [2].

In terms of advertising, since 1 January 2023 [3], advertisers are prohibited from claiming in an advertisement that a product or service is carbon neutral (or equivalent wording) without complying with a specific framework, the terms and conditions of which are defined by decree [4]. Ignoring such an obligation exposes professionals to a maximum fine of €20,000 for a natural person and €100,000 for a legal entity. The purpose of this measure is to ensure the transparency and accuracy of the information provided to the consumers regarding the carbon footprint.

To be more concrete on what can be claimed, one can refer to the Practical Guide on Environmental Claims [5], The French National Consumer Council (NCC) published in summer 2023.

The NCC Guide reminds that the AGEC law established Article L. 541-9-1 of the French Environmental Code, according to which the wording “biodegradable”, “environmentally friendly” or any other equivalent, cannot be affixed to the products or their packaging. In a nonexhaustive list, the NCC notes that the following wording may be considered equivalent to “environmentally friendly”, and therefore prohibited: “environmentally responsible”, “bioresponsible”, “biocompatible”, “nature-friendly”, “planet-friendly”, “environmentally favourable”, “good for the environment”, “good for climate”, “good for the planet”, “ecological”, “ecofriendly”, “ecologically correct”, “protects climate”, “preserves the environment”, “green” or “nature lover”. These claims are considered as all-inclusive and present a high risk of misleading consumers regarding the real environmental qualities of the product, thus constituting greenwashing.

Obviously, some claims are authorised, if they are sufficiently substantiated (e.g., “reduced carbon footprint”, “reduced ecotoxicity”, “organic”, “ecodesigned”). That is the key for green claims as it is for any claims: substantiation. Let’s indeed not forget that greenwashing claims are not just about money, it is mostly about reputation and follow-on civil claims such as class actions and mass tort. It is therefore wise to be cautious and to prefer a “shy” approach rather than being bold in this field.

[1] https://www.france24.com/en/live-news/20240507-arcelormittal-hit-by-olympic-flame-greenwashing-accusations

[2] Article L. 132-1 of the French Consumer Code

[3] Law no. 2021-1104 of 22 August 2021 on combating climate change and strengthening resilience to its effects (Climate and Resilience Law)

[4] Decree no. 2022-539 of 13 April 2022 relating to carbon offsetting and claims of carbon neutrality in advertising

[5] Guide accessible via the following link: https://www.economie.gouv.fr/files/files/directions_services/cnc/avis/2023/Allegations_environnementales/guide_2023.pdf

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