The European Green Deal: a continuing story
In 2019, the European Commission issued its communication on the European Green Deal1, announcing both legislative and non-legislative efforts to reduce the risks of false green claims (so-called “greenwashing2”), including by requiring companies to substantiate environmental claims about their products with a standard methodology to assess their impact on the environment. In 2020, the European Commission specified its plans for a directive that would address green claims in its circular economy plan released in March 20203.
In March 2023, the European Commission finally unveiled its long-awaited proposal for a directive on the substantiation and communication of explicit environmental claims (the Green Claims Directive)4. The Green Claims Directive further complements the European Commission’s proposal last year to update EU consumer rights legislation to empower consumers for the green transition5.
We set out below the Green Claims Directive's aim and main features as currently proposed by the European Commission. The Green Claims Directive is still to be debated and approved by the European Parliament and the Council, meaning that it will most likely be subject to further amendment.
The Green Claims Directive’s aim and main features
In its 2020 study, the European Commission found that 53.3% of examined claims were vague, misleading or unfounded, and that 40% were completely unsubstantiated. It also found a huge variety of “green labels” that would undermine consumer trust as those labels differed widely in robustness and reliability6.
While dealing with vague, unfounded or unsubstantiated green claims has so far mostly been a matter between private parties (such as competitors), the European Commission now seeks to respond to greenwashing practices by regulatory means. The Green Claims Directive’s aim is to combat greenwashing and ensure that consumers receive environmental information that is reliable, comparable and verifiable, inter alia by establishing minimum requirements on the substantiation and communication of voluntary environmental claims and environmental labelling in business-to-consumer commercial practices. Compliance with the Directive’s requirements will be enforced by public authorities. In this respect, an equable transposition of the Directive throughout the Member States will be key in order to ensure the homogeneous treatment and enforcement of the Directive’s principles.
Substantiation and verification of green claims
The Green Claims Directive targets (voluntary) “green claims”7 made by businesses in relation to their products, services or organization that either state or imply a positive environmental impact, lesser impact, no impact or improvement over time, and requires that such claims are substantiated and that such substantiation is verified ex-ante8.
The Green Claims Directive requires inter alia that the substantiation of explicit environmental claims is based on an assessment that relies on recognized scientific evidence and state of the art technical knowledge; demonstrates the significance of impacts, aspects and performance from a life-cycle perspective; takes into account all aspects and impacts to assess the performance, demonstrates whether the claim is accurate for the whole product or only for parts of it (for the whole life cycle or only for certain stages, for all the trader’s activities or only part of them); demonstrates that the claim is not equivalent to requirements imposed by law; provides information on whether the product performs environmentally significantly better than what is common practice; identifies whether a positive achievement leads to a significant worsening of another impact; requires greenhouse gas offsets to be reported in a transparent manner; and includes accurate information9.
It also sets up specific requirements for comparative claims, and introduces requirements on the communication of environmental claims. For instance, explicit environmental claims may only cover the environmental impacts, aspects or performance assessed in accordance with the substantiation requirements.
Requirements for environmental labels and environmental labelling schemes
Furthermore, the Green Claims Directive includes provisions on environmental labels, and sets requirements for environmental labelling schemes. In particular, new environmental labelling schemes established by private operators in the EU or by public authorities in third countries are subject to an approval mechanism (either by the national authorities of the EU Member States or by the European Commission). Approval requests must be duly substantiated by the applicant(s), and must include the criteria and methodology used to develop and award the environmental label, as well as its expected impacts on the market.
The Green Claims Directive sets up an ex-ante verification system for environmental claims and labelling schemes by an independent, third-party conformity assessment body (a Verifier). If the Verifier has carried out the verification and such verification is satisfactory, the Verifier will issue a “certificate of conformity”. Such certificate of conformity will be recognized across the EU and will provide businesses with certainty that their certified claim or scheme is acceptable to the competent authorities of other EU Member States.
This means that businesses based outside the EU that wish to make voluntary claims directed at EU customers, or wish to use environmental labels or labelling schemes will also need to consider the requirements of the Green Claims Directive.
Enforcement and penalties
Whilst enforcement rests with the competent authorities of the EU Member States, the Green Claims Directive puts a strong emphasis on enforcement measures: the national competent authorities must perform regular checks of explicit environmental claims and environmental labelling schemes, and must publish the reports detailing the results of such checks. Where the national competent authorities find that the substantiation and communication of the explicit environmental claim or the environmental labelling scheme is not compliant with the requirements of the Green Claims Directive, they must notify the trader of this and urge it to take the appropriate corrective measures within 30 days.
In terms of penalties, the Green Claims Directive states that the national competent authorities must impose penalties and measures that include: (i) fines that effectively deprive those responsible of the economic benefits derived from their infringements, and increasing the level of such fines in the case of repeated infringements10, (ii) the confiscation of revenues gained by the trader from relevant transaction(s), and (iii) the temporary exclusion from public procurement processes and access to public funding, including tendering procedures, grants and concessions for a maximum period of 12 months.
What’s next?
The Green Claims Directive must still be negotiated by the European Parliament and Council through the so-called “ordinary procedure”, so it will most likely be subject to further amendment.
Once the text is final, EU Member States will have 18 months to implement the requirements of the Green Claims Directive nationally. Such national rules will then start to apply 24 months as from the date of the Green Claims Directive’s entry into force (which is set at the twentieth day after the publication of the Green Claims Directive in the EU’s Official Journal).
Companies operating in the EU (whether they are based in or outside the EU) that make voluntary environmental claims or otherwise use environmental labels on their products (eg by making commitments to reduce carbon emissions linked to the production of their products or by making statements about the use of recycled materials in their products’ packaging) should carefully monitor any related requirements as they will most likely be impacted by this new initiative and may wish to start preparing for these new measures sooner rather than later. In addition, companies should be aware that EU Member States may in the meantime take their own measures in this field. For instance, under a current legislative proposal in Germany, the government may adopt criteria that companies need to meet in order to promote themselves as being “climate-neutral”11.
If you have any questions regarding EU product regulatory-related requirements, please feel free to reach out to our experts.
Footnotes
1. Please consult our website at www.allenovery.com for our various, previous publications on the European Green Deal.
2. Greenwashing occurs when a trader attempts to present an environmentally responsible public image in a way that is unfounded or misleading, see also Commission Staff Working Document, SDW(2022) 85 final, text available here.
3. Communication from the Commission to the European Parliament, the Council, the European and Social Committee and the Committee of the Regions, A new Circular Economy Action Plan For a cleaner and more competitive Europe, text available here. The Circular Economy Action Plan is one of the main building blocks of the European Green Deal.
4. Proposal for a directive of the European Parliament and of the Council on substantiation and communication of explicit environmental claims (Green Claims Directive) dated 22 March 2023, COM (2023) 166 final (2023/0085 (COD), text available here.
5. On 30 March 2022, the European Commission proposed amendments to Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market and Directive 2011/83/EU on consumer rights; see Directive of the European Parliament and of the Council amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and better information, COM(2022 143 final, 2022/0092 (COD), available here.
6. Questions and Answers on the European Green Claims, text available here.
7. The Green Claims Directive refers to “environmental claims” within the meaning of Directive 2005/29/EC, i.e.: “any message or representation, which is not mandatory under Union 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”.
8. While the Green Claims Directive has a wide scope of application, it foresees a number of exclusions, such as environmental labelling schemes or explicit environmental claims regulated by or substantiated by rules established in Directive 2013/34/EU of the European Parliament and of the Council and other Union, national or international rules, standards or guidelines for financial services, financial instruments, and financial products.
9. Traders that are microenterprises within the meaning of Commission Recommendation 2003/361/EC would be exempt from these requirements.
10. Article 17 of the Green Claims Directive states that Member States must ensure that, when penalties are to be imposed, the maximum amount of such fines should be at least 4% of the trader’s annual turnover in the Member State(s) concerned.
11. See our newsletter on tightened energy efficiency requirements for buildings, companies and data centers here.
