What are the top three developments in Ukraine concerning green claims and the associated risk of greenwashing?
Sustainability claims have become a powerful marketing and sales tool during the past decade. As a result, many businesses, including those operating in Ukraine, face a temptation to use sustainability claims in their marketing activities. In turn, the regulatory authorities in Ukraine have been keeping this growing trend firmly within their focus.
Under the effective law in Ukraine, sustainability claims fall under consumer rights protection, advertising and labeling rules, unfair competition practices as well as certification compliance requirements. This implies that even unintended violations related to “greenwashing” may be subject to investigation and scrutiny by the authorities, including the Antimonopoly Committee of Ukraine (the “AMCU”) and the State Service for the Foodstuff Safety and Consumer Protection. Furthermore, such violations may result in civil and administrative liability for the businesses making false sustainability claims and engaging in greenwashing.
Therefore, businesses conducting their activities in Ukraine should carefully consider their sustainability claims, policies, and marketing strategies, as well as ensuring compliance with the effective legal requirements.
The most recent trends in sustainability claims regulation and enforcement in Ukraine are presented below.
1. Organic and ‘eco’ products regulation comes under the enforcing authority’s spotlight
The application of specific sustainability claims in Ukraine is regulated by the Law of Ukraine “On Basic Principles and Requirements for Organic Production, Circulation, and Labelling of Organic Products” No 2496-VIII dated 10 July 2018 (the “Law”).
The Law sets out a general legal framework on who can market and label organic products using sustainability claims such as “organic” or “ecological”, and under what circumstances such claims can be made. The Law also establishes a detailed certification procedure, further elaborated upon in several supplementary regulatory acts.
Generally, to be able to use specific terminology in relation to organic products and goods, a company operating in Ukraine must be registered as an operator and obtain a certificate confirming compliance with the organic production requirements. Non-compliance with this requirement is considered a violation of labeling rules and may respectively lead to violation of advertising and competition regulations.
The AMCU systematically verifies compliance with the Law. In particular, the AMCU has initiated several proceedings against companies that used the terms “organic”, “eco”, and similar claims in their product labeling and advertising, which resulted in the companies’ activities being found to amount to dissemination of misleading information and a recommendation for them to cease infringement of competition laws.
Following this trend, the AMCU will likely issue more decisions penalising companies that fail to meet the above sustainability claims requirements in the upcoming years.
The fines for disseminating misleading information can reach up to 5% of the company’s annual income (revenue) from sales of products (goods, works, services), and the perpetrator may be forced to compensate damage suffered by the affected parties in the courts.
2. Avoidance of specific claims, such as “organic” or “biological”, does not release advertisers from the risk of non-compliance
The AMCU has also been targeting other types of sustainability claims that fall outside of the organic certification and labeling requirements.
This trend is well-illustrated by the recommendations issued by the AMCU to an operator in the food industry. Even though this particular operator did not use any specific indications implying “organic” production, it stated in its labeling and advertising that the product was produced in one of the “clean/pure” regions of Ukraine. The claim was followed by a lengthy and poetic description of the production surroundings that further implied the product was produced in a specific region and that this location guaranteed that the product itself was “clean” and “of high quality”.
However, the AMCU found that the product was neither produced, nor did it include other products or materials produced in, the designated “clean/pure” region. Furthermore, even though the respective claims were registered as a trademark in Ukraine, the AMCU still regarded their usage in the product’s labeling and advertising as dissemination of misleading information.
Therefore, the current trend is that all kinds of sustainability claims, irrespective of the specific laws regulating their usage, will be in the AMCU’s focus. In this case, the violations identified by the AMCU will be subject to the same level of fines i.e., up to 5% of a company’s annual income (revenue) from sales of products (goods, works, services) and the potential compensation of inflicted damage.
3. Sustainability claims in the agricultural sector face reduced scrutiny during martial law
The most common sustainability claims (terms such as “organic”, “ecological”, etc.) are widely used in the agricultural industry and are subject to certification compliance in Ukraine. Under the general rule, companies that hold certificates confirming organic production compliance outside of Ukraine can use the sustainability claims provided in the Law only if a number of specific requirements are fulfilled.
The Russian invasion of Ukraine and the damage inflicted by the war on the agricultural industry in Ukraine steered Ukraine’s government to lift a number of restrictions and requirements for business activities in the agricultural sector, including those concerning sustainability claims.
In particular, the government allowed usage of sustainability claims by companies that hold organic production compliance certificates issued outside of Ukraine until 1 July 2024 without the necessity for them to comply with the former stringent requirements under the Law. Nevertheless, the general sustainability claims compliance remains relevant for businesses operating in Ukraine even during the martial law regime.
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