The decision-making practice of the Italian Competition Authority (ICA or Authority) and recent legislative initiatives at EU level show more and more clearly how sustainability is taking on an increasingly central role for consumers when making purchasing choices, and for the policy makers in their activities, at least within the EU.

As known, the ICA enforces consumer protection legislation constituted by Legislative Decree 206/2005 (Consumer Code). Suppressing unfair commercial practices is one of the fundamental pillars of the ICA's public enforcement activities.

Combating commercial practices of companies that use environmental claims and boasts – known as green claims – that are unfair under consumer protection legislation is one of the priorities of the ICA's action.

In exercising its powers under the Consumer Code, the Authority can impose penalties of up to EUR10 million (and up to 4% of their turnover in case of widespread infringements within the EU imposed pursuant to Article 21 of Reg. EU 2017/2394) against companies that use unfair green claims. It can also prescribe other remedies, such as injunctive measures, including on an emergency basis. To this end, the Authority has pervasive investigative powers, which include the power to order inspections and to request information and documents.

A company using unfair green claims can also constitute a tort and unfair competition conduct and expose the company to the risk of claims before civil courts for inhibiting conduct and having to pay compensation for damages, either in the form of follow-on claims (which follow the finding of the infringement by the ICA) or stand-alone claims (which can be brought by anyone with an interest regardless of the initiation of proceedings by ICA).

 

The national and EU legislative framework

The Italian legislation on consumer protection prohibits unfair commercial practices in the relationship between professionals and consumers. This means commercial practices that breach professional diligence that distort or are likely to distort to an appreciable extent the economic behaviour, in relation to the product, of the average consumer whom they reach or to whom they're addressed (Articles 20 et seq. of the Consumer Code).

The unfair commercial practices prohibited by the Consumer Code include misleading commercial practices. This can be commissive conduct, where the professional provides untrue or non-transparent information likely to mislead the average consumer. Or it can be omissive conduct, where the professional doesn't provide relevant information that the average consumer needs to make an informed commercial decision, where such conduct is likely to distort the consumer's decision-making process. Misleading may relate to the price, the availability of the product on the market, its characteristics, the risks associated with its use, or other elements relevant to the choice of purchase.

Misleading commercial practices include companies using environmental claims that don't reflect reality or aren't reliable or otherwise verifiable.

The fight against greenwashing practices, which involve using misleading environmental claims to influence consumers' purchasing choices, and to enable consumers to make more conscious commercial decisions and thus contribute to more sustainable consumption models, are also among the priorities of the EU legislator.

Directive 2024/825 (the Greenwashing Directive) is moving in this direction. It came into force on 26 March 2024, and member states have to transpose it by 27 March 2026.

Directive 2024/825 introduced:

• the provision according to which the display of "sustainability labels" that are not based on a certification system or that are not established by public authorities is a commercial practice in all circumstances considered unfair (among the black list provided by Annex I to Directive 2005/29/EC);
• the explicit prohibition on the use and dissemination of generic environmental claims such as "environmentally friendly," "eco-friendly," “green,” "nature's friend," "ecological," "environmentally correct," "climate friendly," "gentle on the environment," "carbon friendly," "energy efficient," "biodegradable," "biobased" or similar statements that suggest or create the impression of excellent environmental performance, in the absence of evidence of recognised excellence;
• the explicit prohibition of asserting, on the basis of greenhouse gas emissions offsetting, that a product has a neutral, reduced or positive impact on the environment in terms of greenhouse gas emissions;
• limitations on forming an environmental claim regarding future environmental performance, which must include clear, objective, publicly available and verifiable commitments set out in a detailed and realistic implementation plan that includes measurable and time-bound targets and relevant elements necessary to support their implementation, and that's periodically verified by an independent third party, whose conclusions are made available to consumers.

Furthermore, a proposal for a Directive on environmental claims (the so-called Green Claims Directive) is currently on the table of the EU legislator. It was presented by the EU Commission on 22 March 2023 and approved at first reading by the European Parliament on 12 March 2024 (COM(2023)0166). The proposal for a Directive, which is currently being examined by the Council of the EU, establishes minimum requirements on the substantiation and communication of environmental claims made on a voluntary basis and on environmental labelling in business-to-consumer commercial practices.

According to the proposal for a Directive, before communicating an environmental claim to the public, have to carry out an assessment to certify explicit environmental claims. The certification must inter alia:

• specify whether the claim relates to the whole product, to a part of a product or to certain aspects of a product, or to all the professional's activities, or to a part or aspect of such activities;
• be based on widely recognised scientific evidence;
• demonstrate that the environmental impacts, environmental aspects or environmental performance covered by the claim are significant from a life-cycle perspective of the product; and
• take into account, in the case of an environmental performance claim, all significant environmental aspects or impacts for the purpose of assessing environmental performance.

The proposed directive also requires that the statement made by the professional on the environmental claim is verified and certified as compliant with the requirements of the (proposed) directive by a third-party body before it's communicated to the public. The third party is an officially accredited body (the “verifier”), independent of the companies that use the environmental claims, which has the necessary skills, equipment and infrastructure to carry out ex ante verifications of the environmental indications formulated by the company that intends to use them.

Where the submitted claim, following verification, complies with the requirements of the (proposed) directive, the verifying body issues a certificate of compliance. This certificate will be recognised throughout the EU, shared between member states through the Internal Market Information System, and will allow companies to use the claim in a commercial communication to consumers throughout the Internal Market.

 

The national decision-making practice of ICA

Increasingly, the ICA has intervened against the incorrect use of green claims. It has initiated proceedings that have often ended with imposing sanctions against companies active in various sectors for the unfairness of the claims used by traders on their websites, on the packaging of their products or in advertisements circulated through daily and periodic press, internet, cinemas, radio, fixed and mobile billboards, in fuel stations and through the distribution of brochures. Other proceedings ended with a change in the company's conduct as a result of the assumption of commitments or of the moral suasion exercised by the Authority.

In its interventions the Authority:

• has sanctioned companies active in the freight transport sector for having used, on websites, in communications to customers and in emissions certifications, environmental statements (such as, among others, “100% green energy in our facilities”, “Zero-emission delivery vehicles”, “Buildings built according to high standards of sustainability”) considered ambiguous and/or presented in a manner that is not sufficiently clear, specific, accurate, unambiguous and verifiable, also due to the mixing of the concepts of offsetting and reducing emissions. Furthermore, according to the Authority, these companies had required their customers to adhere to a project aimed at promoting environmental sustainability initiatives, suggesting that they would bear the economic burden of financing it, when on the contrary the economic burden would be passed on to customers and the companies would profit from it;
• successfully concluded a moral suasion activity that led to the modification of environmental claims and boasts indicated on their respective websites by companies operating in the field of electric vehicles for urban mobility, since such claims were considered potentially incorrect under consumer protection regulations. The green claims in question focused on the absence of emissions or impact on the environment, or on the total environmental sustainability of the electric vehicles, and were couched in generic terms such as, for example, "100% sustainable," "100% Green," "Zero emissions," "ECO";
• initiated proceedings against a company active in the "fast fashion" or "super fast fashion" sector for using promotional messages regarding the sustainability of its clothing that were potentially misleading and/or omissive. Among the potentially unfair claims was the company's assertion of a generic commitment to the process of decarbonizing its operations, which wouldn't, however, be reflected in the evidence on the increase in greenhouse gas emissions indicated in the company's sustainability reports;
• fined a company in the poultry sector for claims on its website, deemed misleading, related to the full agricultural production of the derrate/raw materials used to make organic feed and the wholly Italian origin of the derrate/raw materials for animal feed;
• found the potential unfairness of an environmental boast of lower carbon dioxide emissions, inserted by an online travel agency within a section of its website dedicated to a specific paid subscription called "Prime." The claim, according to the Authority, would have deceptively suggested that the lower emissions characterized the flight with the "Prime" fare, when, in fact, this feature referred to a specific combination of airline flights, regardless of the fare used. In this case, the proceedings ended with the acceptance of the commitments submitted by the company;
• fined a company for introducing a "clean air fee" charged to users who book a cab ride through an internet platform or related mobile app, but without clearly specifying the cost, nature, its purpose and the conditions of the charge;
• imposed a fine (later annulled by the Council of State) against a company active in the production, transportation, processing and marketing of petroleum derivatives and natural gas, for disseminating advertising messages and informational materials for promoting its fuel. The messages were deemed misleading since they contained untrue information with respect to the fuel's characteristics, in terms of fuel economy and reductions in gaseous emissions, as well as the positive environmental impact associated with its use;
• fined a number of companies for advertising baby diapers as environmentally friendly when they actually lacked such characteristics. The companies had placed on the packaging of their products and indicated on their websites environmental boasts of eco-friendliness, such as biodegradability, compostability, bacteriostaticity and natural origin of the raw materials used, which were in fact not referrable to these products;
• fined a company active in producing and marketing non-alcoholic beverages for using untrue environmental assertions regarding the claimed reduction of CO2 emissions and oil use directly related to the production of a bottle, dubbed "Bio Bottle," for marketing mineral water made from bioplastics;
• fined a company engaged in producing, bottling, distributing and selling water and beverages for misleadingly using for advertising purposes its adherence to an environmental project aimed at offsetting CO2 emissions associated with the production of a certain quantity of bottles.

 

Conclusions

Countering greenwashing business practices that involve misusing environmental claims is not only the goal of new legislative initiatives at the EU level, some of which are already in force. It's also a clear priority in ICA's public enforcement action concerning consumer protection.

It's therefore important for companies that intend to use environmental claims and boasts – which may relate as much to the characteristics of the products or services as to the company's commitment to sustainability or other claims concerning "green" aspects – to implement suitable procedures and consider the adoption of appropriate compliance programs or revising existing programs to take into account the specific risk of violating consumer protection regulations and the possible consequences (such as reputational risk, fines, compensation, operational impacts on business models, etc.).