Next step against "greenwashing": The EU Commission's proposal for a Green Claims Directive
Published on 28th Mar 2023
With its latest proposal for an EU directive on environmental claims, the EU Commission is tightening the requirements for companies that use "green" claims such as "carbon neutral" or "sustainable packaging" to promote their products to consumers in the EU internal market. At the same time, the proposal aims to ensure fair conditions for those companies that make real efforts to improve the environmental performance of their products.
Proposed directive responds to results of studies from 2020 and 2021
On 22 March 2023, the EU Commission presented a proposal for an EU “Directive on the substantia-tion and communication of explicit environmental claims" (Green Claims Directive) (available here). The proposal aims to protect consumers from so-called "greenwashing" and misleading environmental claims ("green claims"). At the same time, (actually) sustainable traders shall be enabled to compete on a level and fair playing field for sustainable products.
In support of its proposal, the Commission refers to a study it commissioned in 2020, according to which 53.3 per cent of the environmental claims reviewed at the time were vague, misleading or un-substantiated and 40 per cent were unsubstantiated. According to the results of another EU study from 2021, more than half of the 232 eco-labels reviewed were either weakly verified or not verified at all. According to the Commission, this leads to a significant proportion of consumers being sceptical about the spread of such non-transparent environmental labels.
New standards for advertising with environmental claims and eco-labels
The current proposal relates to (voluntary) explicit environmental claims made by companies ("traders") to consumers in a B2C context in relation to the products they sell (i.e. their goods or services) or themselves. These include statements such as "green", "environmentally friendly" or "environmentally compatible" or claims such as "T-shirt made from recycled plastic bottles" or "oceanfriendly sunscreen". The proposed directive, on the other hand, is not intended to apply to environmental claims that fall under existing or future specific EU legislation and are therefore already subject to strict regulation.
If a trader wants to use such explicit environmental claims towards consumers in the future, it shall be obliged to check and substantiate the intended claims in advance on the basis of a catalogue of criteria. This includes, among other things, checking whether the statement actually refers to the entire product or all business areas of the company advertised in this way or whether only individual parts of the product or the company justify the claim. Claims should also have to be substantiated by generally accepted scientific evidence and follow a "life cycle" approach: Advertised environmental impacts or environmentally related aspects or services will therefore have to be taken into account from the acquisition of raw materials to the end of the product's life. The proposed directive also sets precise requirements for claims based on CO2 compensation (e.g. "carbon neutral"). In this context, traders will therefore have to explain, among other things, in a transparent and comprehensible manner to what extent they actually reduce emissions or merely compensate for them.
For environmental statements with which a company compares itself or the products it sells with those of a competitor, additional requirements apply with regard to the robustness and meaningfulness of the comparative data.
The proposal also requires companies to provide consumers with further information on their environmental claims, for example in the form of a QR code.
In addition to the obligations for companies, the proposal also addresses the "proliferation" of environmental labels identified by the Commission and subjects them to new regulation. Existing eco-labels must fulfil transparency requirements and new eco-labels of private providers must pursue more ambitious goals than established labels as well as have the intended eco-labels approved in advance by independent verification bodies.
Whether companies and eco-label providers meet the requirements set out in the proposal is also to be verified in advance by independent, accredited verifiers.
- What does the proposal mean for companies – and what sanctions are on the horizon?
The proposed directive would affect all companies that make green claims to consumers in the EU, even if the advertising company is not based in the EU. Only micro-enterprises with less than 10 em-ployees and an annual turnover of less than 2 million euros shall not be subject to the new require-ments. Small and medium-sized enterprises (SMEs) are to be supported by the EU Member States in applying the requirements by facilitating their access to financial support and organisational and tech-nical assistance. In this way, the Commission wants to create an incentive for SMEs to participate in the green transition and not to shy away from the increased requirements for green claims.
For the companies covered, which want to (further) advertise with environmental claims in the EU, the proposal – subject to its entry into force – initially means an increased effort in checking the validity of the advertising claims and consumer information covered and in their verification by independent verifiers. At the same time, however, the issuing of EU-wide recognised certificates by the verifiers should also facilitate cross-border product launches and advertising measures for companies.
With regard to sanctions, the proposal opens up a certain degree of implementation leeway for the member states, whereby the confiscation of revenues and also the temporary exclusion from public funding and procurement procedures (e.g. tendering procedures) is made mandatory. For certain cross-border constellations, a minimum fine of 4 percent of the annual turnover in the member state(s) concerned is provided for.
- How does the proposed directive fit into the existing regulatory framework?
One year ago, in March 2022, the Commission presented a proposal for a “Directive on empowering consumers for the green transition" (available here), which is currently being revised by the European Parliament and the Council. The proposal aims to address the prohibition of greenwashing specifically in the EU Unfair Commercial Practices (UCP) Directive (available here): For example, certain green-washing practices are to be included in the "black list" there – and would thus to be considered unfair per se. The following proposal for a directive on green claims is intended to supplement the already "upgraded" UCP Directive by laying down concrete requirements for substantiation, verification and communication in connection with voluntary explicit environmental claims and environmental labelling schemes on the EU market.
- Where do we go from here and what is the status quo in other (member) states?
The Commission's proposal now continues to go through the ordinary EU legislative procedure and must be approved by the European Parliament and the Council. After a successful conclusion at EU level, implementation in the member states is then imminent. Member states such as Germany would then have to decide in the course of the implementation procedure whether and to what extent the new requirements can be integrated into existing laws, or whether the time is ripe for a coherent "greenwashing law".
You can read here which requirements currently apply in connection with green claims in the EU member states France, Poland and Belgium, as well as in the United Kingdom.