Netherlands - Sustainability claims and greenwashing

• Consumer and markets authority publishes guidelines for sustainability claims and conducts investigations into misleading sustainability claims
• The Code for Sustainability Advertising regulates the use of green claims in advertising – and is applied strictly
• Consumer studies reveals low levels of consumer understanding and confidence in the use of sustainability labels or claims regarding carbon offset, highlighting the need for reform of the current system

What are the top three developments in the Netherlands concerning green claims and the associated risk of greenwashing?

Sustainability is becoming increasingly important for companies and consumers alike. Recent research shows that 40% of Dutch consumers consider sustainability important. Today, Dutch consumers, activist groups and the Dutch government are no longer satisfied with vague promises about the sustainability of companies and products and are demanding hard evidence. This is also apparent from the attitude of consumers towards sustainability or green claims. So-called "greenwashing" is no longer tolerated.

One of the current priorities of the Netherlands Authority for Consumers and Markets ("ACM") is sustainability. One way in which the ACM makes sustainability a priority is by taking enforcement action against misleading sustainability claims. Non-compliant companies face the risk of severe sanctions such as formal investigations and heavy financial penalties.  In addition, since the ACM publishes all of its sanctions on its website, there is also the risk of reputational damage. Such damage can also occur if a complaint about a misleading green claim is upheld by the Advertising Code Committee ("ACC"). The ACC is a self-regulating body, dealing with the Dutch rules on advertising, such as the Code for Environmental Advertising.

We have identified the three most important trends to watch out for when making green claims to Dutch consumers.

1. Consumer and markets authority publishes guidelines for sustainability claims and conducts investigations into misleading sustainability claims

The ACM has published the “Guidelines on Sustainability Claims” (the Guidelines) to provide businesses with practical examples on phrasing sustainability claims. The guidelines include the following five rules of thumb for businesses: Make clear what sustainability benefit the product offers; 

• Substantiate sustainability claims with facts, and keep them up-to-date; 
• Comparisons with other products, services, or companies must be fair; 
• Be honest and specific about the company’s efforts with regard to sustainability; 
• Make sure that visual claims and labels are useful to consumers, not confusing.

Pursuant to the publication of the Guidelines the ACM initiated investigations into allegedly misleading sustainability claims in the energy sector, dairy products sector, and clothing sector. The ACM contacted over 170 businesses in these sectors to verify the accuracy of their sustainability claims. 

In the clothing sector, the ACM investigated, among others, the sporting goods retail chain Decathlon and the clothing retail chain H&M. The investigation found that Decathlon and H&M offered their products using general terms such as “Ecodesign” and “Conscious” without immediately specifying the sustainability benefits associated with these claims. During the investigation, both retailers indicated their willingness to adjust their practices and made commitments. In September 2022, the clothing companies committed to use no longer such general sustainability claims on their products and/or websites and to inform consumers more clearly to minimize the risk of misleading practices involving sustainability claims. In addition, they agreed to make donations of 400,000 euros and 500,000 euros, respectively, to various sustainable causes to compensate for their use of unclear and insufficiently substantiated sustainability claims.

 The ACM also investigated the energy companies Greenchoice and Vattenfall. The investigation found that Vattenfall and Greenchoice presented themselves as sustainable through the use of comparisons, but it was unclear what these comparisons were based on or who or what was being compared. During the investigation, both suppliers indicated their willingness to adjust their practices and made commitments. In October 2022, the two suppliers committed to informing consumers more clearly to minimize the risk of misleading practices involving sustainability claims. In addition, they agreed to make donations of 950,000 euros and 450,000 euros, respectively, to various sustainable causes to compensate for their use of unclear and insufficiently substantiated sustainability claims.

After accepting the commitments made by the above-mentioned companies, the ACM did not impose any sanctions

On January 20, 2023, the ACM published the commitments made by the airline Ryanair regarding the use of green claims. The ACM conducted an investigation into CO2 compensation claims in the airline industry and found that Ryanair used claims such as “Fly greener to [….]” . These claims could mislead consumers in believing that they could fly “greener” with Ryanair. Following the confrontation by the ACM, Ryanair implemented three changes to the CO2 compensation option in the online sales process for airline tickets:

• Adding a clear message that CO2 compensation does not make flying itself more sustainable. Claims such as “Fly greener to [….]” were changed to factual messages such as “compensate your estimated CO2 emissions,” and icons such as green leaves were removed; 
•  Displaying the calculation and amount of CO2 being compensated; 
•  Providing additional clarity about the projects on which the CO2 compensation is spent and highlighting the independent certification of these projects.

These investigations received significant media attention, including coverage in newspapers and on consumer programs on television. 

2. The Code for Environmental Advertising regulates the use of green claims in advertising – and is applied strictly

The Code for Sustainability Advertising (“CSA”) applies to all sustainability claims, i.e. environmental claims as well as ethical claims. The term sustainable refers not only to the environment, but also to animal welfare or working conditions.

The CSA applies to all aspects of the life cycle of goods and services, including production (also the processing of raw materials) and waste processing. The CDR applies also to advertising messages that warn against environmental impacts of particular goods of services. 

The main rules of the CSA are:

• Make the sustainability claim clear, specific, correct, and unambiguous and be clear and realistic about ambitions; 
• Substantiate claims with current evidence; 
• Clarify if a claim only applies to certain components or aspects; 
• Be honest about the absence or reduction of harmful ingredients; 
• Make fair comparisons with objectively comparable products; 
• Use only symbols or labels whose origin is clear; 
• Use claims about waste collection, waste disposal, or recycling only if these options are available and achievable. 

The ACC takes a very broad view of the concept of sustainability claims. According to the ACC, sustainability claims can also be made through images.  The ACC is also very strict when assessing green claims, ruling, for example, that vague terms such as “sustainable”, “natural” and “responsible” do not have a definitive meaning. As a result, these terms should be used cautiously and it must be made clear in advertisements which specific interpretation the advertiser is using for the term. Without sufficient information, the average consumer may not be able to make an informed decision, and the advertisement will be considered misleading.

The ACC is even stricter in assessing absolute claims. The more absolute the green claim, the more stringent the requirement of evidential material. Absolute claims require strong, clear, and convincing evidence. This strictness is reflected in the assessment of the claim “carbon neutral”. The ACC has ruled several times that an absolute green claim such as “carbon neutral” may only be used if the advertiser demonstrates this with solid, independent, verifiable and generally recognised evidence that there is full offsetting of the carbon footprint of the advertised product or service in practice. Merely referring to applied international standards or stating that the company participates in a certified project is not sufficient to substantiate such claims.

3. Consumer studies reveals low levels of consumer understanding and confidence in the use of sustainability labels, highlighting the need for reform of the current system

In 2021 and 2022 the ACM published two studies that examined the knowledge of consumers regarding sustainability labels and claims regarding carbon offset.

In June 2022, the ACM published a study entitled "Study of the Impact of Sustainability on Consumers". The study found that knowledge of sustainability labels among Dutch consumers is limited, with many consumers being unaware of the meaning behind the labels or who issues and verifies them. Only 25% of consumers have confidence in these labels. As a result, the labels are not effective in guiding consumers to make sustainable choices. The study also determined that consumers prefer visual sustainability scores, similar to energy labels for electronics. The study concluded that clear and reliable information is necessary to drive consumers to make sustainable choices. However, the current system of labels fails to provide that assurance. As a result, changes are needed in the legislative and corporate spheres to revamp the system of sustainability labels. Legislative proposals are needed to introduce requirements on sustainability labels.

The second study researched CO2 compensation claims by airlines when purchasing airline tickets. This study shows that information provided by businesses regarding carbon offset is not easy-to-understand for many consumers. One in two consumers sees little to no difference between carbon reduction and carbon offset. Most consumers do not understand the term ‘carbon-neutral’.  As a result of this study, the ACM concludes that there is a serious risk of deception when using general and vague terms such as ‘carbon-neutral’ and ‘climate-neutral’. The ACM therefore advises that businesses should avoid these terms, and provide clear and concrete explanations with their claims.

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