Three non-governmental organizations have sued a Dutch subsidiary of Air France KLM over the airline’s environmental claims, as accusations of greenwashing are on the rise.
Greenwashing is a term used to describe false, unsubstantiated, or outright misleading statements or claims about the sustainability of a product or a service by a company or organization.
ClientEarth UK, Fossielvrij NL and Reclame Fossielvrij filed the lawsuit before Amsterdam’s district court on July 6 in what is believed to be the first greenwashing lawsuit in the airline industry—a sector that relies on heavily polluting fossil fuels.
The three NGOs contend that one of KLM Royal Dutch Airlines’ ad campaigns—”Fly Responsibly”—breaches European consumer law by encouraging customers to buy carbon offset products to reduce the environmental impact of their flight. By giving consumers the false impression that its flights will not worsen the climate crisis, the airline is breaching the EU consumer law, the NGOs argue.
They are being represented by Bureau Brandeis, a boutique law firm with offices in Amsterdam and Paris that specializes in litigation.
“When it comes to offsets claims, the law on misleading marketing needs to be enforced. Trying to reassure customers that a small payment for tree planting or ‘sustainable’ fuel compensates for flight emissions undermines urgent climate action, is gravely misleading, and, the claim argues, is unlawful,” ClientEarth U.K. lawyer Johnny White said in a statement.
In an email sent to Law.com International, a spokesperson for the Dutch airline noted the information needs of its customers had changed in recent years and that its information provision had evolved accordingly.
“We believe that our communications comply with the applicable legislation and regulations. Others think differently,” the spokesperson said. “In that respect, we hope that a court ruling in this case will clarify how best to shape our communications policy.”
KLM Royal Dutch airlines is being represented by the Dutch business law firm Stibbe.
Lawyers said the lawsuit against KLM should be seen as part of a broader trend, and expected more legal disputes to follow. They also expect that enforcers that until now were passive will in the future increasingly crack down on misleading environmental claims in advertising.
“This is not something marginal,” said Isabelle Rahman, the managing partner of Reed Smith’s Brussels office. “It’s definitely something that has to be on companies’ radar screen.”
Julia Grothaus, a partner in Linklaters’ Frankfurt office, agreed.
“Expectations of regulators, investors, business partners, consumers and other stakeholders regarding sustainability are growing, and so [are] the greenwashing risks. Companies no longer face only reputational issues and minor legal risks,” she said.
“False and misleading statements can result in enforcement action with substantial sanctions and bear considerable litigation risks,” she added.
The degree of risk varies depending on a company’s jurisdiction, size and business, she said.
Lawyers also said legal disputes and enforcement would come from many different directions.
“I think definitely [they will come from] class actions led by consumer rights associations, or environmental lobby groups or private investors,” Reed Smith’s Rahman said, adding that advertising authorities, as well as environmental agencies and consumer protection agencies, would also step up their enforcement. “They can do it at their own initiative or be tipped off by people who think there’s greenwashing going on.”
Research suggests that greenwashing is a widespread problem. Last year, the European Commission and national consumer protection authorities carried out a large sweep of green claims made by companies on their websites and found that the claims were exaggerated, false or deceptive in 42% of cases.
In March, the EU’s executive body proposed a series of changes to the Unfair Commercial Practices directive, the bloc’s main consumer protection legislation, that would introduce a legal ban on greenwashing claims. Consumers who believe they have been misled by a company’s environmental claims “will be entitled to remedies,” including under the EU’s class action scheme, the Commission said when it announced the new rules. The proposed changes still need to go through the EU legislative process.
At the national level, the rules around environmental advertising are fragmented, Philine-Luise Pulst, a senior associate in CMS Hasche Sigle’s Hamburg office, told Law.com International. “The legal framework on the national level is very heterogenous—from countries with rather specific and strict laws such as France, to countries with legally non-binding codes and guidelines such as the Netherlands, as well as countries like Germany with no specific green claims rules at all,” she said.
“As there is a lot of innovation in the market and more and more ‘green’ concepts are being developed, there are many advertising claims that are not yet included in legislation and technical standards or have not been part of legal disputes,” she added.
This was echoed by Linklaters’ Grothaus, who said the increase in disputes would task courts with “applying existing legislation to tackle greenwashing, and finding answers to the many unresolved questions—for example, regarding the exact meaning of specific claims or in the area of assessing ESG harms.”
Lawyers said the number of legal disputes over greenwashing claims would also increase as new sustainable concepts develop and sustainability becomes more and more important to lawmakers, businesses and consumers.
Rahman noted that the transition to a green economy is one of the EU’s key priorities at the moment and consequently also top of mind for companies operating in the 27-member bloc. Pointing out that businesses want to comply with policy initiatives proposed as part of the landmark Green Deal package to make the bloc climate-neutral by 2050, she said: “In doing so, they’re making more and more of these green claims and that’s leading to growing awareness that, ‘Oh, I have to be careful when I make green claims.’”
At the moment, national consumer protection agencies, advertising authorities and environmental agencies can all open investigations into greenwashing claims and fine companies found to have breached the applicable rules. But Rahman described the track record on enforcement as “weak.”
Although a number of investigations over greenwashing claims are ongoing, no major fines have been issued to EU-based companies to date. In Germany, Deutsche Bank’s fund unit DWS Group is being investigated by the country’s federal financial supervisory authority over claims that it misled investors about its sustainable investments.
It is believed to be the first greenwashing probe in Europe’s financial sector. In the U.S., however, the Securities and Exchange Commission has slapped Bank of New York Mellon’s investment arm with a $1.5 million fine for making ESG-related misstatements for certain mutual funds it managed.
The European Commission is itself also facing potential legal action. ClientEarth and Greenpeace, as well as Austria and Luxembourg, announced earlier this month they would bring legal challenges over the executive body’s proposal to include natural gas and nuclear energy in the EU’s list of sustainable investments—a move described by Greenpeace as “politically motivated greenwashing.”
Rahman, a competition lawyer, noted that making unfounded or exaggerated environmental claims can also raise competition concerns.
“What I’m seeing is my clients being very sensitive to what their competitors are saying—not only about the green credentials of their products but also whether in doing so they’re disparaging our clients’ products,” she explained, noting that competition enforcers were also starting to pay more attention to this. “The market is watching you. It’s not going to be just consumers or consumer associations. It’s also your competitors.”
The next step in the KLM Royal Dutch Airlines legal dispute is for the Amsterdam court to consider the claim’s standing to proceed.
