Greenwashing in Consumer Protection Law: Three Key Risks for Companies in the Region
When “Green” Becomes a Regulatory Red Flag
The pressure from consumers and investors for companies to act sustainably has never been greater. As a result, environmental claims have flooded the market—from “eco-friendly packaging” to “carbon-neutral” services. However, when these claims are not substantiated, we enter the zone of Greenwashing—and that’s where the Law steps in.
In countries across the region, the Consumer Protection Act (CPA) is the main legal instrument used to sanction such practices, treating them as misleading business conduct. Greenwashing, therefore, is not just an ethical failure—it’s a direct violation of the law.
What are the three most significant risks companies in the region face under the scrutiny of the CPA?
The Consumer Protection Act in the region (Serbia, Croatia, Bosnia and Herzegovina, Montenegro, etc.) clearly prohibits unfair business practices, particularly those that are misleading.
A business practice is considered misleading when a trader induces a consumer to make a purchasing decision they otherwise wouldn’t have made—by providing false or unverifiable information. This is the very definition of Greenwashing.
A company doesn’t have to lie; it’s enough to withhold essential information or use vague, generic terms without precise scientific backing.
Three Key Risks for Companies in the Region
- Direct Financial Penalties
This is the most obvious and immediate risk. The Market Inspectorate, as the main authority for enforcing the CPA, is authorized to initiate misdemeanor proceedings against companies engaged in misleading advertising.
Penalty Amounts: The laws impose significant fines, often ranging from several thousand to tens of thousands of euros (depending on the specific country’s legislation and company size). In some cases, penalties are calculated as a percentage of annual turnover (as in the EU), making them especially painful for large corporations.
Procedure: Sanctions are imposed once it’s determined that a claim (e.g., “100% natural” or “climate neutral”) isn’t backed by evidence (such as tests, certificates, or LCA analyses).
Example: A company claims its product is “fully recyclable,” but ignores the fact that local recycling infrastructure cannot process that type of packaging—this constitutes a misleading claim punishable under the CPA. - Reputational Collapse and Loss of Consumer Trust
Although not directly regulated by the CPA, reputational risk often has far-reaching and costlier consequences than the financial penalty itself. In the age of social media, news about a Greenwashing fine spreads rapidly.
“Cancel Culture”: Consumers—especially younger generations—are extremely sensitive to unethical business behavior. Public backlash and boycott campaigns can cost a company millions through reduced sales and long-term brand damage.
Impact on B2B and Investors: A reputation problem with consumers quickly extends to business partners (B2B) and investors. Loss of trust can make it harder to raise capital and may decrease share value. - Regulatory Measures and Mandatory Correction
In addition to fines, a company is legally required under the Consumer Protection Act to immediately remove the misleading advertisement and, in some cases, publish a correction at its own expense.
Correction Costs: This includes expenses for withdrawing disputed marketing materials, redesigning packaging, and—in extreme cases—recalling products from the market. This creates significant operational pressure and additional financial burdens.
Increased Oversight: Once fined, a company becomes the target of increased scrutiny by inspection authorities. Every new environmental claim will be carefully analyzed and verified, slowing down the launch of new products and marketing campaigns.
How to Avoid the Greenwashing Trap
The only way to avoid these risks is by adopting the principle of provable transparency.
Instead of relying on expensive legal battles after inspections, the focus should be on preventive measures:
Scientific Substantiation: Every claim must be supported by internal or external technical documentation (e.g., Life-Cycle Assessment or independent certification).
Precision: Forget vague terms like “eco-friendly.” Use precise language: “The packaging contains 30% recycled plastic” or “We reduced CO2 emissions by 15% over the past two years in production process X.”
Legal Design Thinking (LDT): Use the LDT methodology to transform complex technical evidence into visually clear and legally defensible marketing materials—understandable to both consumers and regulators.
Transparency as the Only Defense
Under regional Consumer Protection Laws, Greenwashing is treated as a serious form of deception. The risks of high fines, catastrophic reputational damage, and operational paralysis are real.
For companies in the region, the path to compliance lies in full transparency and the creation of marketing claims that are irrefutable. Otherwise, the cost of deception will always outweigh the cost of truth.
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