Sustainability claims in the spotlights

Sustainability initiatives are one of the focus areas of the Netherlands Authority for Consumers and Markets (ACM). This does not only concern cooperation agreements between companies to achieve sustainability objectives, which are subject to competition law, but also sustainability claims that companies use independently when offering their products. Following investigations into misleading sustainability claims in the clothing sector, the ACM recently published its commitments decisions regarding H&M and Decathlon. Both companies will adjust or remove sustainability claims on their clothing and/or websites. This marks the ongoing monitoring of sustainability claims by the ACM, not only in the clothing sector, which could lead to the imposition of fines in the future.

Guidelines sustainability claims

In January 2021, the ACM published its Guidelines sustainability claims (Guidelines), in which it provides guidance on the application of consumer protection rules to sustainability claims made by companies. The ACM has identified the following rules of thumb for companies to take into account when drafting sustainability claims:

1. Make clear what sustainability benefit the product offers

2. Substantiate your sustainability claims with facts, and keep them up-to-date

3. Comparisons with other products, services, or companies must be fair

4. Be honest and specific about your company’s efforts with regard to sustainability

5. Make sure that visual claims and labels are useful to consumers, not confusing

Investigations into claims

The ACM subsequently sent numerous companies, among which companies in the clothing industry, a letter requesting them to check their sustainability claims, and if necessary, adjust them to bring them in line with consumer protection legislation. In the letters, it was also announced that the ACM would start investigations into sustainability claims that do not comply with the applicable legislation and that companies would run the risk of enforcement by the ACM.

In November 2021, the ACM followed up these letters by the announcement that it had investigated sustainability-related claims made by ten major clothing companies for accuracy, clarity, and verifiability of the information. The targetted companies were those with the highest turnover in the Netherlands from online sales. This investigation specifically focused on the use of misleading sustainability claims on the basis of three types of violations:

• the use of vague/unclear/absolute terms, as a result of which the product’s sustainability benefit is not clear, missing or not easily found;
• the incorrect or improper use of the claim “organic cotton”; and
• the use of sustainability filters and sustainable collections without making clear what criteria are used, or without providing a substantiation as to why a specific product falls under such a filter or collection.

The ACM announced that it would launch a follow-up investigation into six of the investigated companies where ACM found the most potentially misleading sustainability claims. Two of those companies include H&M and Decathlon.

Commitments decisions

The investigations regarding H&M and Decathlon now have come to an end. Earlier this month, the ACM published two commitments decision in which it declares binding commitments offered by respectively H&M and Decathlon. H&M and Decathlon therefore avoid the imposition of fines.

The remaining four investigations have been referred by the ACM to regulators abroad.

Commitments H&M

It follows from the H&M commitments decision that the ACM found two types of sustainability claims used by H&M to be problematic. Firstly, H&M used, according to the ACM, the sustainability claims “Conscious” and “Conscious Choice”, without explaining what these actually mean. An explanation of the sustainability benefits for specific products was also lacking. Secondly, H&M provided information about its sustainability efforts under the heading “product background” of individual products, regardless of whether these products were made of more sustainable materials. According to the ACM, this may incorrectly give the impression that these products have sustainability benefits. In these texts, H&M emphasized the intention to work with more sustainable materials, without making clear what the current status was regarding those intentions. In the view of the ACM, this could lead to a too rosy a picture about the current state-of-play to emerge. Moreover, in the text about cotton, H&M allegedly gave the impression that all cotton that it used was sustainable, whilst the majority of the cotton was purchased through the Better Cotton Initiative. The ACM deemed it impossible to guarantee that an individual product actually contained any Better Cotton threads, thus making it impossible to claim with certainty that the used cotton was sustainable.

With the offered commitments, H&M acknowledges that the provision of information regarding sustainability on its website in the past should have been clearer and more complete. In view of this, H&M has committed to donating an amount of € 500,000 to an independent non-profit organisation that is active in sustainability. H&M has also committed to changing its website, through the removal of references to the “Conscious”/ “Conscious Choice” labels, and the removal of information about sustainability aspirations and sustainability efforts from the heading “product background”. H&M will change the current texts in the product backgrounds regarding the used materials and clarify the information about the composition of its products, for example, by indicating what share of the used material concerns a more sustainable variant. Furthermore, H&M has committed to ensuring that future sustainability claims, too, will be in line with applicable law. H&M has also committed to creating a compliance programme, which will consist of the appointment of compliance officer(s) and of monitoring whether the commitments have been implemented. A reporting obligation is also part of the commitments. The commitments will be effective for a period of two years.

Commitments Decathlon

The ACM had similar objections with regard to Decathlon’s sustainability claims. Decathlon used the sustainability claim “Ecodesign” without immediately specifying clearly the sustainability benefits. In addition, an explanation regarding the sustainability benefits was missing or only sparingly explained for certain products. Also, Decathlon used a sustainability filter with the term “Ecodesign” of which the explanation and the criteria for products were vague and/or unclear. According to the ACM, Decathlon also used an “Environmental labelling system”, in which it gave grades to, in any case, “Ecodesign” products, ranging between A and E, whilst the grades and the functioning of the system were not or only sparingly explained.

Like H&M, Decathlon acknowledged that the provision of information regarding sustainability on its website should have been clearer and more complete. Decathlon has also committed to donating € 400,000 to two non-profit institutions that conduct research into the development of sustainability in the production of and during the life cycle of pieces of clothing. Furthermore, Decathlon has committed to implementing changes to its website. It will temporarily remove the sustainability claims from its website and will replace the “Ecodesign” label or expand it by adding various labels and filters with specific sustainability benefits. These sustainability filters will be explained by using concrete criteria. Additionally, under the heading “Ecodesign”, Decathlon has committed to providing further explanation to the sustainability benefits regarding the sustainable materials/technologies that are used. Decathlon will also add a link to the website to the information page about “Ecodesign”, which will include an extensive explanation and videos about the benefits of “Ecodesign”. Furthermore, Decathlon has committed to ensuring that future sustainability claims, too, will be in accordance with applicable law. Decathlon will also appoint a legal counsel compliance and create a compliance programme, which will consist of, among other elements, a legal check of all current and future sustainability claims and regular and up-to-date instructions and workshops for employees that are involved in the creation of sustainability. The commitments will be effective for a period of two years.

Sustainability remains on ACM’s radar

By declaring the commitments of H&M and Decathlon binding, the ACM has now issued its first decisions following the investigations into companies' sustainability claims announced in 2021. We expect more decisions to follow, as the ACM announced in January 2022 that it will launch a follow-up investigation into sustainability claims in the energy sector. It cannot be ruled out that the ACM will proceed to impose fines on companies that violate the applicable law. It therefore remains important for companies in all sectors to assess both existing and possible new sustainability claims.