Leaked EU proposal seeks to help consumers make better-informed choices
Euractiv reports that it has seen a leaked draft of a new EU proposal which aims to help consumers make better-informed choices on products and help prevent misleading green claims being made by companies. The proposal, which is to be tabled by the European Commission in the coming weeks, is seeking to address concerns around ‘greenwashing’, arguing that at present, almost half (40%) of the environmental claims made about products are unsubstantiated. In the draft, the EU states that:
“Consumers lack reliable information about the sustainability of products and face misleading commercial practices like greenwashing or the lack of transparency and credibility of environmental labels.” it adds: “Companies making ‘green claims’ should substantiate these against a standard methodology to assess their impact on the environment.”[i]
The proposal suggests setting up a verification system for environmental claims, where EU member countries will be requested to have these claims checked and signed off by so-called ‘independent verifiers’. It will be the job of EU members to enforce rules, and it is suggested that a criterium is established from which penalties can be established for those falling foul of the new rules. The proposal argues that these criteria should include “the nature and gravity of the infringement as well as the economic benefits derived from it and the potential environmental damage caused”[ii]. Whilst campaigners have welcomed the proposal in its current form, they remain cautious and have stressed that penalties must be set high enough to work as a deterrent; they also fear watering down as the proposal moves through parliament and to its final version.
The EU is also set to table its ‘green claims’ regulation on 30th March, aiming to make environmental labels and credentials comparable and verifiable across the EU. This will be achieved via a unified PEF[iii] (Product Environmental Footprint) methodology, which assesses the whole life of a product and will standardise environmental labels for the region- where presently these labels are numerous, fragmented, non-compatible, and often an incomplete assessment:
There are currently 457 voluntary environmental labels worldwide and even more environmental claims, which are often poorly defined, explained, understood and underpinned by non-comparable methods to measure and assess environmental impacts. In the EU, over 100 labels are active. This multiplication of methods and labels/claims makes it difficult for market actors (consumers, businesses, investors, and public administrations) to identify and trust environmental claims.[iv]
Pressure from investors ramps up
As companies face increased pressure to verify their green claims being made and promoted to consumers, so too are they seeing investor pressure ramp up in relation to their environmental credentials. CDP’s recently released findings from the 2022 edition of its Non-Disclosure Campaign have shown that a record 260 financial institutions (up 56% from 2021)[v] worth a collective $30 trillion, participated in requesting environmental information from companies across the globe.
The research found that companies were 2.3 times more likely to disclose after being targeted by financial institutions through the 2022 NDC. In a sign of the influence direct engagement has, 388 out of the 1,466 companies targeted through the campaign responded, a response rate 2.3 times greater than those companies not engaged by financial institutions (these were instead contacted by a control group). In addition, more than 550 companies were engaged on water security, up 50% compared to last year. Of these companies, a record 104 disclosed as a result, 60% more than in 2021[vi].
CDP’s global director of capital markets, Claire Elsdon, said: “This campaign shows the power of direct engagement. Financial institutions are more aware of their role in tackling the economic threats posed by the climate and nature crises.” She added: “By pushing companies in their portfolio to disclose – some of which have huge environmental impacts – they can kickstart a fundamental and positive change in how businesses operate.”[vii]
As we noted in our recent top trends for 2023 research, Zero Carbon Academy believes that the coming year will see corporate green credentials under scrutiny like never before, as investors and consumers place increased pressure on businesses to not only tackle sustainability issues but to tell the truth about their practices. As such, we forecast this to be our number one trend for the year- you can read our in-depth analysis here.
[i] LEAK: EU to slap penalties on companies making false green claims – EURACTIV.com
[ii] LEAK: EU to slap penalties on companies making false green claims – EURACTIV.com
[iii] European Commission Service Site (europa.eu)
[iv] Environmental performance of products & businesses – substantiating claims (europa.eu)
[vii] Investors ramping up corporate disclosure requests on forestry and water - edie
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