The European Commission proposes directive to combat greenwashing

On 22 March 2023, the European Commission presented its proposal for common criteria against greenwashing and misleading environmental claims. The proposed Green Claims Directive aims to strengthen consumer protection through greater transparency and stricter requirements on the use of environmental claims. It is meant as a complement to the proposed changes to the Unfair Commercial Practices Directive.[1]

For companies, it will facilitate competition on a level playing field, boost the competitiveness of sustainable companies and make it easier for companies with environmentally friendly products to differentiate themselves on the market.

The Directive follows the Commission’s commitment to ensure that consumers are empowered to make more informed choices and play an active role in the green transition, outlined in the European Green Deal.[2]

To achieve this commitment, the proposal can be considered to have three focal areas:

1. Misleading business practices related to the sustainability aspects of products.
2. Unclear or poorly substantiated environmental claims by companies.
3. Sustainability labels that are not always transparent and credible.

To address these areas of concern, the Commission proposes several measures.

Substantiation of environmental claims
Companies making environmental claims about their products or services must, according to the proposal, comply with certain minimum requirements in terms of how the claims are substantiated and communicated. The proposal focuses on explicit claims, such as ’made from recycled plastic bottles’. In short, the proposal means that, before making such explicit environmental claims, the company must independently verify and provide scientific evidence to support the claims. This should be done by means of an assessment, in which companies must:

• show that they rely on recognised scientific evidence and state-of-the-art technical knowledge;
• demonstrate the significance of impacts, aspects and performance from a life cycle perspective;
• take into account all significant aspects and impacts to assess performance;
• demonstrate whether the claim is accurate for the entire product or only parts of it, for the whole life cycle or only for certain stages, and for all the trader’s activities or only a part of them;
• demonstrate that the claim is not equivalent to requirements imposed by law;
• provide information on whether the product performs environmentally significantly better than is common practice and identify whether a positive achievement leads to significant worsening of another impact;
• be required to report offsets in greenhouse gases in a transparent manner; and
• include accurate primary or secondary information.

If the company uses comparative claims (i.e. claims, states or implies that a product or trader has less or more environmental impacts or performs better or worse regarding environmental aspects than other products or traders), the proposal introduces some additional requirements to ensure that the comparison is accurate and based on equivalent information and evidence. These requirements are as follows:

• Use of equivalent information when assessing environmental impacts, aspects and performance.
• Use of data that has been generated or sourced in an equivalent manner.
• Equivalent coverage of the stages along the value chain, with the most significant stages being taken into account.
• Equivalent coverage of environmental impacts, aspects or performance, with the most significant impacts, aspects or performance being taken into account.
• Equivalent use of assumptions.

Communication of environmental claims
Furthermore, the Directive stipulates that environmental claims communicated to consumers may only relate to environmental impacts, aspects or performance assessed in accordance with the requirements set out in the Directive and must be significant for the product or company. Communication must also include, where relevant to the claim, information about how consumers can use the product appropriately to reduce the environmental impact, as well as supporting evidence for the claim. The proposal further stipulates that information that is required to be communicated to consumers must be made available together with the claim, either in physical form or in the form of a web link, QR code or equivalent.

For communication of comparative claims, a further requirement that environmental impacts, aspects or performance of the product compared with another product from the same trader, a competing trader no longer active on the market, or a trader that no longer sells to consumers may not be made unless evidence proving that the impact is significant and achieved in the last five years is provided.

In this respect, it should be noted that ‘microenterprises’, defined in the Directive as companies with less than 10 employees and an annual turnover not exceeding EUR 2 million, are not subject to the above requirements.

Labelling scheme requirements
The proposal also imposes restrictions on the possibility of participation in labelling schemes. In brief, the proposal introduces requirements for transparency and availability of information on the ownership, decision-making body and objectives of the labelling scheme. Furthermore, the criteria on which the award is based must be developed by experts and reviewed by stakeholders, decisions must be appealable, and there must be procedures for dealing with non-compliance and the possibility of withdrawing or suspending the label.

In addition, the Directive introduces a ban on new national or regional publicly owned labels not developed at EU level. Furthermore, it also proposes more restrictive requirements for new private labels through the introduction of a validation procedure to be carried out by national authorities. Such validation may only be provided if the scheme is demonstrated to add value in terms of environmental ambition, coverage of environmental impacts, product category group or sector and the ability to support the green transition of SMEs as compared with the existing Union, national or regional schemes.

Ex-ante verification of environmental claims and labelling schemes
Lastly, before the claim or label is used in commercial communication, it will be required to be verified and certified by a third party. An officially accredited independent body must carry out this procedure upon request by the company. Once the verification process has been completed by such body, it may (or may not) issue a certificate of conformity which will be recognized across the EU and shared between Member States via the Internal Market Information System. An issued certificate may not be challenged by competent authorities in the Member States.

Setterwalls looks forward to seeing how this develops and will monitor the situation.

[1] Directive 2005/29/EC.

[2] The European Green Deal, COM(2019)640.