Say "green" only if you mean it!

Are consumers being deceived by misleading environmental and sustainability claims about products and services? "Greenwashing" is getting increasing attention from EU policymakers.  What is the European Union doing to combat "greenwashing" by companies? How does this impact businesses and what should companies expect?

This blog delves into the issue of misleading environmental and sustainability claims on products and services. It explores the EU's actions against the practice of "greenwashing", when a company makes misleading or unsubstantiated green claims making a product look more sustainable than it is. 

The European Union’s efforts against greenwashing started in 2020, when the European Commission’s Consumer Protection Cooperation (CPC) Network carried out 344 assessments on sustainability claims. The study found that in over half of the cases the company did not provide sufficient evidence to support the claim’s accuracy. Additionally, the CPC Network had difficulty identifying whether the claim covered the whole product or just one of its components, whether it referred to the company or only certain products, and which stage of the product's lifecycle it covered.

To give consumers the opportunity to make informed choices concerning their purchases and enable them to contribute to the green transition, the European Commission has recently stepped up its commitments against greenwashing. It proposed a directive on “Empowering Consumers for the Green Transition” in March 2022, and a directive on the “substantiation and communication of explicit environmental claims (Green Claims Directive)” in March 2023. Below we look at their key provisions and implications for businesses.

Empowering consumers for the green transition

On 30 March 2022, the Commission submitted a proposal for a directive on empowering consumers for the green transition. The key provisions include the following: 

• Manufacturers would be responsible for informing consumers on the durability and repairability of products, adding these characteristics to the list of product features about which a business cannot mislead consumers. 
• Consumers would receive a repairability score or information on the availability of spare parts and, if applicable, of use and repair manuals. The text also introduced the obligations for producers to share with the consumers details concerning the foreseen software updates and the production of spare parts beyond the two-year guarantee, the period under which defective products must be repaired or replaced without any cost to the consumer. 
• Ten new commercial practices would be added to the list of banned practices, including displaying non-certified sustainability labels, making generic environmental claims such as “green” or “sustainable”, and falsely claiming product durability, reusability or repairability.
• Traders providing sustainability comparison services, such as websites that compare the emissions of different flights, would be required to disclose details about the methods of comparison they use.

In the European Parliament, the Committee on the Internal Market and Consumer Protection is handling negotiations, with Biljana Borzan MEP (S&D, Croatia) as rapporteur. She proposed amendments to strengthen the directive, including by regulating sustainability labels, information tools, and environmental claims. The MEPs suggested amendments that would require national authorities to pre-approve sustainability labels and tools. 

Another important measure introduced by the European Parliament is to ban environmental claims based only on carbon offsetting schemes. Using carbon credits to compensate for emissions, rather than actual emissions reductions measures in a company’s production chain, will be forbidden. This provision will impact many companies that base their environmental strategy on buying and selling carbon credits to decrease their carbon footprint. 

The Council of the EU’s position appears to be in line with that of the Parliament and Commission, which are pushing for a ban on generic environmental claims which are not substantiated by official certification schemes.

Green Claims Directive

The directive on “substantiation and communication of explicit environmental claims” or Green Claims Directive, published on 23 March 2023, complements existing EU legislation such as the Unfair Commercial Practices Directive (UCPD). It sets out detailed regulations for substantiating, verifying, and communicating voluntary environmental claims and environmental labelling schemes in the EU market. 

The Green Claims Directive aims to ensure that the information provided on the sustainability of a product is accurate and reliable. It is not yet clear whether this proposal would introduce rules for “implicit” green claims such as colours or images with a sustainability theme in the packaging. What is certain is that in the current formulation, companies will have to provide background information and assessments that support their claims through an official label, link or QR code. 

The proposal requires that a third party substantiates environmental claims, based on scientific evidence. Once the Green Claims Directive comes into force, companies would only be able to use environmental labels that are EU‑approved and included in a central EU list. These independent verifiers would have to be officially accredited to be allowed to carry out their verification activities.

Businesses would have to demonstrate the impacts and performance of their products and services from a life-cycle perspective, and declare whether the claim is accurate for the whole product or just for part of it. The verifier should also be able to identify whether a positive achievement on one side (e.g. sustainable battery design) leads to significant worsening of another impact (e.g. decrease in the product’s battery life). Verifiers would then issue certificates of compliance that companies would have to obtain before publishing their claims. This marks a significant move away from voluntary claims that typically do not mandate prior certification or authorisation under current EU law. 

Under this proposed directive, microenterprises (i.e. fewer than 10 employees and with an annual turnover under €2 million) would be exempt from some requirements, while SMEs would benefit from financial and technical assistance, access to finance, and training. 

Penalties include fines aimed at removing any profits resulting from the false green claim. In cases of widespread violations or violations affecting multiple countries, the directive suggests setting fines at a minimum of 4% of the trader's total annual turnover in the relevant Member State(s).

In the European Parliament, Ansip Andrus MEP (Renew Europe, Estonia) will shepherd the file through the Internal Market and Consumer Protection (IMCO) Committee. The Commission has opened a public feedback period on the proposed Green Claims Directive. Companies interested in submitting comments may do so until 21 July, 2023, through the Commission’s feedback website.

While the negotiations on the file are still open, we can already identify a number of challenges that European policymakers will need to address. First, the responsibility and accountability of verifiers for the claims they approve, especially as they oversee the proposed communications, remains unclear. This needs to be addressed, also in the interests  of creating a new market for certifiers, free of uncertainty. Secondly, displaying a label, link, or QR code may be challenging for products with minimal packages, and may potentially conflict with packaging minimisation requirements. Lastly, it is uncertain whether there will be a transitional period to phase out packaging that includes claims that are not yet certified. 

What impact for businesses?

The proposed directives promote consumer trust in environmental claims. They emphasise the importance of scientific evidence, life-cycle considerations, and accurate information in substantiating claims, while introducing measures to validate these claims through third-party authorities. The main implications that these two pieces of legislation will have for businesses include, among other things: 

• The cost of making green claims will increase, as companies will have to scientifically prove their claims and have them verified. Making profits on sustainable products might be more difficult and may discourage some companies from marketing their goods as “green”. On the other hand, this will also reduce competition for companies that offer truly sustainable products and services. 
• Companies will have to find alternatives to carbon offsetting schemes as buying carbon credits will no longer serve as a justification for a green claim on a product or service. This will represent a challenge for those industries that are intrinsically carbon intensive such as aviation, chemicals and shipping. 
• Companies will have to make changes in the packaging of the product to provide the customer with information on its durability and repairability through solutions such as a QR code. 
• Companies will have to refrain from marketing a product as sustainable even if a product is “as sustainable as it can be”. This implies that if a product requires components that are intrinsically non-sustainable, such as phone batteries for example, it could not be marketed as sustainable even if the other components are. 

In conclusion, the fight against "greenwashing" is gaining momentum within the European Union. Policymakers are determined to empower consumers and promote genuine sustainability through proposed directives. These initiatives are shining a light on the importance of accurate information and scientific evidence. By requiring companies to substantiate their claims and undergo third-party verification, these directives will foster a new era of trust and transparency. These measures will encourage businesses to embrace true sustainability.

If your company would like our help on the challenges these regulations might pose to your business, please contact us and visit our website.