EU’s Green Claims Directive: Cutting through the climate jargon
There is a bewildering array of “green” claims from companies around the world that profess the environmentally beneficial qualities or characteristics of individual products or their company. Pledges such as environmentally friendly, eco-friendly, green, carbon-neutral, climate-neutral, biobased, biodegradable, conscious, responsible and net-zero seek to create an impression of an ethical company doing their utmost to protect our environment.
Companies have recognised that customers want climate action. Marketing departments have also learned that putting their climate credentials front-and-centre can provide their company with a competitive advantage.
However, an expanding number of climate pledges tout vague product attributes with limited accompanying information to legitimise their claims. Claims can be difficult to verify and are often confusing for consumers. In some instances, claims are simply “greenwashing”—deliberately misleading or deceptive information is provided to present an environmentally responsible public image. Fraudulent claims that deceive consumers and investors undermine efforts to mitigate climate change.
There is no doubt that companies are under pressure to communicate the efforts they are making to clean up their supply chains. But sometimes the rhetoric doesn’t match the reality and falsely promoting environmental measures is becoming a considerable legal risk for organisations. Over the past couple of years, several non-governmental organisations (NGOs) have taken matters into their own hands, forcing companies to defend what, they say, are questionable climate pledges in the courtroom.
In France, TotalEnergies’ net-zero marketing has come under fire. In March 2022, Greenpeace France, Friends of the Earth France and Notre Affaire à Tous filed a lawsuit against the country’s largest energy company in the Paris Judicial Court over what it says are misleading claims around its efforts to fight climate change.
In 2021, The Forest Litigation Collaborative lodged a complaint with the OECD regarding Drax Group plc, a wood-burning electricity generator in the United Kingdom, over claims they generate “carbon-neutral” electricity. The NGO suggests the burning of woody biomass emits more carbon emissions per unit of final energy than burning coal. Environmental Action Germany (DUH) is also acting against BP Europa SE and Shell Deutschland GmbH over the advertising of certain products as carbon or CO2-neutral. The outcome of these landmark cases may have a significant impact on future climate claims in advertising.
The European Commission conducted a study in 2020 where it determined that 53.3% of environmental claims about characteristics of the products assessed provided vague, misleading and unfounded information. Many jurisdictions are now beginning to up their regulatory game to combat false green claims.
As previously reported in F+L Magazine, the United States Federal Trade Commission (FTC) recently published a proposal on changes to Green Guides for the Use of Environmental Claims. The update was presented on December 14, 2022, with the public comment period ending on April 24, 2023— following an earlier extension.
Now, the European Union (EU) is looking to step up its response to confusing climate jargon. After several earlier postponements, the European Commission published its proposal for a Directive of the European Parliament and of the Council on Green Claims (The Directive) on March 22, 2023. The Directive delivers an amendment of two existing directives that protect the interests of consumers, the Unfair Commercial Practices Directive 2005/29/EC and the Consumer Rights Directive 2011/83/EU. The changes are broadly in line with the U.S. proposal.
Oftentimes rulemaking, monitoring, enforcement and remediation occurs faster in a competitive, self-regulating market than by government regulation. When it comes to sustainability, this does not appear to be the case. The “dieselgate” scandal that erupted around eight years ago, where the Volkswagen Group misled consumers by claiming environmentally friendly features of diesel-powered vehicles while fitting devices to cheat official emissions testing, is perhaps one of the most high-profile examples. During open public consultation for the EU Green Claims Directive, reliability of environmental claims about products was recognised as the preeminent obstacle to more sustainable consumption behaviour.
Individual countries in Europe have differing regulations around green claims. The directive should provide greater consistency across the European bloc and address the growing issue of greenwashing by forcing companies to substantiate their claims. The European Commission says it will provide better protection against unfair practices and help accelerate the green transition.
It was initially anticipated that the EU would propose regulation that would be immediately enforceable as law in all member states. Instead, a directive establishes a goal which member nations must achieve—with responsibility falling on the member states to translate it into national legislation. Commentators have noted that this may cause slight variances in green claims throughout the EU.
The directive will force companies to substantiate their environmental claims against standard methodologies. Under the proposal, companies are obliged to provide more information to consumers to assist with purchasing decisions. The directive is likely to result in fewer, more specific claims, says the commission. Companies leading the field in terms of real environmental performance should come to the fore, they say.
The proposal is designed to prevent misleading claims or greenwashing, and applies to green claims whether they imply a positive environmental impact, lesser negative impact or no impact. Early obsolescence practices, or the premature failure of goods, and the use of unreliable and non-transparent sustainability labels and information tools are also targeted. Companies with fewer than 10 employees and less than EUR2 million (USD2.18 million) turnover are exempt from the directive.
Specific requirements include information on the existence and length of a producer’s commercial guarantee of durability and on the reparability of products. Companies advertising benefits to consumers that are considered common practice in a relevant market are forbidden and the use of sustainability labels that are not based on a certification scheme or not established by public authorities is prohibited.
Generic environmental claims in marketing are banned where they cannot be demonstrated in accordance with Regulation (EC) 66/2010 (the EU Ecolabel), officially recognised eco-labelling schemes in the member states, or other applicable union laws.
Making environmental claims about entire products when it only concerns a specific aspect of a product are no longer permitted and there is a ban on presenting requirements imposed by law on products as a distinctive feature. Product comparisons are only permitted if information is provided around the method of the comparison, the products and suppliers covered. The commission expects the bans on environmental claims used in marketing to bring significant benefits to consumers while limiting the burden on traders.
The directive also addresses environmental labelling schemes which it says must be transparent, verified by a third party, and regularly reviewed. EU-level schemes should be encouraged, and new public schemes that are not developed at an EU level are not permitted. Restrictions also exist on private schemes.
EU member-states will be required to establish independent verification and enforcement processes. Direct penalties for non-compliance under the directive could be up to 4% of annual turnover, legal investigations and the potential exclusion from public procurement for up to a year.
Most see this is a significant step forward in addressing unclear climate jargon and the deliberate misleading of consumers, though there has been criticism of the directive in some corners. The commission did not stipulate a single methodology to substantiate green claims, despite the recent development of the EU Product and Organisation Environmental Footprint (PEF and PEO) methods by the Commission’s Joint Research Centre.
PEF and PEO are designed to help companies determine environmental performance based on verifiable and comparable information. However, the analysis tools do not yet cover all relevant impact categories and product types. Several NGO have criticised the failure to impose an EU-wide method—warning that green claims will not be comparable.
The directive is currently undergoing the regular legislative process with the European Parliament and member-state governments in the EU Council working to establish their positions before undertaking joint negotiations.