The European Commission has released a new proposal for how companies should communicate and substantiate environmental claims in order to cut down on widespread “greenwashing.” In connection with the proposed Directive on Green Claims that it released on Wednesday, the EU Commission says that it aims to address rising greenwashing by “tackling false environmental claims made towards consumers and stopping the proliferation of public and private environmental labels” by way of “a clear regime for environmental claims and labels.” The EU entity has also proposed “common rules promoting the repair of goods,” which it says will help “contribute to sustainable consumption by a number of measures that promote repair, and make repair easier and more attractive for defects consumers may experience throughout the lifecycle of goods.”
In terms of the proposed Directive on Green Claims, the European Commission states that the rules target “green claims” made by businesses that “state or imply a positive environmental impact, lesser negative impact, no impact, or improvement over time for their products, services, or organization.” The proposal requires that green claims – such as “packaging made of 30 percent recycled plastic,” “bee-friendly juice,” “carbon compensated ride,” or “commitment to reduce CO2 emissions linked to the production of this product by 50 percent by 2030 as compared to 2020” – be “substantiated and this substantiation be verified ex-ante.” (It also notes that
A few key points about the newly released Directive courtesy of the European Commission …
– The proposal covers explicit claims made voluntarily by businesses for consumers, which relate to the environmental impact, aspect, or performance of a product or the trader itself, and adopt a “life cycle” approach, from raw materials to end-of-life. It also addresses environmental labeling schemes, stopping the proliferation of public and private labels and ensuring transparency and robustness of labeling schemes.
– The proposed directive would require Member States to ensure that minimum requirements for substantiation and communication are respected by companies when they make voluntary green claims.
– Member States will be responsible for setting up verification and enforcement processes, to be performed by independent and accredited verifiers, as follows: (1) Claims must be substantiated with scientific evidence that identifies the relevant environmental impacts and any trade-offs; (2) If products or organizations are compared with others, these comparisons must be fair and based on equivalent info/data; (3) Claims or labels that use aggregate scoring of a product’s overall environmental impact on, for example, biodiversity, climate, water consumption, soil, etc., generally shall not be permitted; (4) Environmental labeling schemes should be solid and reliable, and new private schemes are only allowed if they can show higher environmental ambition than existing ones and get a pre-approval; and (5) Environmental labels must be transparent, verified by a third party, and regularly reviewed.
– The EU also speaks directly to “climate-related claims that are based on carbon offsets or carbon credits,” which it says have been shown to be “particularly prone to being unclear and ambiguous, and to mislead consumers.” Companies “should focus on reducing emissions in their own organization or value chain,” the Commission states, noting that “companies have to be transparent about what part of [a carbon] claim concerns their own operations, and what part relies on buying offsets.” Also worth noting: “There are also requirements on the integrity of the offsets themselves as well as on their correct accounting.”
As for how the new rules will affect companies in the EU, the Commission says that the proposal introduces “minimum requirements for businesses that would like to make voluntary claims in the areas of substantiation, communication, and verification.” It notes that “companies will have to ensure the reliability of their voluntary environmental claims, and communicate their claims in a transparent way,” and that “their claims will need to be checked by an independent verifier against the requirements of the Directive.”
What’s Next: Now that the greenwashing-centric proposal has been formally presented by the EU Commission, the European Parliament and Council will now consider its adoption “through the ordinary legislative procedure, which will allow for the introduction of amendments and will take at least 18 months,” Hogan Lovells attorneys stated in a recent note. During the legislative process, “Companies are well advised to closely monitor the development of the proposal and review their marketing communication and [claims made on] products, themselves, for any claims to which the Directive could apply.”
THE BIGGER PICTURE: The EU Commission says that companies operating in the EU “often make voluntary environmental claims without any or little evidence and substantiation backing these claims,” which can result in greenwashing and be “both misleading for customers and unfair to companies that are genuinely working to improve their environmental performance.” In particular, the Commission pointed to a 2020 study, in which it found that 53.3 percent of the voluntary environmental claims that it examined were “vague, misleading or unfounded,” while 40 percent were completely unsubstantiated.
Reflecting on the potential impact of the proposed new rules, Hogan Lovells states that when “combined with the Empowering Consumers Directive Proposal,” which amends the Unfair Commercial Practices Directive and the Consumer Rights Directive to “empower consumers for the green transition through better protection against unfair commercial practices and better information,” the Green Claims Directive Proposal “could lead to an upheaval in environmental advertising on products.”