Update | Green claims, sustainability, and misleading messages: AGCM imposes a fine of 100,000 euros

Green claims, sustainability, and misleading messages: AGCM imposes a fine of 100,000 euros. The qualification of “benefit corporation” among the elements under evaluation.

1. Background

With a decision dated 29.01.2024, the Italian Competition Authority (AGCM) addressed a case of deceptive commercial practices regarding sustainability involving a benefit corporation operating in the food sector (chicken farming).

While acknowledging the correctness of the company’s actions regarding one of the alleged violations previously contested, the Authority concluded the illegality of the second conduct and deemed it inappropriate to accept the commitments made by the company, imposing a fine of 100,000 euros.

2. The Contested Commercial Practices

2.1 The illegal activities identified by the AGCM

Following a report from the consumer association Codacons, the AGCM initiated investigative proceedings regarding two different aspects.

Firstly, the Authority investigated the company’s communications regarding the environmental sustainability of its business activities, particularly focusing on carbon dioxide emissions offset projects.

Specifically, the AGCM scrutinized information published on the website (especially on the increasingly common “Sustainability” section), a video titled “Choosing to Defend the Future,” and claims made in the previous year’s “Sustainability Report” (including offsetting emissions generated by its activities).

Secondly, the AGCM contested the claims of the complete agricultural production of raw materials used for the production of organic feed and about the entirely Italian origin of the commodities used for animal feeding.

Specifically, the AGCM complained about the falsity of the company’s assertions regarding both the direct cultivation of raw materials, which actually stopped at a quantity not exceeding 10% of the declared surface, and the origin of these raw materials (mostly foreign, with peaks exceeding 75% for some plant proteins).

2.2 Company’s defenses

The company initially intervened on its website to remove or correct all contested messages to halt the spread of any possibile deceptive effects.

In addressing the issue, the company asserted the correctness of the green claims used, arguing that when considered together (and not taken out of context), they conveyed truthful messages. Furthermore, it highlighted how carbon emissions offsetting through CO2 credits would be managed in collaboration with specialized companies in the sector to ensure both the accuracy of emission calculations and the reliability and validity of purchased credits and funded projects.

Regarding the agricultural activities, the company provided clarifications on the concept of “direct and indirect” cultivation, as well as the characteristics of organic cultivation. It also cited contingent reasons, such as the war in Ukraine and drought, that had led to the necessity of sourcing some raw materials from abroad. In this context, the company admitted to addressing the raw material sourcing issue but neglected to update the communications on its website.

Finally, in a collaborative effort and as additional commitments, the company highlighted that it had:

• implemented an environmental compliance program;
• established the company position of “Sustainability Officer,” reporting directly to the CEO;
• initiated contacts with research institutes to establish a scientific partnership aimed at acquiring support in environmental claims.

3. AGCM’s Decision

Regarding environmental assertions (green claims), after emphasizing their significant role in terms of competition, the AGCM stated that the evidence gathered during the investigation did not reveal elements to consider the company’s communications deceptive. Therefore, the company’s environmental claims were deemed correct and truthful.

Conversely, the Authority deemed the communications regarding the complete agricultural production of feeds and their Italian origin illicit, as they were contradicted by the data collected during the investigative process. Regardless of the specific circumstances that led to the company’s sourcing choices, the deceptive claims were deemed in violation of the obligation of professional diligence incumbent upon professionals, especially those constituted as “benefit corporations.”

Therefore, taking into account the company’s size and its role in the market, the AGCM imposed a fine of 100,000 euros.

4. Final Considerations

The AGCM’s decision offers some important points for consideration.

On one hand, it confirms the Authority’s interest in sustainability and green claims, presumably leading to an increase in the number of investigative proceedings. Companies are thus urged to exercise particular caution, especially given the current historical and social context.

Furthermore, it is noteworthy how the analysis of the actions taken by the company under investigation had a positive outcome, demonstrating that a well-constructed sustainability policy allows for competitive advantage in the market.

Lastly, it is important to highlight how the qualification of a “Benefit Corporation” was evaluated among the factors that should logically lead to greater rigor on the part of the company in pursuing its common benefit objectives. The company had indeed committed itself statutorily to operate “responsibly, sustainably, and transparently towards individuals, communities, territories, and the environment”, implying that the company’s business model should have reflected these commitments and prevented, with greater punctuality and effectiveness, a commercial practice like the one identified and sanctioned by the Authority. This is also evident for a more accurate assessment of the actual implications associated with adopting the “Benefit Corporation” qualification. Thanks to this AGCM ruling, it is even more apparent that integrating the corporate purpose with common benefit objectives cannot disregard corporate management and a business strategy, including communication, capable at all times of fully reflecting these contents.