Overview
On March 23, 2023, the European Commission published a proposal for a Directive on substantiation and communication of explicit environmental claims ("Green Claims Directive"). This proposal aims to tackle so-called greenwashing claims by regulating how companies communicate and substantiate voluntary environmental claims.
Scope
The proposal will regulate voluntary environmental claims and environmental labeling provided by traders in business-to-consumer commercial practices.
The notion of "environmental claims" is broadly defined and covers any message or representation, including 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 limitation of the scope to "voluntary" claims excludes claims made under existing EU instruments such as the EU ecolabel, organic farming or the energy labeling and ecodesign frameworks, as well as claims that will be covered by forthcoming EU law in this area. By way of example, biocidal products should fall outside the scope of the Green Claims Directive. The Biocidal Products Regulation (BPR) contains provisions prohibiting references to biocidal products as “natural”, "environmentally friendly" or "animal friendly". Competent Authorities have recently agreed that "bio", "eco", "green", "nature", "natural" or "organic" should also no longer be used as prefix or suffix in the trade names of any biocidal product, giving effect to a 2020 General Court judgment according to which the presence of the term "bio" in the product's name would be sufficient to risk deceiving consumers.
It is proposed that the Green Claims Directive will not apply to microenterprises (i.e., enterprises with fewer than 10 employees and an annual turnover not exceeding 2 million EUR), unless the microenterprises will wish to receive a certificate of confirmatory for any environmental claims. While non-EU companies are not directly caught by the proposal, they will have to take the EU requirements into account if they wish to place their products or services on the EU market – or to support their EU importers and distributors with verification of the environmental claims made.
Minimum substantiation requirements for voluntary green claims
The Green Claims Directive proposal sets out minimum requirements to be met by voluntary environmental claims. These include the requirement for explicit environmental claims to, for example:
- specify whether the claim relates to the whole product or part of the product / to all activities of a trader or a certain part;
- rely on "widely recognized scientific evidence";
- not simply consist of requirements imposed by law;
- identify whether an improvement leads to significant worsening of other impacts; and
- communicate about greenhouse gas emissions offsets separately and specifically (e.g. specifying whether offsets relate to emission reductions or removals).
If a trader claims that their product or themselves have less environmental impacts or better environmental performance than other traders or products, they will need to comply with additional requirements concerning the way the assessment is conducted. Amongst others, the traders should use equivalent data with that used by the other trader and the data should be acquired in an equivalent manner.
All claims will have to be communicated together with information on the substantiation, in physical form, on a website or via a QR code. Traders will also have to review and update their environmental claims when circumstances so require and no later than five years after the making available of information on the claim.
Crack-down on green labeling schemes
In order to address the feedback on proliferation of environmental labeling schemes, the proposal for the Green Claims Directive introduces a number of requirements intended to improve the transparency and credibility of such schemes. These include:
- the prohibition of labels presenting a rating or score representing cumulative environmental impacts unless these are established at the EU level;
- the obligation to make available information on ownership, decision-making body and objectives;
- a requirement to have procedures in place to deal with non-compliance, including the possibility to withdraw or suspend the label in case of "persistent and flagrant non-compliance."
New environmental labeling schemes by the private operators in the EU and in third countries will be subject to a validation procedure, requiring demonstration of their added value. The existing labeling schemes will be allowed to continue only if they meet with the requirements of the Green Claims Directive. There will be no more new national or regional labeling schemes by public authorities of the Member States. At the same time, third country public authorities will be able to get approval of the labeling schemes that are to be used on the EU market from the European Commission.
Validation of green claims by third parties
The proposal will require traders to carry out a third-party assessment before making environmental claims – self-certification will no longer be allowed. The assessment will have to be conducted by an independent stakeholder (i.e. verifier) accredited in accordance with the Green Claims Directive, resulting in the issuance of an EU-wide certificate of conformity. While the format for the certificate of conformity is to be established by the European Commission, the choice of procedures for the verification are to be developed by Member States, creating a possibility for national divergence.
Enforcement against traders for non-compliance
The proposal envisages both private and public enforcement of the Green Claims Directive. In respect of private enforcement, Members States will need to ensure that their rules allow natural or legal persons or organizations to make substantiated complaints and challenge any decision before the courts or other independent public body. Furthermore, non-governmental entities or organizations promoting human health, environmental or consumer protection should be allowed to take legal action to protect collective interests of consumers.
When it comes to the public enforcement, it is envisaged that the competent authorities should have wide ranging powers to carry out investigations and ensure compliance with the Green Claims Directive. While usually the penalties are left to be determined by the Member States, the proposal specifies that such penalties should include the following:
- fines up to at least 4% of company’s annual turnover in the Member State(s) concerned;
- confiscation of revenues gained by the company from a transaction with the relevant products concerned; and
- temporary exclusion for a maximum of 12 months from public procurement processes.
Interplay with existing and forthcoming EU law
The proposed Green Claims Directive complements the proposal to revise the existing Unfair Commercial Practices Directive (UCPD) and the proposal on common rules promoting the repair of goods.
The revision of UCPD is essential for the implementation of the Green Claims Directive, as the relevant definitions will be set out in the revised UCPD. The UCPD will also be revised to extend the scope of what is considered misleading practices to cover environmental claims. For example, the prohibited misleading practices will include:
- displaying a sustainability label which is not based on a certification scheme or not established by public authorities;
- making a generic environmental claim for which the trader is not able to demonstrate recognized excellent environmental performance relevant to the claim; and
- making an environmental claim about the entire product when it actually concerns only a certain aspect of the product.
While the proposal establishing “right to repair” after the expiry of the legal guarantee does not explicitly deal with environmental claims, it plays a material role in achieving the Green Deal’s commitments.
Next Steps
The Green Claims Directive proposal will now be assessed by the European Parliament and the Council under the ordinary legislative procedure.
If adopted, the Green Claims Directive will still require EU Member States to transpose its rules into their national laws, 18 months after its date of entry into force. Member States will have to apply the national measures 24 months after the date of entry into force of the Directive.
While there is still time before any new rules from the proposed Green Claims Directive come into effect, companies can already start reviewing claims on the products they supply on the EU market against the proposal. Gathering relevant data for substantiating and backing up any voluntary environmental claims will be time consuming. Communications up and down the supply chain will be key, so will a consistent approach across EU Member States.
To know more on global anti-greenwashing regulations, join members of Steptoe’s EU chemical and environment regulatory practice, on Tuesday, May 16, 2023 for a complimentary webinar, part of EU Chemicals Strategy for Sustainability webinar series where lawyers will compare initiatives in the EU, UK and US. To register, click here.
