On 17th January 2024, the European Parliament gave the final approval to a new law that will ban misleading environmental claims on products, services and organisations, and improve labelling, making the European Union (EU) the toughest region of the world in its approach to greenwashing claims that deceive the public.

“This law will change the everyday lives of all Europeans! We will step away from throwaway culture, make marketing more transparent and fight premature obsolescence of goods. People will be able to choose products that are more durable, repairable and sustainable thanks to reliable labels and advertisements”, explained S&D Group VP and EP negotiator Biljana Borzan. “In the EU, there are more than 1200 green labels and claims, but barely 35% have any form of verification. The jungle of false environmental claims will end.”

EU member states now have two years to introduce the new rules into national law.

WHAT LED TO THIS?

In 2022, the European Commission mapped around 230 active ecolabels in Europe and 100 private green energy labels in the EU.  The report revealed that some environmental claims are not reliable, and consumer trust in them was extremely low. Consumers were being misled by companies giving a false impression of their environmental impacts or benefits – a practice known as greenwashing.

The absence of specific EU rules contributed to this situation. The European Parliament is updating existing rules regarding commercial practices and consumer protection in order to better protect consumers’ rights, promote environmentally-friendly decisions and create a circular economy that reuses and recycles materials.

In March 2023, the European Commission adopted a “Proposal for a Directive on Green Claims” to prevent companies from making misleading environmental claims about their products and services. 

EU DIRECTIVE ON GREEN CLAIMS – NEW RULES 

Under the new rules, companies will need to … 

– SUBSTANTIATE environmental claims using robust, science-based and verifiable methods and life cycle assessment.

– COMMUNICATE accurately, holistically, honestly and transparently.

+ Common environmental phrases would be prohibited in advertisements, in social media posts or on packaging unless they were sufficiently substantiated and verified to make product labelling more trustworthy. These phrases include ’biodegradable’, ‘carbon neutral’, ’climate neutral’, ’eco’, ‘eco-friendly’, ‘energy efficient’, ‘environmentally friendly’, ‘green’, ‘natural’, ‘nature’s friend’, and more.

+ Claims that a product has a neutral, reduced or positive impact because of emissions offsetting schemes on the environment would also be prohibited due to consumer concern about the environmental impact of carbon offsetting schemes.

+ There must be a visible guarantee of information to focus producers and consumers on the durability of goods and harmonised label will be created to give more prominence to goods with an extended guarantee period. Unfounded durability claims that prompts earlier replacement of  consumables and presenting goods as repairable when they are not are also prohibited.

– VERIFY claims externally by an accredited verifier.

TRAVELLERS ARE FED UP WITH GREENWASHING

In travel and tourism, it is increasingly important to consumers that businesses take responsibility for their impacts on communities and the environment. The challenge for consumers is to find out what is real and who is greenwashing. 

A Special Eurobarometer 501 survey revealed that 94% of Europeans say that protecting the environment is important to them personally, and 68% agree that their consumption habits adversely affect the environment in Europe and globally.  For this to happen, consumers need reliable, verifiable information.

Can consumers’ representatives bring collective actions against businesses/trader not respecting the new Directive? 

In the Representative Actions Directive (EU) 2020/1828, “qualified entities” such as consumer organisations will be able to bring legal actions to protect the collective interests of consumers. This will apply, for instance, if a business/trader makes green claims (implicitly or explicitly) assuring that it complied with the minimum requirements for substantiation, but it is suspected that it was not the case.

A MINEFIELD FOR HOTELIERS

Hospitality businesses will face a minefield of considerable challenges, from knowledge and data gaps, to accountability and transparency, to significantly increased costs. 

Worldwide, a growing number of hotel owners and operators have implemented a variety of eco-labels, but not all of them are science based and accountable with rigorous independent audits for verification. Many have chosen an easier and less costly route with self-audits, and many more have dragged their feet in denial.  
Very few provide transparent sustainability reporting of their positive impacts, eco and social footprint, responsible supply chain and SDG Actions.

Which EU companies are affected?

The scope of the Directive is broad. It would apply to the vast majority of EU operating companies, from SMEs to large public companies, and across industries. Only micro-enterprises (companies that have fewer than 10 employees or generate less than €2 million annual turnover) would be exempt from the obligations, unless they themselves wish to use the rules as a competitive advantage.  It would apply to claims made voluntarily to consumers in the EU about a product, service or organisation that state or imply a positive effect on the environment.  

EU Member States are to take measures to help SMEs apply the requirements by facilitating access to financial support, as well as organisational and technical assistance. The EU Commission will also support companies by making available funding to provide data to support solid claims and develop calculation tools for SMEs.

What will the new rules mean for international partners? 

The directive also apply to companies based outside the EU – from SMEs to large public companies across industries – who are targeting EU consumers. This encourages global partners to contribute to the green transition.

What types of claims are included in the new rules?  

The directive targets “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 organisation. Green claims must be substantiated and be verified ex-ante (forecasts or calculations based on future scenarios). It includes 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 includes environmental labelling schemes to stopping the proliferation of public and private labels and ensuring transparency and robustness of labelling schemes. 

Climate-related claims that are based on carbon offsets or carbon have to be transparent about what part of that claim concerns their own operations, and what part relies on buying offsets, and prove the integrity of the offsets, as well as on their correct accounting.

Is there a penalty?

Companies that make unsupported environmental claims could be fined up to 4% of their profits and barred from public procurement contracts.

How will companies meet the new requirements?  

Companies will need to have a robust environmental claims management framework. This will likely require changes to key elements of operating models, from organisational capabilities to data management and technology; and enhancements to governance structures. A more robust management of environmental claims could help companies to reduce reputational and litigations risks, and support brand value. It may also generate new insights and guide better decision-making.

How exactly will verification and enforcement of green claims work? 

The proposed directive would require EU 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:

– Claims must be substantiated with scientific evidence that is widely recognised, identifying the relevant environmental impacts and any trade-offs between them

– If products or organisations are compared with other products and organisations, these comparisons must be fair and based on equivalent information and data

– Claims or labels that use aggregate scoring of the product’s overall environmental impact on, for example, biodiversity, climate, water consumption, soil, etc., shall not be permitted, unless set in EU rules

– Environmental labelling schemes should be solid and reliable, and their proliferation must be controlled. EU level schemes should be encouraged, new public schemes, unless developed at EU level, will not be allowed, and new private schemes are only allowed if they can show higher environmental ambition than existing ones and get a pre-approval

– Environmental labels must be transparent, verified by a third party, and regularly reviewed.

What should companies do?

Urgently act NOW.  Companies in the EU and abroad that target EU consumers will be affected by the EU Green Claims Directive.

Stakeholders are concerned about greenwashing. Review how you currently evidence and communicate environmental claims. Review your environmental claims to ensure compliance are more manageable and design an environmental claims management framework that is honest, rigorous, accountable and transparent.

For information please look at the European Commission Q&A on European Green Claims