On the 23 March 2023, the European Commission proposed a new Green Claims Directive (the “Directive“). If adopted, the Directive will have a huge impact on businesses making green claims on the products they sell in the EU. In particular, it would create (1) strict rules on what type of evidence companies need to have to support their green claims, (2) a brand-new requirement that the claims be verified and certified by a third party before they can be used, and (3) an obligation to provide information to consumers on the green claim, either with the product or via a weblink or QR code. This is part of a broader effort in to crack down on greenwashing in Europe. Read on for more details, and our take on why this is going to matter for our clients.
What is being proposed?
Key takeaways include:
- Green claims would need to be based on an assessment, meeting new minimum ‘substantiation requirements’ that include:
- Relying on recognised scientific evidence and state of the art knowledge;
- Demonstrating the significance of impacts from a life-cycle perspective;
- Requiring greenhouse gas offsets to be reported in a transparent way;
- Providing information on whether the product performs environmentally significantly better than what is common practice; and
- Identifying whether a positive achievement leads to significant worsening of another impact.
- Green claims can only cover environmental impacts that have been assessed in accordance with the substantiation requirements and identified as ‘significant’ for the product or business.
- Green claims will need to be accompanied by information on their substantiation, either in physical form, or by way of a weblink, QR code, or equivalent. This means that businesses making green claims may need to reconsider their product packaging.
- Obtaining a ‘certificate of conformity’ for green claims. Businesses making green claims are required to have their green claims verified and certified as compliant by an officially accredited body before they are communicated. Certification would provide companies with certainty that their claims would then not be challenged by any Member State competent authorities.
- Stricter regulation of environmental labelling schemes, including third country labelling schemes.The Directive targets the perceived proliferation of environmental labels by banning the establishment of new national or regional public environmental labelling schemes in the EU Member States, unless these are established at EU level. New environmental labelling schemes established by public authorities in third countries (e.g. the US) need to be approved by the European Commission before they can enter the EU market. Private schemes will need to be approved by the national authorities, and can only be approved if they can show added value compared to existing schemes.
- Comparative green claims can only be used if they can be substantiated based on equivalent information and data.
- Emphasis on enforcement. There are many provisions in the Directive devoted to enforcement of the new rules, which will take place at the Member State level. In short, Member States will need to designate competent authorities responsible for enforcement; establish a penalty regime and ensure access to a court or other independent body competent to review the procedural and substantive legality of the competent authority’s decisions.
What type of green claims are covered?
The Directive applies to explicit environmental claims made by businesses to consumers in the EU, unless these claims are not already governed by specific EU rules e.g., the EU Ecolabel. An “environmental claim” includes any message or representation in any form that states or implies a positive environmental impact, lesser negative impact, no impact, or improvement over time for a product, service, or organisation e.g., “sustainable”, “eco-friendly”, “packaging made of 100% recycled plastic” and “climate neutral”. The Directive also regulates environmental labels.
Why does this matter?
The Directive is part of a clear drive to create stricter rules on green claims and increase the enforcement of greenwashing in the EU, which has historically not been approached in a consistent way across the 27 EU Member States. Companies that wish to use green claims on their products will now need to consider them very carefully and make sure they have carried out assessments to back them up and had them verified and certified by an independent certification body.
This will involve time and resources, and will need to be taken into account when planning packaging and marketing strategies.
We anticipate that, if adopted, these new rules may have a chilling effect on companies wishing to make green claims, given the regulatory hurdles they will need to pass to support their claims. However, we think the companies with products that have products that are genuinely environmentally-friendly stand to benefit from these rules, since they will no longer be at a competitive disadvantage compared to companies that were applying less effort behind a similar claim or publishing misleading claims.
With the EU Representative Actions Directive entering into force this year and creating a class-action style mechanism in Europe, we can also expect to see consumer organisations taking advantage of this new redress mechanism to bring actions against green claims that they consider not properly substantiated.
The Commission’s proposal will now pass to the European Parliament and Council for consideration. We anticipate that this process will take around 18 months allowing time for businesses and other stakeholders to participate in a public consultation process and provide their comments. We will continue to follow how the proposed Directive develops during this period and its impact on current industry practices.
If you would like assistance assessing the impact on your business of these proposed rules or preparing feedback for the public consultation process, please contact a member of the Cooley team.
Where can I find it?
- The draft legislation is available here.
- The Q&A document issued by the Commission here.
- Factsheet issued by the Commission here.
- Press release here.