European Commission proposes the Green Claims Directive

On 22 March 2023, the European Commission proposed a new Green Claims Directive to tackle the growing scourge of greenwashing. This is an important step towards increasing transparency and trust in relation to environmental claims. 

The term greenwashing was first used by Jay Westerveld in the 1980s and implies any dishonest practices used by businesses to represent themselves as more sustainable; either by giving a false impression or providing misleading information as to the sustainability of a product or service.

In recent years, claiming to be "green" and/or “sustainable” has become an important competitive factor. Products marketed as green often experience greater growth, as shown by a global 71% rise in searches for sustainable goods.

However, a study by the European Commission in 2020 highlighted that 53.3% of examined environmental claims in the European Union (EU) were found to be vague, misleading or unfounded, and 40% were unsubstantiated.

In response, the European Commission wants to ensure that consumers have more clarity on the sustainability characteristics of a product or service. This will provide stronger reassurance that when something is sold as green, it is in fact green, and provide better quality information when choosing environment-friendly products and services. In this context, a proposal for a Directive on substantiation and communication of explicit environmental claims (the so-called "Green Claims Directive") was published on 22 March 2023.

The proposed Green Claims Directive aims to establish the first set of detailed EU rules for the substantiation of voluntary green claims and, by extension, regulate the use of environmental claims in marketing communications in Europe. The proposal includes:

• clear criteria on how companies should prove their environmental claims and labels;
• requirements for these claims and labels to be checked by an independent and accredited verifier; and
• new rules on governance of environmental labelling schemes to ensure they are solid, transparent and reliable.

The proposed Directive furthermore requires companies to provide clear and accurate information about the environmental impact of their products or services. It also prohibits unsubstantiated or vague environmental claims. A claim is defined as any message or representation, not required by applicable law, that states or implies a positive impact on the environment. This includes text, images, graphic or symbolic representation, labels, brand names, company or product names. In this regard, the proposal also provides the need for verification by independent third parties for the substantiation of green claims in order to prevent greenwashing and better protect consumers.

The proposed Directive additionally addresses the jungle of environmental labelling schemes and the inconsistencies between them by putting a stop to public labelling schemes and labels with aggregated scoring. In addition, any new private labelling schemes must prove that they are of added value compared to the existing labels.

Offending companies will be subject to penalties ranging from fines to confiscation of revenues, and temporary exclusion from public procurement processes and public funding. Furthermore, there is also a great risk of reputational damage and tarnishing of a company's image if a product or service offered as green turns out to be non-compliant. The proposed Directive thus represents an important step in the protection of businesses and consumers from harmful greenwashing practices.

The proposed Directive still needs to be approved by the European Parliament and the Council of the European Union. Once adopted, the Directive must be implemented in national legislation in EU Member States. Under the proposal, Member States will have to designate competent authorities and give them all necessary powers of investigation and enforcement, to ensure compliance with the Directive and establish a regulatory and sanctioning regime.