ESG: Risk minimization against "colorful" lawsuits!
Articles
Legal
Governance / ESG
Litigation / Arbitration
Greenwashing is on everyone's mind, but this is not the only "color of complaint" that threatens.
Adrian Peyer
Legal Partner
"Greenwashing": Companies present themselves or their products as more sustainable, environmentally friendly or climate-friendly than is the case.
Example: Complaint against marketing with "CO2-neutral skiing"
Engadin St. Moritz Mountains AG advertised on its website that "CO2-neutral skiing" was supposedly possible in its ski area.
The basis for the mountain railroads' claim was their switch to a new type of fossil synthetic fuel called "GTL Fuel Alpine".
It was clear to the Consumer Protection Organization that the term "CO2-neutral" was misleading and that the advertising by Engadin St. Moritz Mountains AG was unfair. On the basis of the information available, the Consumer Protection Organization filed a complaint with SECO for unfair commercial practices under Art. 3 of the Federal Act against Unfair Competition (UWG).
SECO then reprimanded St. Moritz Mountain AG and asked it to stop using the term "climate-neutral snow sports", as this promise was misleading. 1, 2
"Bluewashing": Companies advertise themselves or their products with their social commitment and sense of responsibility, although this does not correspond to the truth or corresponding commitments are only implemented in the short term.
Example: No public complaint is (yet) known in Switzerland, but cases from the UK are known. [3]
"Purplewashing" / "Rainbow washing": Companies proclaim equality, but do not live it in their corporate culture or they use strategies to promote their products by allegedly identifying with the LGBTQ+ movement.
Example: In this respect, too, no public complaints are (yet) known in Switzerland, nor are they widespread internationally.
Legal classification4
Switzerland
The risks of criminal liability for entrepreneurs and companies that engage in greenwashing with regard to their companies or products are manageable. The hurdles for punishing greenwashing under the offense of fraud pursuant to Art. 146 SCC are high. As a rule, there is a lack of a motivational connection or a lack of damage. Both must be proven by the criminal authorities.
The greatest risk is a violation of Art. 3 para. 1 lit. b UCA (in conjunction with Art. 23 para. 1 UCA). According to this catch-all provision, anyone who makes incorrect or misleading statements about themselves, their company, their business name, their goods, works or services is acting unfairly. Greenwashing is advertising with (inaccurate) sustainability promises and is therefore (primarily) a competition law issue.5 This catch-all provision also applies to cases of blue and purplewashing.
In the case of greenwashing, the specific Art. 3 para. 1 lit. x UCA will now apply from 1.1.2025: "In particular, anyone who makes statements about themselves, their goods, works or services with regard to the climate impact caused that cannot be substantiated by objective and verifiable bases is acting unfairly."
By amending the law, Switzerland is also stepping up the fight against greenwashing in the real economy.6
Risks based on UWG Art. 3 para. 1 lit. x
Various parts of information can be used as data relating to climate impact: qualitative statements ("sustainable", "climate-neutral", "green", "CO2-free", etc.);
Quantitative information (KPIs, CO2 consumption in tons, greenhouse gas emissions, offsetting, figures for Scope 1, 2 and 3, progress measurement, achievement of quantitative targets, statements on climate-related financial risks, etc.);
procedural information (description of measures taken to reduce climate impact, success stories, interviews, etc.).
The greenwashing ban applies to various activities and areas of the company. In particular:
large companies that prepare a sustainability report (report on non-financial matters pursuant to Art. 964b of the Swiss Code of Obligations) must be able to objectively and verifiably substantiate all statements on climate impact.
Companies that voluntarily publish a sustainability report must also be able to prove and substantiate their statements on climate impact.
Advertising and marketing for products (including financial products) and services
Descriptions of products and services
Use of climate labels
Corporate Communications
Violations of the UWG can have consequences under civil and criminal law. Not only competitors, but also customers, professional and trade associations and consumer protection organizations are entitled to take legal action. The Consumer Protection Organization Switzerland, for example, has introduced a reporting platform where consumers can report suspected greenwashing.7
Outlook EU
The "Green Claims Directive" is intended to create transparency and give consumers the certainty that something that is advertised as environmentally friendly is.
The proposed directive would contain detailed rules on the substantiation of explicit environmental claims about products and related communication in the context of business-to-consumer commercial practices.
It would apply to voluntary explicit environmental claims and labeling schemes, i.e. certification schemes under which a product, process or company is certified as meeting the requirements of an eco-label.
Member States would have to ensure that companies carry out an assessment to substantiate environmental claims. However, there is no prescribed method for this assessment.
In addition, some requirements for comparative environmental statements would be defined.
The proposed directive would also lay down requirements for eco-label schemes. Member States would have to establish procedures to ensure ex ante verification of the substantiation of claims and related communication against the requirements laid down in the Directive. This verification must be carried out by a verification body, which issues a certificate of conformity attesting that the claim or label complies with the requirements.8
The EU Parliament adopted its position at first reading on March 12, 2024. The European Council published its position on June 17, 2024. Negotiations will continue at the start of the new legislative period. Following a final agreement, the member states will then have 18 months to integrate the directive into national law and a further twelve months for the provisions to actually enter into force.
Preventive measures
Companies should raise awareness of the issue of greenwashing (and blue and purplewashing) and take appropriate measures.
Measures can include, for example, integration into risk management and the ICS or corresponding directives and controls. The relevant persons (e.g. BoD, MB, marketing, communication, etc.) should also receive specific training.
Solid governance is also the foundation for preventing greenwashing. "Box-ticking" is not only not enough, it also creates a greenwashing risk if the goal of sustainable economic activity is lost sight of. An external review (audit, certificates, labels) can additionally promote trust and can minimize the liability risk of the company, the board of directors and the top management.9
Swiss companies operating in the EU (or advertising their products there) should also keep a close eye on regulatory developments.
Our ESG team provides you with competent support in the prevention of proceedings, while our litigation team is available at any time in the event of impending or ongoing proceedings. Our ESG and litigation teams will be happy to meet with you for an initial informal discussion.
