Croatia - Sustainability claims and greenwashing

• The status quo
• New developments – Empowerment of consumers
• Sustainability claims beyond consumer law

What are the top three developments in Croatia concerning green claims and the associated risk of greenwashing?

As consumers continue to focus on climate change and its effects, and the demand for sustainable practices grows through corporate environmental, social and governance initiatives, businesses are often faced with sustainability demands that they cannot yet fulfil. Because of that, cases of greenwashing are more and more on the rise. Similarly to the rest of Europe, greenwashing is present in the Croatian market, and although there are no specific laws that are regulating greenwashing practices, protection is given to consumers and general public through the Croatian Civil Proceedings Act and Consumer Protection Act.  

However, Croatia is actively working on implementing the Croatian National Programme for Consumer Protection for the 2021-2024 which marks combating greenwashing through specific legislation as one of its priorities. Moreover, there are going to be major changes to the Accountancy Act and additions to the Audit Act and Capital Market Act in order to successfully implement CSRD in the Croatian legislation. 

1. The status quo  

Greenwashing refers to the practice of making false or exaggerated claims about the environmental friendliness or sustainability of a product, service, or company in order to deceive consumers and create a positive public image. Addressing greenwashing is important to protect consumers, promote genuine environmental sustainability, hold corporations accountable, ensure fair competition, and achieve sustainability goals. While Croatia is still working on the legal framework which would directly address greenwashing, the current legal framework provides protection to the consumers by holding the. preservation of nature and human environment as the highest constitutional value of the Republic of Croatia.  

The Croatian Consumer Protection Act (CPA) provides guidance on the permissible advertising, i.e., which claim can be classified as green without constituting the greenwashing. The CPA prohibits commercial practices which would mislead the consumers on the “basic features of the product, such as its availability, benefits, risks, performance, composition, accessories, existence of after-sales assistance to the consumer and complaint resolution system, methods and date of manufacture or purchase, delivery, fitness for purpose, method of use, quantity, specification, geographical or market origin, results expected from its use or results and essential indicators of tests or checks carried out on the product.” Therefore, as an example, false or exaggerated claims about the environmental characteristics or performance of a product, such as that a product is eco-friendly or sustainable without providing proper evidence or verification would be contrary to the CPA. Likewise, if for example, a trader misrepresents the nature or features of a product in relation to its environmental impact by claiming that a product is environmentally friendly when it is not, or making unsubstantiated claims about a product's eco-friendly attributes. 

In case of greenwashing, protection is given to consumers and general public through the Croatian Civil Proceedings Act and Consumer Protection Act. 

The collective claim proceedings i.e., class actions, may be initiated under the Civil Proceedings Act with regard to, inter alia, environmental and consumer interests (e.g., greenwashing claims). Currently, consumers are not yet entitled to individually initiate proceedings; however, the class actions may be brought by associations, bodies, institutions, or other organisations which are specifically authorized by the governing authorities’ decision. As the consequence of class actions, any legal or natural person (i.e., consumer) may later file individual claims for damages and invoke findings from the judgements regarding class actions which are binding to the courts.  

Based on the limited availability, unfortunately, class actions are not frequent in Croatia, and up-to-date, no class actions were filed for environmental causes or greenwashing itself.  

In addition to the civil law consequences, the CPA also envisages the misdemeanour penalties and measures. For example, if a trader pursues commercial practices which are considered unfair i.e., greenwashing practices, the authorized inspector will render decision prohibiting the trader to pursue the unfair practice, and it will issue a fine. Such fine is, however, only substantial to small traders and does not necessarily have the same deterring effect to businesses with greater revenues as it only amounts to maximum of EUR 26,544.56 (and for the responsible person within trader fine would amount to the EUR 1,990.84.) 

2. New developments – Empowerment of consumers  

Croatia is actively working on implementing the Croatian National Programme for Consumer Protection for the 2021-2024 (“Programme”), its goal of ensuring reliable, comparable and verifiable information that enable customers to make sustainable decisions and reduce the risk of "green marketing". Probably the most important proposed piece of new legislation under the Programme is the announced directive on empowering consumers for the green transition through better protection against unfair practices and better information which has the aim of providing reliable information about the product at the time of sale (product life, spare parts) and to protect consumers from commercial practices which can be considered to be greenwashing. At the moment, this directive is still in the proposal phase, however Croatian legislation will adapt accordingly when the directive is adopted.  

The Croatian legislator is also in process of adopting the Act on Representative Claims for the Protection of Collective Interests and Consumer Rights (“Draft Act”). In relation to the current regulation of the collective protection of consumer rights under the CPA and Civil Procedure Act, this Draft Act for the first time comprehensively regulates theprerequisites for the active legitimization (legal standing) of consumer protection associations in order to ensure the expertise and independence of prosecutors who represent consumer rights. interests. The Draft Act elaborates in detail the issue of conflict of interests of the plaintiff and other traders, especially defendant’s competitors. Although it is expected that the plaintiffs in these proceedings will be consumer protection associations that have direct contact with consumers (who, themselves, turn to associations with a request for legal assistance), the Draft Act foresees the possibility that public law bodies responsible for consumer policies can also file representative lawsuits and thus play an active role in ensuring the compliance of traders' actions with consumer legislation. 

3. Sustainability claims beyond consumer law  

Following the implementation of the NFRD (Non-Financial Reporting Directive) in 2014, public interest entities are obliged to publish ESG relevant information in the form of annual non-financial reports, as well as to inform about all third parties that contribute to their supply or value chain. In Croatia, NFRD was implemented through the Accountancy Act. Since the NFRD will now be replaced by the CSRD (Corporate Sustainability reporting Directive), the Accountancy Act will also be amended. This is especially important because one of the main goals of CSRD is reducing greenwashing. Besides the Accountancy Act, there will be changes and additions to the Audit Act and Capital Market Act. These changes and additions to the legislation will need to prescribe higher environmental standards for traders and consumers alike. Big change will consider the sheer scope of companies concerned, as the SMEs will also have to report from 2025. This is especially important for Croatian market where the majority of companies falls under this category.  

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