Introduction
The fight against greenwashing is a centrepiece of the European Green Deal and deemed key to delivering on the ecological transition objective enshrined in it.
On 22 March 2023, the European Commission adopted a proposal for a Directive on the substantiation and communication of explicit environmental claims (the Green Claims Directive). The Green Claims Directive requires companies to substantiate claims they make about the environmental aspects or performance of their products and organisations using robust, science-based and verifiable methods.
The objective of the Green Claims Directive is twofold. By tackling false and misleading green claims, and ensuring that buyers receive reliable, comparable and verifiable information, the Green Claims Directive is expected to provide consumers with increased clarity and better quality information to allow them to choose environment-friendly products and services. The Green Claims Directive will thus empower consumers to make better informed and more sustainable decisions, thereby reducing the risk of greenwashing.
The Green Claims Directive will also benefit businesses, as those that make genuine efforts to improve the environmental sustainability of their products will be more easily recognised and rewarded by consumers and able to boost their sales. By establishing a level playing field when it comes to information about the environmental performance of products, the Green Claims Directive will also contribute to reducing the risk of unfair competition.
An “environmental claim” is defined as any message or representation, which is not mandatory under EU law or national law, including text, pictorial, graphic or symbolic representation, in any form, including labels, brand names, company names or product names, in the context of a commercial communication, which states or implies that a product or trader has a positive or no impact on the environment or is less damaging to the environment than other products or traders, respectively, or has improved their impact over time.
So-called “greenwashing”, which the Green Claims Directive aims at combating, involves making unclear or not well-substantiated environmental claims.
This practice is widespread across the EU, as evidenced by the Explanatory Memorandum to the Green Claims Directive proposal, which reports that the majority (53.3%) of environmental claims across the EU and across a wide range of product categories provide vague, misleading or unfounded information about products’ environmental characteristics. In the vast majority of cases, green claims were also found to be unsubstantiated, meaning that the trader did not provide sufficient detail allowing for judgement of the claim’s accuracy. Issues include difficulties identifying (i) whether the claim covered the whole product or only one of its components (50% of cases), (ii) whether it referred to the company or only certain products (36%) and (iii) which stage of the products’ lifecycle it covered (75%).
The practice of greenwashing is not new. In 2020 already, a “sweep” carried out by authorities participating in the Consumer Protection Cooperation Network1 revealed its existence and how well established it is across the EU.
The proposed Directive is therefore welcome. It will complement the Unfair Commercial Practices Directive (UCPD), which already regulates misleading practices and misleading omissions, but with general provisions (lex generalis). Whilst the latter can be applied to environmental claims in business-to-consumer transactions when they negatively affect consumers’ transactional decisions, the need for a specific piece of EU legislation dedicated only to the substantiation and communication of voluntary business-to-consumer environmental claims was felt (lex specialis). In the proposal as it stands, the Green Claims Directive is therefore meant to focus on elements that have not been integrated into consumer protection legislation, notably as regards the substantiation of claims, and to act as a safety net for all sectors where environmental claims are unregulated at EU level.
This stand-alone proposal will not amend existing legislation. Businesses must therefore not assume that all existing or future targeted sectoral rules will soon be subsumed by the proposed Green Claims Directive. Quite the contrary, the proposed Green Claims Directive should be viewed as an additional layer, so businesses must ensure continued compliance with all currently existing legislation.2
In terms of timing, the Green Claims Directive proposal will now follow the ordinary legislative procedure and thus be subject to the approval of the European Parliament and the Council. Once adopted and transposed into member states’ national legislation, consumers will be entitled to remedies in the event of breaches, including through the collective redress procedure under the Representative Actions Directive. Having said that, businesses would be well advised to begin or continue monitoring all legislative developments in this area as early as possible – indeed, right now if possible –, because it may well be that member states will not wait for long before adopting measures aimed at tackling greenwashing. By way of example, France has already adopted legislation, which entered into force on 1 January 2023, in an attempt to lead the effort in tackling greenwashing.
Substantiation and communication requirements
The Green Claims Directive states that explicit environmental claims may only cover the environmental impacts, aspects or performance that are “substantiated” (Article 5.2). In other words, green claims that do not meet minimum substantiation criteria are forbidden and will have to be removed.
This substantiation requirement is logically complemented by positive communication obligations requiring businesses to make available, together with the claim, in a physical form or in the form of a weblink, QR code or equivalent, all information on the product or the trader that is the subject of the explicit environmental claim and on the corresponding substantiation (Article 5.6).
The Green Claims Directive provides detailed information on what it takes to meet the substantiation requirement, namely the carrying out by businesses of an assessment that meets the relevant minimum criteria of, inter alia, reliability, verifiability and comparability, which are to prevent claims from being misleading, i.e., to ensure that when something is sold as green, it actually is green.
This assessment for the purpose of substantiation should be reviewed and updated by businesses regularly, i.e., whenever circumstances arise that may affect the accuracy of the substantiated environmental claim, and no later than five years from the date of its communication (Article 9).
The assessment for the purpose of substantiation includes, inter alia, the following steps (Article 3):
- Specifying whether the claim is accurate for the whole product or only for parts of it (i.e., for the whole life cycle or only for certain stages, and for all the trader’s activities or only a part of them).
- Relying on recognised scientific evidence and the latest technical knowledge.
- Demonstrating the significance of the environmental impacts, aspects or performance of the product from a life-cycle perspective.3
- Demonstrating that the claim is not equivalent to requirements imposed by law.
- Providing information on whether the product performs environmentally significantly better than what is common practice.
- Identifying whether a positive achievement leads to significant worsening of another impact.
- Reporting greenhouse gas offsets in a transparent manner.
In addition, the Green Claims Directive sets out further requirements for comparative claims (i.e., claims that state or imply that a product or trader has less or more environmental impacts, or performs better or worse environmentally, than other products or traders). These requirements include, inter alia, the use of equivalent information, data generated or sourced in an equivalent manner, and equivalent coverage and consistent assumptions for the assessment of the environmental impacts, aspects or performance of the compared product or trader (Article 4).
On top of these requirements on substantiation and communication applicable to all types of claims, which environmental labels must also fulfil, the proposal sets out additional safeguards to improve the quality of ecolabelling schemes by imposing transparency and credibility requirements, with a view to banning labels based on self-certification (Article 7).
Enforcement and cost of compliance
The Green Claims Directive will require member states to set up procedures for verifying the substantiation and communication of explicit environmental claims, as well as the compliance of environmental labelling schemes (Article 10). Concretely, each member state will have a national third-party conformity assessment body (so-called “verifier”) in charge of undertaking the verification exercise following an ex ante procedure (i.e., before the environmental claim is made public or the environmental label is displayed by a trader). Upon completion of the verification, the verifier will issue, where appropriate, a certificate of conformity certifying that the explicit environmental claim or environmental label complies with the requirements of the Green Claims Directive. This certificate will be recognised across the EU and provide businesses with the certainty that their certified claim will not be challenged by the competent authorities responsible for the application and enforcement of the Green Claims Directive in another member state.
This ex ante verification process under the proposed Green Claims Directive is not to be confused with ex post enforcement of the UCPD by the competent authorities. As always in EU law, the proposal makes clear that the certificate of conformity delivered under the Green Claims Directive will not prejudge the assessment of the environmental claim by national authorities or courts in accordance with the UCPD, meaning that an explicit environmental claim found ex ante by the verifier to be well substantiated and adequately communicated under the Green Claims Directive could in theory still be found ex post by a court to be unfair under the UCPD. In other words, whilst the certificate of conformity will be binding on competent authorities for the purpose of their Green Claims Directive assessment, it will not be binding for the purpose of their UCPD assessment. The reason for this is that there are other requirements in the UCPD which exceed the substantiation requirements that are laid down in the Green Claims Directive and certified by the certificate of conformity, and a competent authority carrying out an UCPD assessment could find that these further requirements have not been met. Such competent authority would thus issue an infringement decision under the UCPD in spite of the existence of the certificate. Whilst businesses may feel that an opportunity to obtain legal certainty has been missed with the proposed Green Claims Directive, it is always the case in EU law that mere certification issued by conformity assessment bodies is not binding as such on courts.
Competent authorities responsible for the application and enforcement of the Green Claims Directive4 will be given extensive investigative and remedial powers, including the power to impose penalties such as fines, confiscation of revenues gained as a result of the infringement, temporary exclusion from public procurement processes, etc. (Article 17). With the objective of effectively depriving companies found guilty of greenwashing of the economic benefits derived from their infringements and discouraging non-compliance, the maximum amount of the fines to be imposed should be set at least at 4 % of the company’s annual turnover in the member state(s) concerned (Article 17.3).
Such extensive powers well illustrate how fierce the European Commission intends to be in its battle against greenwashing. The message to businesses is clear: non-compliance will be costly. But compliance will also come at a cost. Indeed, businesses will have to bear the cost of substantiation of claims and this may well prove much more costly than before, depending on the nature and complexity of the claim. It will nonetheless always remain a company’s decision whether or not to include environmental claims in its voluntary commercial communications, and so companies will remain in control of their costs by determining the scope of their claims (if any). While certain types of claims will require a significantly higher investment (e.g., claims regarding the environmental impact of a product throughout the life-cycle and value chain), the Green Claims Directive will contribute to levelling the playing field by subjecting all companies to the same set of requirements when it comes to their green marketing strategy. Businesses would therefore be well advised to assess their current practices in light of the proposed new requirements, with a view to amending them if necessary.
- National authorities in individual countries are responsible for the enforcement of EU consumer protection laws. In order to protect consumers when shopping across national borders and tackle issues in a coordinated manner, a network of competent public enforcers was established. The cooperation is applicable to consumer rules covering various areas such as unfair commercial practices, e-commerce, geo-blocking, package holidays, online selling, and passenger rights. More information is available at Consumer Protection Cooperation Network.
- By way of example, the Green Claims Directive does not apply to explicit environmental claims regulated by or substantiated by rules established in Directive 1999/94/EC of 13 December 1999 relating to the availability of consumer information on fuel economy and CO2 emissions in respect of the marketing of new passenger cars (Article 1.2.h).
- Defined as “the consecutive and interlinked stages of a product’s life, consisting of raw material acquisition or generation from natural resources, pre-processing, manufacturing, storage, distribution, installation, use, maintenance, repair, upgrading, refurbishment as well as re-use, and end-of-life” (Article 2.13).
- Note that for the purpose of the enforcement of Articles 5 and 6 related to communication of explicit environmental claims, these competent authorities can be the same competent authorities as those in charge of the enforcement of the UCPD if the Member State so wishes (Article 13.2)
In-depth 2023-090
