The Green Claims Directive proposal in a nutshell

On 22 March, the European Commission published its Proposal for a Directive on Green Claims  (“Green Claims Proposal”). The key objective of the Green Claims Proposal is to combat “greenwashing” and to enable consumers to contribute in accelerating the green transition by making informed purchasing decisions based on credible environmental claims and labels.

The Green Claims Proposal sets out the minimum requirements on the substantiation and communication of voluntary environmental claims and environmental labelling in business-to-consumer (B2C) commercial practices. Furthermore, it aims to amend the Unfair Commercial Practices Directive.

What are “green claims”?

Green Claims are defined in the Green Claims Proposal as:

“any message or representation, which is not mandatory under Union Law or national law, 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 Green Claims Proposal will only apply to voluntary claims made in a B2C context. Common examples include ‘carbon positive’, ‘packaging made from recycled plastic bottles’, ‘CO2 compensated delivery’, ‘bee-friendly honey’ or ‘ocean friendly sunscreen.’

Which companies will be affected?

The Green Claims Proposal targets EU-operating companies that have more than 10 employees and generate more than EUR 2 million annual turnover.

The Proposal has an extra-territorial impact because it also applies to non-EU companies who target EU consumers.

The Proposal will not apply to certain sectors because it does not aim to change existing or future sectoral rules. Most financial services for instance are excluded from the Green Claims Proposal. 

What are the key requirements and implications for companies? 

a)      Substantiate green claims

The Green Claims Proposal introduces new criteria on how companies must substantiate their green claims, such as:

·         they must rely on recognized scientific evidence and state of the art technical knowledge

·         demonstrate the significance of impacts, aspects and performance from a life-cycle perspective

• demonstrate whether the claim is accurate for the whole product or only parts of it (for the whole life cycle or only for certain stages, …)
• provide information whether the product performs environmentally significantly better than what is common practice
• demonstrate that the claim is not equivalent to requirements imposed by law

Companies making explicit environmental claims that state or imply that a product has less environmental impacts or a better environmental performance than other products (“comparative environmental claims”) will have to comply with additional requirements.

b)      Communication of green claims

Companies must meet new minimum requirements before they can communicate their green claims to consumers. These include:

• only state the environmental impacts included in the claim’s substantiation.
• make the information used to substantiate the claim publicly available via a weblink, QR code or equivalent. This includes the underlying studies, calculation and/or assumption used in the analysis, the certificate of conformity, and environmental impacts covered within this claim.

The Green Claims Proposal introduces measures that will affect the way companies use and communicate carbon offsets. Key requirements include:

• state the extent to which climate-related claims, such as ‘carbon neutral’, are based on carbon offsets by being transparent on emission reductions and emission removals.
• describe how the offsets are of high integrity and their impact on the climate is correctly accounted for.

c)       Labelling schemes

The Green Claims Proposal outlines measures to control the increasing number of ecolabels and ensure their reliability. Such measures include:

• new public labelling schemes will not be allowed unless they have been developed at the EU level.
• new private labelling schemes would only be allowed if they demonstrate higher environmental ambition than existing ones and are pre-approved by the relevant national authorities.
• existing labelling schemes must also meet the new minimum norms on how to substantiate and communicate green claims. They must follow requirements that ensure they are more transparent, independently verified and regularly reviewed. The rules do not apply to already regulated schemes, such as the EU Ecolabel, energy efficiency label and organic farming label.

Amendment of the Unfair Commercial Practices Directive

As stated above the Green Claims Proposal also seeks to amend the Unfair Commercial Practices Directive by adding new practices to the list of prohibited unfair commercial practices, the so-called “black list”, such as:

• making a generic or environmental claim without providing evidence (e.g. “sustainable”, “eco-friendly”, “plastic free”, ...) and when excellent environmental performance cannot be demonstrated;
• making an environmental claim about the entire product when it actually concerns only a certain aspect of the product;

Enforcement

The Member States shall designate one or more competent authorities responsible for the application and the enforcement of the Green Claims Proposal. These authorities will have the power of inspection and enforcement necessary to ensure compliance with the Green Claims Proposal. Such powers shall include e.g.: the power of access to any relevant documents, data or information related to an infringement of the Green Claims Proposal, the power to start investigations or proceedings related to the cessation or prohibition of infringements of the Green Claims Proposal; the power to require traders to adopt adequate and effective remedies, …

Natural or legal persons or non-governmental organizations promoting human health, environmental or consumer protection who have legitimate interest shall be entitled to submit substantiated complaints to the competent authorities. 

Penalties

Member States shall lay down the rules on penalties. These need to be effective, proportionate and dissuasive. When determining the type and level of penalties to be imposed in case of infringements, Member States should consider, amongst others, the nature, gravity, extent and duration of the infringement.

The penalties and measures for infringement of the Green Claims Proposal need to include: (a) fines which effectively deprive those responsible of the economic benefits derived from their infringements; also increasing the level of such fines for repeated infringements; (b) confiscation of revenues gained by the company; (c) temporary exclusion for a period of maximum 12 months from public procurement processes and from access to public funding.

The maximum amount of fines should be at least 4% of the company’s annual turnover in the Member State(s) concerned. 

What are the next steps?

Companies and other relevant stakeholders can provide their feedback to the European Commission on the Proposal through a public consultation open until 21 July 2023.

The Green Claims Proposal will now be discussed by the European Parliament and the Council. Once a common text is agreed upon, the Green Claims Directive will formally enter into force. Member States will then have 18 months to adopt the text into their national legal frameworks.