In January 2024, the European Parliament formally approved a new greenwashing directive, requiring member states to introduce stricter rules surrounding the use of environmental claims by companies. Here’s a breakdown of the new directive and what it means for European countries going forward.
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In an effort to protect consumers from misleading corporate greenwashing tactics, the Directive on Empowering Consumers for the Green Transition clamps down on unfair commercial practices where environmental claims cannot be sufficiently substantiated by the relevant trader. Intended to be supported by the Green Claims Directive, both legislative acts will work jointly to strengthen consumer rights by putting traders under increased scrutiny on companies’ environmental claims about their business and/or products.
What Is Greenwashing?
In recent years, environmental labels and sustainability comparisons have become increasingly used as marketing tools by companies to persuade consumers into thinking that, by buying their product, they are contributing to the development of a more circular economy. Such claims, however, are often purposefully vague, lacking sufficient elaboration while still creating the illusion of sustainability in order to appeal to a market of consumers who are becoming increasingly concerned about the impact of their consumption choices on the environment.
A 2020 study analysing green online claims conducted by the European Commission found that in over half of the claims surveyed, insufficient information was provided by the trader to enable an accurate assessment of the claim.
The use of insufficiently substantiated environmental claims is now described collectively in the European Union (EU) as greenwashing, which employs different tactics ranging from the use of descriptive words in advertising such as “eco-friendly”, “green”, or “conscious”, to making claims that a company is on track to achieve net-zero emissions without having any specific plan in place to achieve this goal. These practices are widely recognised as both misleading to consumers, as well as harmful to the environment in the way that they prevent the development of competition between companies to create more environmentally friendly products.
Banned Practices
The Directive will make a number of amendments to the list of unfair practices included in the Unfair Commercial Practices Directive (UCPD). This will have a direct impact on traders by introducing a stricter approach towards environmental claims made in respect of environmental and social characteristics and the circularity aspect.
In its proposal, the European Commission provides guidance on what can be considered misleading environmental claims as follows:
“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.”
The following are some of the most significant amendments that will be added to the list of prohibited practices under the Directive, which companies will be required to observe:
- Practices related to early obsolescence, referring to the method of misleading consumers on a product’s durability where it is purposely designed to become prematurely obsolete;
- The use of “generic” environmental statements such as “eco-friendly”, “ecological”, and “biodegradable”;
- The display of sustainability labels that are not accredited by an independent certification scheme or established by public authority;
- Making claims about the future sustainable performance of a product that cannot be substantiated by a detailed implementation plan;
- The advertising of irrelevant features to deceive consumers into believing a product is more sustainable when compared to others on the market;
- Claims of carbon neutrality based off the purchasing of carbon credits or offsetting carbon emissions outside the production’s supply chain;
- The use of environmental claims that simply reflect compliance with a legal requirement already in place;
- Environmental claims made in respect of an entire product or business that only apply to a specific aspect of the product, or specific activities carried out by the trader.
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Increased Transparency from Traders
With the prohibition of these practices, a number of positive obligations are created for companies to provide more accurate information to consumers regarding their products durability and environmental impact. For instance, if a company has made claims regarding its future transition to net zero by a certain date, it will now be required to publish a comprehensive implementation plan setting out “clear, objective, publicly available and verifiable commitments and targets” that must be verified by an independent third party expert.
Similarly, where comparisons are made in relation to a product’s social characteristics or circularity aspects, the Directive also requires that the company publishes detailed information regarding the basis of these comparisons. In order to enable consumers to make more informed transactions, objective standards must be applied by companies when carrying out such comparisons which relate, for example, to a product’s durability, reparability, or recyclability. In doing so, the products compared must have the same function, using a common method and common assumptions, comparing material and verifiable features of the products involved.
The Directive will therefore require significantly higher levels of transparency from companies regarding their emissions, endeavouring to create a fairer and more trustworthy market for consumers.
Case Study: France
While this is new terrain for many EU member states, legislation on greenwashing was introduced by France in 2023 under its Climate and Resilience Law in an effort to curb the widespread use of deceptive environmental terminology used in advertising. The legislation explicitly prohibits companies from making disingenuous claims that relate both to a product’s environmental impact and false claims made by advertisers in respect of their environmental commitments.
Similarly to the new EU-wide Greenwashing Directive, France’s law creates a higher burden of proof for companies in relation to declarations of carbon neutrality, which are prohibited unless supported by a comprehensive report outlining all greenhouse gas emissions associated with their service or product, both directly and indirectly. Furthermore, this must be accompanied by an explanation describing the process on how these emissions are avoided, reduced, and then offset.
It is particularly significant that this legislation creates mandatory reporting that extends to include emissions stemming across a product’s whole life cycle. By only allowing net zero claims accompanied by detailed proof will be allowed, the EU’s standards of accountability inevitably improved. With two years to transpose the Directive, member states will now be required to follow suit and introduce similar, stricter regulations.
Final Thoughts
Since the adoption of the Paris Agreement in 2015, governments have begun recognizing that increased transparency and integrity are needed when it comes to achieving the EU’s ambitious emissions reduction targets.
Accounting for a significant portion of global carbon emissions, it is vital that companies do not continue attempting to evade their environmental obligations but rather align their business strategies with their climate commitments. By setting out concrete guidance on reporting requirements, it is hoped that this move beyond the traditional, non-binding standards previously in place will prompt expansion towards more sustainable and transparent industries.
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