Regulatory attention on the making of misleading green
claims is growing tighter, with new EU regulation
imminent
Recent weeks have seen changes in the communication of green
claims made by British fashion companies and an accommodation
booking platform resulting from the actions of the British and
Dutch regulator, respectively. A recent judgment by the Amsterdam
court that confirmed greenwashingallegations against KLM airlines
has also been widely discussed (see our Insight).
This raises the question whether Polish entrepreneurs should be
concerned about greenwashing risks in relation to sustainability
claims they may be making.
Greenwashing on the international radar
As a result of action by the Dutch regulator (Autoriteit
Consument & Markt), an accommodation booking platform has
been forced to withdraw from its “sustainable travel”
programme of rating accommodations on their sustainability efforts
(and marking them with the appropriate number of green leaf
symbols).
The Dutch regulator’s allegations concerned unclear rules
for awarding ratings, creating a false impression about the
sustainability character of travelling as well as a false
impression that the accommodations not included in the programme
had not taken any steps towards being sustainable. The regulator
has also alleged that a regulatory requirement (eliminating of
single-use plastic products) was used as one of reasons to mark an
accommodation as a sustainable one.
Following the UK regulator’s (Competition and Markets
Authority) investigations, three fashion industry businesses
have pledged to change their sustainability communications and use
only claims that are clear and understandable to the viewer,
visible and sufficiently detailed.
The above reports coincided with the announcement of a Dutch
court ruling against KLM. The case was initiated by a
non-governmental organisation. In its judgment, the court confirmed
that KLM’s claims under review were in violation of Dutch
unfair commercial practices laws.
Reading about these proceedings, Polish businesses may wonder
what the risk is of making green claims on products, services or
operations under Polish regulations.
Polish greenwashing regulations
Making unsubstantiated green claims can lead to certain
liability under Polish law, currently in force.
Claims about the pro-environmental or sustainable nature of
products, services or operations that mislead consumers may be
considered a violation of the collective interests of consumers.
This can lead to the initiation of investigation against the
company by the President of the Office of Competition and Consumer
Protection (UOKiK) and the imposition of a fine of up to 10% of the
turnover achieved in the fiscal year preceding the year in which
the fine is imposed.
Board members may be subject to individual fines of up to PLN 2
million imposed by the UOKiK for intentional
greenwashing.
Businesses’ green claims are already on the UOKiK’s
radar. Last year, UOKiK requested eight companies from the
cosmetics and fashion industry, as well as an online market
platform, to provide explanations for their green claims. The aim
of this was to collect material for UOKiK to review whether there
are grounds to investigate the possible violation of the collective
interests of consumers resulting from making these claims.
The use of greenwashing practices may lead to legal proceedings
against the entrepreneur under the Polish Combating Unfair
Competition Act. A lawsuit can be brought by a competitor of the
entrepreneur or an organisation of entrepreneurs and, as a result
of the proceedings, the entrepreneur may be obliged to cease the
unfair practice, compensate damage, make a declaration of
appropriate content and form or make a payment towards the social
purpose, among others.
In other EU countries, regulators (for example, in the UK or
Netherlands) or professional associations (such as in Switzerland)
have issued guidelines to help assess practices that may qualify as
a greenwashing. In Poland, unofficial guidelines derive from the
Code of Advertising Ethics issued by an industry organisation, the
Council of Advertising Ethics (Rada Etyki Reklamy).
Consumer organisations can also demand the business cease a
violation, make a specific statement or pay money for a social
purpose under the Unfair Commercial Practices Directive.
Commercial impact of greenwashing
Accusations of greenwashingcan also lead to serious reputational
damage, consumer boycotts and loss of business.
Companies that have adopted a sustainability strategy and goals
may not be interested in starting or continuing cooperation with a
partner accused of misrepresenting the environmental impact of its
products, services or its operations.
In addition, new sustainability reporting rules resulting from
the implementation of the Corporate Sustainability Reporting Directive
(CSRD) will oblige entrepreneurs to provide detailed information
about their impact on sustainability-related matters (including the
environment). Based on this information, not only authorities, but
also environmental organisations, consumers and competitors will be
able to analyse to what extent the green claims of businesses
correspond to their actual activities.
Impact of activists
The growing global activity of environmental organisations is
also worth noting. They are expected to scrutinise the green claims
of entrepreneurs more and more thoroughly and reach for legally
available instruments if they identify green claims as
greenwashing, once provided with information on the actual impact
of businesses on sustainability issues (including their
environmental impact) in sustainability reports prepared under the
CSRD. They could sue Polish entrepreneurs who use misleading or
unsubstantiated green claims on the grounds of the combating unfair
competition regulations, demanding that they stop using these
deceptive claims, or file reports to the UOKiK to start
investigations.
Such organisations may be more be eager to take action as the
burden of proof that a particular market practice does not
constitute an unfair and deceptive practice is on the business that
uses it. Thus, it will be the businesses that will have to
demonstrate the evidence for the correctness and accuracy of their
claims.
Osborne Clarke comment
Polish regulations already provide authorities (such as the
UOKiK) with the instruments to combat claims that constitute
greenwashing. Greenwashing is already on the UOKiK’s radar(as
seen from last year’s investigations).
Based on the experience of the implementation of the Omnibus
Directive, UOKiK is expected to begin to combat misleading green
claims more actively after the implementation of EU directives on
greenwashing in Poland (the recently adopted Consumer Empowerment
Directive and the Green Claims Directive, which is on its way
– see our Insight).
Therefore it is worthwhile for businesses to implement
appropriate anti-greenwashing compliance measuresnow. Under these
procedures, any claim made by a business relating to its
sustainability impact, or that of its products and services, should
be checked to ensure that it will not be misleading for consumers.
Such a review should take into account the communication as a
whole, including the symbols and colours used.
Before publishing claims, it is important for businesses to
check whether adequate evidence or material to substantiate the
claims is in place. Once public, claims should be reviewed
regularly to check whether they are still up-to-date and that the
environmental benefit claimed has not became a legal
requirement.
Training managers (whose statements may also fall under
scrutiny) and people in charge of marketing and communication is
strongly recommended. The adoption of an ESG strategy and defined
sustainability goals by a business should be followed by preparing
and implementing an action plan on how to achieve these goals.
Otherwise, businesses may be exposed to accusations that these
goals and strategies are merely empty statements.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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