Europe has become a risky place for corporate green claims

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Greek Prime Minister Kyriakos Mitsotakis this week added his voice to the chorus calling for a rethink on EU green policy. “For many years, Europe elevated decarbonisation above everything else,” he wrote. “We cannot afford to stay on this path. Decarbonisation is vital but it is not the only objective.”

The blunt intervention comes as European Commission president Ursula von der Leyen faces pressure to water down various elements of her Green Deal agenda. But that programme has already created new legal risks for companies, as highlighted by a striking ruling yesterday against the EU’s biggest energy company.

LITIGATION

Mind your language

“It’s fundamental, because it’s our future,” Patrick Pouyanné told me last year of his company’s approach to low-carbon energy.

In our conversation at the World Energy Congress in Rotterdam, the TotalEnergies chief executive extolled the French oil major’s “virtuous model” of using hydrocarbon profits to fund renewable energy investment. Unlike “pure green” companies that had been buffeted by interest rate fluctuations, Pouyanné argued, Total’s fossil fuel cash flow gave it a rock-solid foundation for consistent green investment.

“Don’t ask me today to give up or to decrease my oil and gas business,” Pouyanné said. “The more cash I make there, the more I invest on the other side.”

But the company’s narrative about its contribution to the green transition has just fallen foul of French law. A Paris court yesterday found Total guilty of “misleading commercial practices” in its public claims to be a “major actor in the energy transition”.

The verdict is particularly striking because Total has been investing much more heavily in green areas than most of its oil and gas peers, with $4.8bn of capital expenditure on low-carbon energy last year.

True, it has reduced its 2030 target for electricity generation to between 100 and 120 terawatt hours, down from an earlier goal of 130TWh. But compared with the large-scale green investment reversals by European rivals BP and Shell — let alone US peers such as ExxonMobil, which never jumped on the green bandwagon in the first place — Total’s low-carbon investment strategy has been robust and relatively consistent.

The problem, in the court’s view, is that Total’s hydrocarbon investment has been greater, and continues to rise. Back in 2021, it said that its oil and gas production would peak this decade, with a significant decline between 2025 and 2030.

But with the outlook for hydrocarbon demand looking stronger — thanks largely to weaker than expected government climate action — Total is now targeting oil production growth at an annual rate of 3 per cent over the next five years. The oil and gas business accounted for nearly three-quarters of its capex last year.

This was the key factor in the court’s ruling, in a case brought by several non-profit groups. The court found that by telling consumers that it wanted to achieve carbon neutrality by 2050, Total had suggested that its business was aligned with a global scenario of net zero emissions by mid-century. Expert analysis by the International Energy Agency, among others, found that such an outcome would need large and immediate reductions in oil and gas production, in contrast with Total’s rising output.

This is the crux of the verdict:

“The TotalEnergies group deliberately made an environmental claim likely to mislead consumers, leading them to believe that by purchasing its products or services, they were contributing to the emergence of a low-carbon economy, by following the recommendations of the scientific community, based on the Paris Agreement.”

The penalty imposed on Total is relatively modest. It must pay a few thousand euros to each of the plaintiffs and remove offending language from its website. It must also post a prominent link to the verdict on its homepage for 180 days.

But the case is an important reflection of the tightening legal constraints in the EU around green claims by companies, following recent greenwashing verdicts against airlines KLM and Lufthansa.

From the start of the European Commission’s Green Deal policy initiative in 2019, it has emphasised the need to “empower consumers to make informed choices and play an active role in the ecological transition”, in part by ensuring they receive accurate information.

Yesterday’s verdict made repeated reference to EU legislation passed last year, which prohibited green claims unsupported by “clear, objective, publicly available and verifiable commitments and targets”.

The commission wanted to go further still with its so-called green claims directive, which would have forced companies to submit sustainability-related messaging for approval before it could be published to consumers. That idea was withdrawn in June, amid concerns of bureaucratic over-reach and an excessive burden on businesses.

When that latest directive was dropped, campaign groups warned that this would leave consumers “adrift in a sea of greenwashing”. But yesterday’s Paris verdict makes plain that Europe is no longer a safe space for loosely worded corporate environmental claims.

The question now is whether this treacherous legal landscape will drive companies to provide consumers with better information on their environmental credentials — or simply avoid the subject altogether.

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