The EU Green Claims Directive and what it means for businesses

By Yashvee Kalia, Junior Consultant

The new Green Claims Directive proposal was unveiled by the EU last week. A defining moment in the anti-greenwashing movement, the proposal seeks to drive the move from environmental claims to facts through minimum requirements for businesses to substantiate and verify their green claims and ensure that products are accurately represented by the environmental credentials used to tout them.

While at the beginning of its legislative life, the Green Claims Directive presents itself as a significant step towards tackling the issue of greenwashing, which has seen companies from airlines and FMCG brands to clothing retailers and banks on the receiving end of allegations and lawsuits linked to overclaiming on the environmental benefits and outcomes of their products and services.

The Directive aims to allow consumers to make more informed purchasing decisions based on reliable and credible information about the sustainability of the products they buy. Initially expected to be published in 2022, it was delayed several times due to a lack of consensus on methodologies.

The Directive document notes, “If environmental claims are not reliable, comparable, and verifiable, consumers and other market actors cannot fully leverage their purchasing decisions to reward better environmental performance. As such, the parameters for the Directive have not yet fully been defined and the Commission notes that it will continue to build on details, such as what constitutes greenwashing in specific sectors.”

Implications for businesses

What is vital to understand is that Directive seeks to impose new requirements for businesses to prove the environmental claims they make about their products with independent verification and scientific evidence, including claims on, for example, the use of recycled plastic content in packaging and products, and the carbon impact of products and services. Worth noting, the Directive states that scientific evidence must cover the entire lifecycle of a product or service. Companies will be required to identify all environmental impacts relevant to their products.

Failure to provide scientific evidence could result in “proportionate” “dissuasive” action, including fines. However, it will be within the domain of individual EU member states to set and enforce penalties. The Directive also allows consumers to take action against companies.

A key point of contention for businesses will be the wide scope for defining the “evidence” needed to prove a sustainability claim. While the Commission initially showed intent to propose one single methodology to substantiate claims in its proposal, specifically the Product Environmental Footprint (PEF) methodology which is based on a lifecycle assessment approach, the latest Directive falls short of mandating a standardized and clearly defined framework based on scientific foundations. Article 3 in the document simply says claims must rely on “recognised scientific evidence,” which provides much room for interpretation and a lack of legal certainty for companies. A statement in Article 6 says that the European Commission would present legislation in the future “to complement the requirements on substantiation for certain types of claims.” This gaping hole in the current Directive could make it feasible for companies to use a range of varied, non-comparable and non-peer reviewed science to back up their claims, rather than accredited scientific evidence, thereby risking undermining the Directive’s intended outcomes.

Strengthening rules on labelling

The Green Claims Directive also aims to set standard criteria for the voluntarily sustainability labels used throughout the EU. At present, there are 230 sustainability labels and 100 green energy labels in the EU, with vastly different levels of transparency, and half of all green labels offer weak or non-existent verification. The Directive seeks to ensure that environmental labels and claims are credible and trustworthy to allow consumers to make informed purchasing decisions.

As such, the Directive sets out requirements for a certification scheme, through an independent accredited verifier who confirms that a product complies with the requirements for an environmental label. In parallel, the Directive aims to fight the proliferation of labelling schemes by preventing further new labels. The Directive underlines that the EU Ecolabel is the official European Union voluntary label for environmental excellence.

What’s next?

Depending on negotiations, it is likely that the Directive will be pushed through the second half of the year. If adopted, the Commission will then publish a report assessing progress within six years. As is the case with other Directives, the Green Claims Directive will need to be implemented into Member State law. Each law may differ, and some countries may adopt stronger standards.

Campaigners and consumer groups understand the Directive to be a big step forward from the current arena of unregulated green claims. However, they also warn that the proposal would give companies a larger scope to choose which data or impacts they use to assess a claim.

Overall, this is a step in the right direction as it mandates that businesses make authentic, verifiable and credible claims and brings more transparency to defining the right and wrong in green claims..

However, the Green Claims Directive will only be as effective as its clarity on substantiation and its enforcement, and companies will have to be held accountable in order to prevent future misleading green claims and labelling.