Net-Zero Claims and Carbon Offsets

Net zero claims and carbon offsets: the short answer

Net zero claims and carbon-neutrality messages have become one of the riskiest areas of advertising law in Germany. Since 27 September 2026, the amended Act against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb, UWG), implementing the EmpCo Directive (EU) 2024/825, prohibits per se any claim, based on the offsetting of greenhouse gas emissions, that a product has a neutral, reduced or positive impact on the environment in terms of emissions. Claims about future climate performance, such as "net zero by 2040", are misleading unless backed by a detailed, realistic, publicly available implementation plan with measurable, time-bound targets that is regularly verified by an independent expert. Companies may still communicate their investments in carbon credit projects, provided they do so accurately and without implying product neutrality.

This article explains why offset-based neutrality claims are restricted, how companies can substantiate climate targets in advertising, how to talk about carbon credits lawfully and what the EU's carbon removal certification framework changes. It complements our overview of green claims after EmpCo.

Why offset-based neutrality claims are restricted

The EU legislator considered that claims such as "climate neutral", "CO2 neutral certified", "carbon positive", "climate net zero", "climate compensated", "reduced climate impact" or "limited CO2 footprint" mislead consumers when they rely on offsetting emissions outside the product's value chain. Recital 12 of the EmpCo Directive explains that such claims should be allowed only where they are based on the actual lifecycle impact of the product, because reducing emissions and compensating them are not equivalent. The Directive therefore added a per se prohibition to the black list of the Unfair Commercial Practices Directive, which Germany transposed as no. 4c of the annex to § 3(3) UWG.

The German Federal Court of Justice had already moved in this direction. In its judgment of 27 June 2024 – I ZR 98/23, it held that advertising products as "climate neutral" without explaining in the advertisement itself whether neutrality was achieved by reductions or by offsetting was misleading. The EmpCo rules now go further: for products, an offset-based claim is unlawful even if fully explained.

Substantiating corporate net zero claims

Net zero claims about a company's future performance are now governed by the amended § 5 UWG. A claim about future environmental performance made to consumers is misleading unless it is supported by:

• clear, objective, publicly available and verifiable commitments;
• a detailed and realistic implementation plan, including measurable and time-bound targets and other relevant elements needed to support implementation, such as allocation of resources; and
• regular verification by an independent third-party expert, whose findings are made available to consumers.

In practice, a robust plan addresses scope 1, 2 and relevant scope 3 emissions, sets interim targets (for example for 2030 and 2035), explains the measures and investments needed, distinguishes reductions from neutralisation of residual emissions and explains the role, if any, of carbon removals. Companies often align their plans with recognised methodologies for science-based targets and with the transition plan disclosures required under the European Sustainability Reporting Standards, which helps consistency but does not replace the UWG requirements.

Communicating about carbon credits lawfully

The EmpCo Directive does not prohibit companies from buying carbon credits or from telling consumers about it. Recital 12 makes clear that companies may still advertise their investments in environmental initiatives, including carbon credit projects, provided the information is not misleading and complies with EU law. Lawful communication typically:

• describes the contribution as financial support for a specific project, not as cancelling the product's emissions;
• identifies the project, the standard under which credits are issued and the amount or share of revenue invested;
• avoids words such as "neutral", "compensated" or "net zero" in connection with the product;
• does not use the contribution to distract from the product's actual footprint.

The quality of credits remains relevant. Claims that credits are "certified", "permanent" or "additional" must be accurate. The EU's carbon removal certification framework, Regulation (EU) 2024/3012, establishes a voluntary Union certification framework for permanent carbon removals, carbon farming and carbon storage in products. Once certification methodologies are in place, units certified under the framework may support more precise statements about removals, but they do not reopen product neutrality claims prohibited by Annex no. 4c UWG.

Data quality: footprints, baselines and scope 3

Lawful climate communication depends on reliable data. Product-related claims about reduced emissions need a product carbon footprint calculated with a recognised methodology, a clear baseline year and product, and an explanation of what is included. Comparative claims such as "40 per cent less CO2" must state what the comparison refers to, for example the company's previous model or the market average, and should be verifiable on request. Where emissions vary by batch or location, averages must be presented as such.

For corporate net zero claims, scope 3 emissions are usually the largest share and the most uncertain. A plan that ignores material scope 3 categories, or relies on supplier data that does not exist, is unlikely to qualify as realistic. Companies should explain which categories are covered, how data quality will improve and how supplier engagement contributes to the targets. The same data typically feed into CSRD reporting, so methodology choices should be made once and applied consistently.

Residual emissions and removals

Most net zero frameworks allow companies to neutralise a limited amount of residual emissions with permanent carbon removals once deep reductions have been achieved. Communicating this logic is permissible, but the advertisement must not create the impression that the company or its products are already neutral today, or that future removals cancel present emissions. Distinguish clearly between avoided emissions, reductions, removals and financial contributions to projects.

Sector examples

• Food and beverages: "climate neutral" labels based on offsets were common; they must be replaced by footprint information or project support statements.
• Travel and transport: options to "compensate your flight" remain possible as a voluntary contribution, but the service itself may not be presented as neutral.
• Energy: renewable electricity tariffs may describe the origin of electricity backed by guarantees of origin, but gas tariffs "made climate neutral" by offsets are problematic.
• Consumer goods and fashion: claims about recycled content or renewable energy use in production must be specific and must not be generalised to the whole product.

B2B, investor and reporting contexts

The per se prohibitions in the UWG annex apply to commercial practices towards consumers. Net zero claims made only to business customers or investors are assessed under the general ban on misleading practices in § 5 UWG, capital markets law and reporting rules. German courts apply strict standards to environmental advertising in all contexts, following the BGH's approach that environmental claims require particular clarity. Claims in sustainability reports, green bond documentation and sustainability-linked loans must be consistent with what the company can substantiate and with what it says to consumers.

Investors increasingly scrutinise the credibility of transition plans. A company that advertises net zero targets to consumers but discloses weaker or contradictory information in its sustainability statement exposes itself to both unfair competition claims and investor criticism.

Litigation risk

Enforcement is driven by competitors, trade associations and consumer organisations, which use cease-and-desist letters and preliminary injunctions. Consumer associations have brought numerous actions against "climate neutral" claims in recent years, and the clearer per se rules make such actions easier. In addition, consumers can claim damages under § 9(2) UWG where a culpable infringement led them to take a transactional decision, and qualified entities can bring representative actions. Reputational damage can exceed the legal costs.

Net zero claims can also become evidence in other proceedings. In climate litigation against companies, plaintiffs have pointed to public commitments to argue that companies recognise their responsibility, while in disputes with investors misleading targets could support claims. Accurate, well-documented communication protects against all of these risks.

Checklist for net zero claims

1. Remove any product claim of neutrality, reduced or positive climate impact based on offsets.
2. Base product-related climate claims on lifecycle data from the product's own value chain.
3. Publish a detailed implementation plan before making consumer-facing future performance claims.
4. Commission independent verification and make the results available to consumers.
5. Describe carbon credit purchases as contributions, with project details, not as compensation.
6. Align marketing, sustainability reporting and investor communication.
7. Keep an evidence file for every claim and review it at least annually.

Responsibility for these steps should sit with a defined team. Marketing should not publish climate-related statements without approval from sustainability and legal functions, and agencies should receive written guidance on prohibited terms. Where claims are used across several EU countries, companies should keep in mind that the EmpCo rules are harmonised but national enforcement practice differs, so a single, conservative standard for all markets is usually the most efficient approach.

Illustration: a hypothetical German coffee roaster labelled its coffee "CO2 neutral" because it bought credits from a forest protection project. After the EmpCo rules applied, it removed the label, began publishing the product's carbon footprint per kilogram with its reduction measures, and described its forest project as "supported with EUR 0.10 per pack" on its website. Its corporate goal of net zero by 2045 now appears only alongside a link to its implementation plan and the independent verifier's latest report.

How TRW & Co helps with net zero claims

We advise companies on net zero claims, climate targets and carbon credit communication under the amended UWG. We review campaigns and labels, assess implementation plans and verification arrangements, draft compliant wording for carbon credit contributions and defend companies in cease-and-desist and injunction proceedings. We also align claims with sustainability reporting and financing documentation. Our work connects with our sustainability reporting and compliance and ESG practices. See also climate litigation against companies and the BGH's climate-neutral advertising decision. To review your climate claims, contact us.