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What is the EU's Green Claims Directive?

This article explores the proposed Green Claims Directive, its business impact, and preparation strategies for implementation.
Business
2024-01-02T00:00:00.000Z
en-us
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The European Union's Proposed Green Claims Directive is a significant step in the fight against greenwashing - a practice where companies make misleading or vague claims about the environmental benefits of their products or services. 

The EU Green Claims Directive not only aims to standardize the substantiation, communication, and verification of green claims but also seeks to harmonize the regulatory landscape across EU Member States. As consumer awareness and demand for sustainable products grow, the need for such regulation has never been more pressing. 

👉 This article explores the proposed Green Claims Directive, its business impact, and preparation strategies for implementation.

What is the EU’s Green Claims Directive?

Consumer concerns and the need for regulation

In recent years, environmental awareness has increased significantly among consumers, leading to a growing demand for sustainable products and services. This shift in consumer preferences has not gone unnoticed by businesses, many of which have responded by marketing their offerings as 'green' or ‘environmentally friendly’. However, this rise in eco-conscious marketing has also led to a rise in greenwashing - a practice where the environmental benefits of a product or service are exaggerated or misleadingly portrayed in order to maximize profits.

A study conducted by the European Commission in 2020 revealed that over half of the environmental claims made by companies were vague, misleading, or unsubstantiated. This lack of clarity and honesty in environmental marketing has not only misled consumers but has also undermined the credibility of genuinely sustainable businesses. It highlights the growing need for regulation to ensure that environmental claims are transparent, accurate, and reliable.

👉 Learn more about greenwashing and discover why it is harmful on our blog

Environmental claims regulation

Traditionally, the regulation of environmental claims in the EU fell under the broader umbrella of consumer protection laws. These laws, aimed at preventing misleading advertising in general, were not specifically tailored to address environmental claims. As a result, they were often inadequate in tackling the complexities and specificities of green marketing.

Recognizing this gap, the European Union began to move towards more targeted regulation. The proposed Green Claims Directive represents a significant development in this regulatory landscape. It aims to provide a clear framework for companies making environmental claims, moving beyond the general guidelines of unfair commercial practices to address the unique challenges posed by green marketing.

The proposed Green Claims Directive will help to ensure that environmental claims are not just marketing tools, but accurate reflections of a product’s or service’s ecological impact. It underscores the EU's commitment to not only protect consumers from misleading information but also to support the transition to a more sustainable economy by promoting honest and transparent environmental practices in business.

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What is the aim of the EU Green Claims Directive?

Objective of the proposed Green Claims Directive

The primary objective of the Proposed Green Claims Directive is to establish a more transparent and reliable framework for environmental claims made by businesses. The directive aims to address the issue of greenwashing by setting stringent rules for substantiating, communicating, and verifying such claims. Its goal is to ensure that environmental claims are clear, accurate, and based on solid scientific evidence, thereby fostering greater trust among consumers and promoting genuinely sustainable practices in the business sector.

How does it differ from the Greenwashing Directive? 

The EU’s Green Claims Directive is designed to work in tandem with the proposed Greenwashing Directive (ie. the Commission’s 2022 proposal to amend the EU Unfair Commercial Practices Directive (UCPD) and the Consumer Rights Directive, to tackle greenwashing). While the Green Claims Directive focuses specifically on the substantiation and accuracy of environmental claims, the Greenwashing Directive has a broader scope. It seeks to broadly prohibit misleading sustainability claims, encompassing not just environmental aspects but also social sustainability issues like fair trade and forced labor. 

Together, these directives aim to create a comprehensive set of rules across the European Union, establishing a uniform standard for all sustainability claims, be they environmental or social. This dual approach ensures that companies are held accountable for the authenticity of their claims, thereby protecting consumer interests and promoting genuine sustainability in the marketplace.

How does the Green Claims Directive regulate environmental claims?

Criteria for substantiating environmental claims

The Proposed Green Claims Directive introduces specific criteria to ensure that environmental claims are substantiated with credibility and transparency. These criteria include:

  • Specificity of claims - Companies must clearly specify the aspect of the product or the company's operations that the environmental claim refers to.
  • Scientific evidence - All claims should be backed by robust scientific data, ensuring that the environmental benefits stated are factual and verifiable.
  • Life cycle perspective - Claims must consider the product's entire life cycle, demonstrating that the environmental benefits are significant not just in isolation but across the product’s entire lifespan.
  • Balanced representation - If there are any trade-offs or negative impacts associated with the claimed benefits, these must also be disclosed.
  • Separate accounting for emissions - Greenhouse gas emissions reductions and offsets should be accounted for separately to ensure clarity and honesty in reporting.

Challenges in regulating environmental claims in the EU

Implementing the Green Claims Directive across the EU presents several challenges, primarily due to the diversity of environmental claims and the varying interpretations across member states. Some of these challenges include:

  • Variation in national standards - Different EU countries may have their own standards and interpretations of what constitutes a valid environmental claim, leading to inconsistencies in enforcement and understanding.
  • Complexity of environmental impact -  Assessing the environmental impact of products or services is inherently complex, involving numerous variables and often requiring specialized knowledge.
  • Balancing stringency and practicality - The directive needs to be stringent enough to prevent greenwashing but practical enough to be implementable without placing an undue burden on businesses.
  • Evolving environmental science - As environmental science evolves, so do the benchmarks and standards for sustainability. Keeping the directive aligned with the latest scientific developments is crucial for its effectiveness.

The EU's approach with the Green Claims Directive is to create a standardized, EU-wide framework that addresses these challenges. By doing so, the directive aims to not only protect consumer interests but also provide clear guidance to businesses on how to make credible environmental claims, fostering an environment of transparency and trust in the market.

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What is the effect of the Green Claims Directive on businesses?

Impact on companies

The Proposed Green Claims Directive has significant implications for businesses operating both within and outside the European Union. 

For EU-based companies, this directive requires a rigorous assessment and substantiation of their environmental claims, necessitating a review and potential overhaul of their marketing strategies and sustainability reports. Compliance with this directive is not optional but a critical requirement to continue operating smoothly within the EU market.

For companies outside the EU, the directive extends its reach to those targeting EU consumers, including businesses selling into the EU via e-commerce. These companies must ensure that their environmental claims meet the stringent standards set by the directive, regardless of their geographical location. This global reach emphasizes the EU's commitment to ensuring that all products and services available to its consumers are held to the same high standards of environmental accountability.

Specific requirements for companies

The directive outlines specific requirements for companies, including:

  • Explicit claim substantiation - Companies must substantiate every explicit environmental claim they make. This includes claims made in advertising, packaging, and even verbal statements.
  • Verification process - These claims must undergo a verification process by third-party entities accredited by EU Member States. This process is designed to ensure that all claims are not only accurate but also relevant and significant from an environmental standpoint.
  • Exclusion of microenterprises - The directive excludes microenterprises (businesses with fewer than 10 employees and an annual turnover below €2 million) from these stringent requirements, acknowledging the disproportionate burden it could place on small businesses.
  • Product and company lifecycle claims - Companies must be clear whether their claims pertain to specific aspects of a product (like packaging) or the company's overall environmental impact. They must also ensure that these claims are supported by comprehensive life cycle assessments.
The directive's requirements represent a substantial shift in how environmental claims are managed and communicated in the EU market. Companies will need to invest in ensuring their compliance with these new regulations, which could involve significant adjustments in their operational, marketing, and communication strategies. This shift, though challenging, is aimed at fostering a more sustainable market environment where consumers can make informed choices based on trustworthy and transparent information.
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Substantiation and verification of claims

The process of substantiating green claims

The proposed Green Claims Directive lays out a detailed process for substantiating environmental claims, which is central to its enforcement and effectiveness. This process requires businesses to take several steps to ensure their claims are not only accurate but also meaningful in terms of environmental impact. Key steps in this process include:

  • Detailed assessment - Companies must conduct a comprehensive assessment of the claim, analyzing the specific aspect of the product or service it relates to.
  • Scientific evidence and life cycle analysis - Claims should be supported by scientific evidence, which may involve conducting a life cycle analysis of the product to assess its overall environmental impact.
  • Transparency and documentation - Businesses must maintain transparent documentation of how each claim is substantiated, including the methodologies and data used.
  • Regular review and update - Given the evolving nature of environmental science and standards, companies are expected to regularly review and update their claims to ensure ongoing accuracy and relevance.

The Role of third-party verification

Third-party verification plays a crucial role in the proposed Green Claims Directive, serving as an essential check on the accuracy and validity of environmental claims. This aspect involves:

  • Independent verification - Claims must be verified by third-party entities that are accredited by EU Member States. This ensures an independent and unbiased evaluation of the claims.
  • Compliance certification - Upon verification, the third-party entity will issue a certificate of compliance if the claim meets the directive's standards. This certificate serves as evidence of the claim's legitimacy.
  • Regular audits and reassessment - Verified claims may be subject to regular audits and reassessment to ensure continued compliance, especially in response to new scientific findings or changes in environmental standards.
  • Public disclosure - In some cases, the directive may require public disclosure of the verification process and results, enhancing transparency and consumer trust.

The combination of detailed substantiation and rigorous third-party verification is designed to create a robust framework for environmental claims. This framework aims to eliminate vague or misleading claims, thereby fostering a more trustworthy and sustainable market. For businesses, this means investing in more rigorous sustainability practices and transparency, aligning their operations with the EU's heightened environmental standards.

What are the consequences for companies for non-compliance?

Penalties and fines for unsupported claims

The Proposed Green Claims Directive outlines strict penalties and fines for businesses that fail to comply with its regulations. These penalties are designed to ensure that businesses take the directive's requirements seriously. Key aspects of these penalties include:

  • Proportionate fines - Fines for non-compliance are intended to be proportionate to the severity of the offense and the size of the company. This approach ensures that penalties are fair and significant enough to discourage misleading practices.
  • Reflection of unjust gains - Penalties may also be calculated based on any unjust gains or benefits derived from the deceptive claims, ensuring that businesses do not profit from misleading consumers.
  • Cross-border cases - In cases with cross-border implications, fines could reach up to 4% of the company's annual turnover, demonstrating the directive's serious stance against misleading environmental claims.

Enforcement mechanisms

The enforcement of the Green Claims Directive will be carried out at both the EU and national levels, involving a coordinated approach to ensure effective compliance. The enforcement mechanism includes:

  • Member State responsibility - Each EU Member State is responsible for implementing the directive into their national laws and setting up the necessary enforcement infrastructure.
  • Third-party verifiers - The role of accredited third-party verifiers is crucial in the enforcement process. They will be responsible for checking the compliance of green claims against the directive's standards.
  • Monitoring and auditing - Regular monitoring and auditing of businesses' claims are expected to be part of the enforcement process, ensuring ongoing compliance.
  • Legal proceedings - In cases of non-compliance, businesses may face legal proceedings, which could lead to fines and mandatory corrective actions.
  • Additional consequences - Beyond fines, companies may face additional consequences such as the confiscation of non-compliant goods, public naming and shaming, and potential exclusion from public procurement contracts for a certain period.

The consequences of non-compliance with the Green Claims Directive are significant and reflect the EU's commitment to ensuring that environmental claims made in the marketplace are truthful and reliable. For businesses, understanding and adhering to the directive's requirements is not just a matter of legal compliance, but also an essential part of maintaining consumer trust and corporate reputation in an increasingly environmentally conscious market.

👉 Discover how the UK is protecting consumers from greenwashing in our article

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What preparatory steps can businesses take?

How can companies prepare for the new regulations?

With the impending implementation of the proposed Green Claims Directive, businesses need to proactively prepare to ensure compliance. Effective preparation involves several strategic steps:

  • Assessing current claims - Companies should start by conducting a thorough review of all their current environmental claims. This includes claims made in marketing materials, on product labels, and in corporate communications.
  • Developing internal guidelines - Based on the directive's criteria, businesses should develop internal guidelines for substantiating environmental claims. These guidelines will help ensure that all future claims are compliant with the new regulations.
  • Training and awareness - It's crucial to train marketing, product development, and communication teams about the new requirements. This training should focus on the importance of substantiation and the consequences of non-compliance.
  • Establishing a verification process - Setting up a process for third-party verification of claims should be a priority. This involves identifying and partnering with accredited verifiers who can certify the compliance of the claims.
  • Investing in sustainability - Businesses may need to invest further in sustainable practices to meet the directive's standards. This could involve enhancing product life cycle management or adopting more sustainable production processes.
  • Documenting compliance efforts - Maintaining detailed records of how each environmental claim is substantiated is essential. This documentation will be critical in demonstrating compliance during audits or verifications.
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Looking ahead

When is the Green Claims Directive expected to come into effect? 

The proposed directive is currently under review by the European Parliament and the Council as part of the EU’s ordinary legislative procedure. This process involves detailed examination, amendments, and approval from both bodies.

Once the directive is approved by the Parliament and the Council, it will be formally adopted and published in the Official Journal of the European Union. This marks the directive's entry into force at the EU level.

Member States will then have a designated period - typically 18 months - to transpose the directive into their national laws. This involves integrating the directive's provisions into the domestic legal framework of each member state. Following the transposition, the directive will start to be enforced across the EU. Businesses will be expected to fully comply with the new regulations from this point onwards.

❗️ Possible accelerated timeline - Considering the urgency of addressing greenwashing and the need for clear regulations, there's a possibility that the legislative process could be expedited. Businesses should stay informed about any such developments.

Businesses should also be aware that the legislative process for the Green Claims Directive is dynamic and subject to potential changes and amendments. Key points to consider include:

  • Stakeholder input - Throughout the legislative process, various stakeholders, including industry groups, consumer protection organizations, and environmental advocates, may provide input, potentially influencing the final text of the directive.
  • Amendments and negotiations - During the review by the European Parliament and the Council, amendments can be proposed, and negotiations may lead to changes in the directive's scope, requirements, or implementation timeline.
  • Monitoring developments - It's crucial for businesses to monitor these developments as the legislative process unfolds. Changes made during the legislative process could impact the requirements and obligations placed on businesses.
  • Preparation for variability - Businesses should prepare for variability in the directive’s final form. Flexibility in compliance strategies will be key to adapting to the final set of regulations.

By keeping an eye on the legislative process and preparing for the expected timeline, businesses can ensure they are ready to adapt and comply with the Green Claims Directive as it comes into effect.

👉 To learn how to identify misleading green claims head over to our article

What about Greenly?

At Greenly we can help you to assess your company’s carbon footprint, and then give you the tools you need to cut down on emissions. Why not request a free demo with one of our experts - no obligation or commitment required. 

If reading this article has inspired you to consider your company’s own carbon footprint, Greenly can help. Learn more about Greenly’s carbon management platform here.

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