Switzerland - Sustainability claims and greenwashing
- Swiss regulation is currently based on general competition and advertising laws, while legislators monitor legal developments on sustainability claims in Switzerland and the EU
- Caution needed in relation to green claims when importing products from the EU into Switzerland, to reflect local sustainability infrastructure
- “Corporate social responsibility” trends lead to greater focus by regulators on transparency in green claims
What are the top 3 developments in Switzerland concerning green claims and the associated risk of greenwashing?
Switzerland is not an island when it comes to the present disruptive and important changes to how products are manufactured, packaged and supplied. Not only are the Swiss government, public and companies concerned with sustainability issues, Switzerland also contributes, with its leading academic institutions and its innovative and strong technical sector, to environmentally friendly product manufacturing and packaging.
ESG concerns are increasingly influencing consumer purchasing decisions and a growing number of Swiss consumers are willing to change their purchase preferences based on sustainability credentials. This trend is particularly strong amongst the younger generation. The growing presence of sustainability claims reflects this development as companies have a vested interest in informing the consumer about the sustainability credentials of their services and products. However, non-compliant advertisers face the risk of being targeted (in response to specific complaints) by market surveillance authorities, the Swiss Fairness Commission, a court, or the criminal prosecution authorities. The respective consequences include formal investigations, financial penalties, civil sanctions, and criminal prosecution, which in the worst case could lead to custodial sentences for the company directors and officers involved.
We have identified the top 3 areas of development for those who operate or target consumers in Switzerland to be mindful of when making sustainability claims:
1. Swiss regulation is currently based on general competition and advertising laws, while legislators monitor legal developments on sustainability claims in Switzerland and the EU
In Switzerland, communications on sustainability, including green claims, are not regulated by a separate law or ordinance. Instead, depending on the product or service, various legal bases and regulatory requirements may be applicable. For example, the specifications for the communication of recyclability may, depending on the item to be recycled, be found in different laws and regulations.
The Federal Act against Unfair Competition ("UCA") must always be observed in the case of advertising claims. Furthermore, the Swiss Fairness Commission, which sets standards on fairness in commercial communication, has issued a new guideline on green claims. This guideline mainly consolidates existing decisions of the Swiss Fairness Commission on green claims and takes into account international developments such as the EU Green Claims Directive. The guideline does not introduce new rules, but rather sets out the requirements for companies to make green claims in accordance with the UCA. Even though the Swiss Fairness Commission is an institution of the communication industry with the purpose of self-regulation of advertising, its principles are referred to by doctrine and practice when evaluating advertising communications. Like all other claims in business-to-business and business-to-consumer advertising, green claims must be clear, true and not deceptive. In general, a green claim can be considered to be clear, if (i) the green claim clearly states what it refers to, (ii) the communication outlines the measures that have led to the green claim (e.g. reducing emissions), (iii) the efforts advertised go beyond what is standard for the industry, and (iv) the green claim clearly states whether it refers to current circumstances or future efforts. Information provided to the customer must also be true and the company must also be able to prove the accuracy of the information, if necessary, by means of independent studies or other documentary evidence. For example, if a company makes the claim that its product has been reinvented to have a reduced carbon footprint, it must be able to substantiate this claim with independent evidence upon request.
There is currently no pending legislation regarding sustainability claims in the Swiss parliament. This is consistent with the Swiss legislator’s preference to initially rely on existing general rules rather than issuing a specific law or regulation to tackle new issues. However, any developments in the EU are closely monitored in Switzerland. EU developments, such as the new Green Claim Directive, have not only influenced the guideline on green claims of the Swiss Fairness Commission, but are also expected to influence the interpretation of the current Swiss law. It also cannot be ruled out that once it is clearer which way the international (especially EU) regulation of sustainability claims develops and the foreign legislators have gained initial experience, Switzerland will follow suit with its own regulation. Such legislation is, though, often sector specific.
2. Caution needed in relation to green claims when importing products from the EU into Switzerland, to reflect local sustainability infrastructure
Producers often wish to use the same claims they use in neighbouring EU countries (i.e. Germany, Austria, France or Italy) in Switzerland, especially in the parts of Switzerland where the consumers speak the same language as neighbouring countries.
While practice shows that the same fundamental principles for the fairness of green claims apply in the EU and Switzerland, the actual practical and commercial circumstances, (such as the availability of local waste management facilities) vary from country to country. For example, unlike EU countries, Switzerland has no comprehensive recycling system in place for plastics. This introduces the risk that claims relating to the recyclability of plastic may be untrue or misleading if they are not accompanied by a respective disclaimer. Therefore, green claims used abroad need to be reviewed for compatibility with Swiss sustainability legislation and practice. When doing so, the question of a possible translation of the claim and disclaimer into one or more of the official Swiss languages (German, French and Italian) must also be taken into account.
3. “Corporate social responsibility” trends lead to greater focus by regulators on transparency in green claims
Sustainability claims must also be examined against the background of local legislation on ESG. In general, it is the Swiss Federal Council’s position that corporate social responsibility and sustainability should primarily be implemented spontaneously by companies in response to specific needs. However, the trend toward increased attention to "corporate social responsibility" has long since gained a foothold in Switzerland as well. Any communication that a company is acting in a socially responsible manner has to be in line with the understanding reflected in society and local legislation on ESG.
For example, in May 2021 Switzerland's financial-markets regulator ("FINMA") specified transparency obligations regarding climate risks. Promoting transparency in order to avoid misleading the public about a product’s sustainability characteristics (so-called “greenwashing”) are FINMA's major focus. In doing so FINMA is fulfilling its strategic goal of contributing to the sustainable development of the Swiss financial centre.
Among recent developments in Switzerland is a new legislation providing a general reporting obligation as well as topic-specific due diligence obligations and transparency in connection with conflict minerals and child labour. The new reporting obligation is expected to affect companies for the first time in the 2023 fiscal year. Violations of these duties are punishable by fines.
In addition, Swiss public companies and Swiss regulated companies (in particular banks and insurance undertakings) with 500 or more employees and at least CHF 20 million in total assets or more than CHF 40 million in turnover must in accordance with the new implementing ordinance on climate disclosure provide company-wide transparency on climate impact as well as a CO2 reduction target as of January 2024.
Also, in the area of sustainable investments, the Swiss Bankers Association (SBA) has defined self-regulatory principles, which set a uniform minimum standard within the Swiss financial sector for the consideration of ESG preferences and risks in investment advice and asset management. They are in force since January 2023 and, among other things, they stipulate that advisors must include the ESG criteria in the investment discussions with their clients and that ESG topics are to be included in the training and further education of bank staff. Failing to do so will qualify as greenwashing. In addition to the SBA's principles, the Asset Management Association Switzerland (AMAS) has developed self-regulatory principles for sustainable asset management that will come into force in September 2023. They provide for the first time for binding organisational, reporting and disclosure obligations for institutions that produce and manage sustainable financial products.
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