Clifford Chance

The recent Netherlands Court decision in relation to KLM highlights the application of EU law to businesses seeking to promote their sustainability efforts. The Court was concerned with the (Dutch implementation of) the European Unfair Commercial Practices Directive and the 2021 European Commission's Guidance on the Interpretation of that Directive, meaning that the case is potentially relevant for all EU Member States.

The case

In a greenwashing class action brought by the Dutch environmental NGO Fossielvrij (Dutch for 'fossil free') against the airline KLM, the Amsterdam district court (the "Court") ruled largely in favour of Fossielvrij. The Court held that advertisements which suggested that flying was sustainable were misleading and unlawful. The Court based its decision on the (Dutch implementation of) the European Unfair Commercial Practices Directive (the "EU UCPD") and the 2021 European Commission's Guidance on the Interpretation of that Directive (the "EU UCPD Guidance"), meaning that the case is potentially relevant for all EU Member States.

The claim

According to Fossielvrij, KLM's advertisements were examples of greenwashing; a term which generally refers to unsubstantiated, misleading, or incomplete assertions, statements or claims regarding a company’s environmental performance, processes or products.

Fossielvrij took issue with 19 specific advertisements, which can be grouped into three categories:

1. KLM's "Fly Responsibly" ad campaign, which used language such as "more sustainable travel", "a sustainable future", and which highlighted KLM's steps to achieve "net-zero CO2-emissions" through the purchase of carbon credits.
2. Marketing for a carbon offsetting program called "CO2ZERO", which advertised "reducing your impact" and "zero CO2" flights through carbon-offsets, a type of credit used to finance reforestation or prevent deforestation with the ultimate aim of absorbing (more) CO2 from the atmosphere.
3. Advertisements for KLM's "Real Deal Days", which promoted KLM's usage of "sustainable fuels" and encouraged "sustainable travel".

According to Fossielvrij, all the advertisements that were part of these campaigns falsely led consumers to believe that truly environmentally sustainable flights were possible.

The decision

In a nutshell, KLM was found to have misled consumers with "vague and general" adverts about its efforts to reduce the environmental impact of flying and to have painted an "overly rosy picture" of the impact of measures such as Sustainable Aviation Fuel (made from renewable raw materials) and reforestation.

To reach this conclusion, the Court started from the declared aim of the EU UCPD (which is to safeguard the proper working of the internal market of the EU and bring about a high level of consumer protection through harmonised legislation for all EU Member States) and focused on the green claims requirements established by the EU UCPD Guidance on sustainability and environmental claims: "green claims" must "be truthful, not contain false information and be presented in a clear, specific, accurate and unambiguous manner"; advertisers "must have evidence to support their claims"; and environmental claims can be misleading if they contain "vague and general statements of environmental benefits". The Court further noted that consumers are increasingly conscious of the climate impact of the products and services they consume, and that advertisements that play into that awareness and create an impression of environmental sustainability can influence consumption decisions. This ability to sway consumers' choices is necessary for determining whether an advertisement is misleading within the meaning of the EU UCPD.

Against this background, the Court reviewed the 19 KLM advertisements at issue, and found 15 of them misleading and unlawful.

1. The advertisements that were a part of the "Fly Responsibly" campaign frequently used phrases such as "sustainable future" and referenced KLM's usage of sustainable aviation fuels to achieve "net zero CO2 emissions". The court found these and similar phrases too ambiguous and vague, and unrealistically positive about the possibilities of actually reducing the negative climate impacts of flying.
2. Similarly, the Court found the advertisements for "CO2ZERO", KLM's carbon-offsets scheme, misleading, on the basis that they overpromised on the CO2 compensation achievable through reforestation, and on the reductions in CO2 emissions by using (relatively little) Sustainable Aviation Fuels. The Court explicitly considered that the advertisements suggested a link between a consumer's contribution to the carbon-offsets scheme, and the climate impact of that specific consumer's flight, which could not be justified.
3. The Court then examined the "Real Deal Days" advertisements, and likewise found those mostly misleading. Although KLM was free to express its (environmental) ambitions and to advertise flights, the Court ruled that these advertisements – which again referred to sustainable aviation fuels – were vague and unspecific about KLM's investments in, and the actual environmental benefits of, those Sustainable Aviation Fuels.

However, the Court did not find misleading claims addressed to professionals rather than consumers ("Together, we can make your business trip more sustainable (…)"), phrases which did not amount to a claim ("If you do decide to fly, there are always ways to reduce your impact on the environment (…)" or "Together, we can make a bigger difference (…)") and a text saying "CO2 emissions have fallen steadily" accompanying a table outlining the KLM group's CO2 emissions over the period from 2005 to 2020 and an ambition for 2030 which appears correct in view of the statistics.

The remedy

Fossielvrij sought (1) a declaration from the Court that the advertisements were misleading and unlawful, (2) a rectification of those advertisements, and (3) an order against KLM to refrain from using these or similar advertisements.

Given that, as KLM's defence pointed out, none of the advertisements concerned are currently in use, the Court limited its decision to a declaration that certain advertisements were misleading and unlawful, dismissing both requests for rectification and abstention from further use of the claims.

What's next?

Although existing consumer law legislation and unfair competition laws have already proven to be effective in relation to greenwashing, there are a number of initiatives, also at the EU level, aimed at further combating greenwashing in advertising.

The two pieces of EU legislation concerned are the Empowering Consumers Directive (adopted in February 2024) and the so-called Green Claims Directive proposal, for which approval is still pending. These two directives are intended to work in tandem as they have compatible goals.

The Empowering Consumers Directive aims at strengthening consumer rights, in particular by revising the EU UCPD and prohibiting (1) generic environmental claims with no explanation or evidence to support them, (2) claims of no or reduced impact on the environment of a product or business solely based on carbon offset credits and (3) sustainability labels without proper and independent certification process (see our blog post here). This is intended to end vague claims such “green,” “environmentally-friendly,” “responsible,” "CO2 neutral flights" or "conscious clothes".

On the other hand, the Green Claim Directive proposal provides more specific rules on substantiation and communication of environmental claims, requiring businesses to substantiate their environmental claims with a comprehensive assessment and introducing stricter rules for the approval of new environmental labels (see our blog post here).

All of the above legislative initiatives will add to the powers of regulators, which will play a predominant role in combating greenwashing.

Importantly, and as has already happened in a number of cases (see the Dieselgate case in Italy), decisions by regulators can also be used to initiate and support class action lawsuits against companies claiming substantial damages on behalf of consumers who claim to have been misled or harmed by false environmental claims or other deceptive practices. The KLM scenario led to one such case in New York, which the District Court dismissed on the basis that the consumer had not actually purchased a ticket from KLM and therefore lacked standing to sue. Dakus v. Koninklijke Luchtvaart Maatschappij, N.V., Case No. 1:22-CV-07962-RA (12 Sept. 2023).

Managing the risk

Whilst it is important to discourage false environmental claims, it is also important to many consumers that businesses are able to compete in relation to the sustainability of their products and services and communicate their environmental credentials to consumers. So-called "green-hushing" is also a potential source of market failure.

We would suggest therefore that, taken as a whole, the current trends within the EU will give a competitive advantage to those businesses selling products and services that are "greener" than their competitors. This will, however, require such businesses to have or develop a rigorous understanding and governance around the claims it makes for those products and services because cases such as that against KLM demonstrate the heightened risks that come with making "green" claims.