Next step in combat against greenwashing

In brief

On 22 March 2023, the European Commission tabled a proposal for a Directive on substantiation and communication of explicit environmental claims (“Proposal“).

The Proposal aims to harmonize the evaluation and monitoring of voluntary environmental claims – often referred to as “green claims” – towards EU consumers and control the proliferation of public and private environmental labels. Complementing the March 2022 proposal for a Directive on empowering consumers for the green transition as a lex specialis by providing more specific requirements on the substantiation, communication and verification of green claims, it contributes to the fight against “greenwashing”. Greenwashing is a term used to describe the practice of making unclear or poorly-substantiated environmental claims, potentially misleading consumers into believing that companies, products or processes are more environmentally friendly than they actually are.

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Contents

1. What type of claims are covered? 
2. Reliable, comparable and verifiable claims
3. Exemptions
4. What with businesses outside the EU?
5. Monitoring and enforcement
6. Next steps

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Against this background, the Proposal introduces, amongst others, substantiation, communication and verification requirements for green claims, as well as various monitoring and enforcement mechanisms.

Although directed at the protection of consumers, also businesses that make genuine efforts to improve the environmental sustainability of their products may benefit from the level playing field created by the future Directive on green claims. 

What type of claims are covered? 

The Proposal applies to all voluntary claims made by companies in textual form or contained in an environmental label that are directed to EU consumers and relate to the environmental impact, aspect or performance of the company’s products, services or organization (such as “eco-friendly”, “environmental footprint reduced by 20% since 2018”, “carbon neutral”, or “made of 30% recycled plastic”).

Reliable, comparable and verifiable claims

In addition to the general rules set out in the existing general framework of the Directive 2005/29 on unfair business-to-consumer commercial practices and Directive 2006/114 on Comparative Advertising, the Proposal requires green claims to be substantiated and this substantiation to be verified in advance. It also sets out minimum requirements on substantiation and communication of green claims (including environmental labels), thereby taking into account the full “life-cycle” of the products (from raw materials to end-of-life).

Some of the key requirements provided in the Proposal are as follows:

• Green claims must be substantiated by relying on widely recognized scientific evidence, using accurate information and taking into account relevant international standards, and demonstrate that the environmental impacts subject to the claim are significant from a life-cycle perspective
• Comparative claims comparing a product’s sustainability performance to that of a competitor’s are only permissible under certain conditions (i.e. if the comparison is fair and based on equivalent information and data)
• Green claims highlighting efforts a company undertakes to improve a product’s or company’s future environmental performance shall include commitments and a clearly specified time frame for achieving such milestones inside the company’s own operations and value chains
• The Proposal also tackles claims relying on CO2 offsetting, by requiring transparency on the part of the claim that concerns the company’s own operations, and what part relies on buying offsets. There are also requirements on the integrity of the offsets themselves as well as on their correct accounting
• Information about the ownership, the decision-making bodies, the objectives and the monitoring procedures of environmental labelling schemes should be transparent, accessible, free of charge, easy to understand and sufficiently detailed. To control their proliferation, new public labelling schemes will not be allowed, unless developed at EU level. New private labelling schemes must show higher environmental ambition than existing ones and require pre-approval
• Claims that use aggregate scoring of the company’s or product’s overall environmental impact (e.g., on biodiversity, climate, water consumption etc.) are prohibited, unless based on EU rules or EU labelling schemes established to calculate such aggregated score
• The information on which the environmental claim is based must be made available to the public in a physical form or in the form of a weblink, QR code or equivalent
• The substantiation and communication of green claims shall be subject to third party verification prior to the green claim being made public or the label being displayed. Member States shall appoint independent verifiers according to Regulation 765/2008 setting out the requirements for accreditation and market surveillance relating to the marketing of products

Exemptions

The Proposal only concerns claims that are not covered by other, more specific, EU legislation (such as Regulation 66/2010 on the EU Ecolabel or Regulation (EU) 2018/848 on the organic food logo). This because claims covered by these instruments are already considered reliable in as far as they comply therewith. For the same reasons, claims that will be subject to more specific EU legislation in the future will also be exempted.

Moreover, to avoid a disproportionate impact on smaller companies compared to larger ones, microenterprises (fewer than 10 employees and with an annual turnover and/or annual balance sheet total not exceeding EUR 2 million) are exempt from the requirements on substantiation and communication provided in the Proposal (unless these microenterprises would request to have their claims verified and certified). However, all companies, including microenterprises, remain within the scope of Directive 2005/29 on unfair business-to-consumer commercial practices and Directive 2006/114 on Comparative Advertising.

What with businesses outside the EU?

Businesses that are based outside the EU and make voluntary environmental claims directed at EU consumers will also have to respect the requirements set out in the future Directive.

Monitoring and enforcement

The requirements set out in the Proposal will be applied, monitored on a regular basis and enforced by one or more appointed authorities in each Member State. The enforcement authorities will benefit from various inspection and enforcement powers (including, but not limited to, the power to access any relevant information, data or documents or to require any natural or legal person to provide such information, data or documents, to impose adequate and effective remedies or adopt injunctive relief, and to impose penalties in case of infringements).

However, in case Member States appoint the same authorities as those responsible for the enforcement of Directive 2005/29 on unfair business-to-consumer commercial practices, they should be able to rely on the means and powers of enforcement that they have established under that Directive in derogation from the rules on enforcement laid down in the Proposal.

Apart from a complaint handling procedure under which natural or legal persons or organizations having a legitimate interest shall be entitled to submit substantiated complaints to the competent authorities, the Proposal also foresees that, thanks to the Representative Actions Directive (EU) 2020/1828, “qualified entities”, such as consumer organizations, will be able to bring legal actions to protect the collective interests of consumers. 

Next steps

Following the submission of the Proposal on 22 March 2023, the European Parliament and the Council will now consider the adoption of the Proposal through the ordinary legislative procedure. The draft text may be subject to further amendments in the course of this process.

In the meantime, companies are recommended to closely analyze and adapt their marketing strategy with respect to claims that may be subject to the future Directive.