The EU’s new ‘green claims directive’ hopes to stamp out greenwashing

Greenwashing activities to receive ‘proportionate’ penalties

The European Commission has launched the first draft of its new Green Claims Directive, with further explanation and guidance as to what counts as greenwashing within specific sectors, set to follow soon. We reported earlier this year that Euractiv had seen a leaked draft of these EU proposals- the aim of which would be to help consumers make better-informed choices on products and help prevent misleading green claims being made by companies.

The commission argues action is required, citing its own research from 2020, which found that 53.3% of EU environmental claims were seen to be vague, misleading or unfounded, and concerningly 40% were unsubstantiated[i]. The proposal will apply across a broad range of industries to cover all manner of goods and services, ultimately though it will be the job of each EU member state to impose “proportionate” penalties- these will include fines. Of course, this opens the door for disparity between nations with regard to how heavy-handed they are, both in enforcing these proposed rules and in the levels of punishment handed out.

Commission expects ‘reliable, comparable and verifiable’ information for consumers

The new Green Claims Directive delivers a proposal for businesses to soon be required to be able to prove their environmental claims with scientific evidence; this includes claims surrounding the use of recycled plastic content in packaging and products, as well as the carbon impact of products and services.

According to the proposal, when companies choose to make a ‘green claim' about their products or services, they must respect minimum norms on how they substantiate these claims and how they communicate them. The draft text notes: “If environmental claims are not reliable, comparable and verifiable, consumers and other market actors cannot fully leverage their purchasing decisions to reward better environmental performance. Similarly, the lack of reliable, comparable and verifiable information hinders incentives for optimising environmental performance, which would typically go hand in hand with efficiency gains and cost savings for companies along the supply chain as well. These consequences are exacerbated by the lack of a common reference across the internal market and the ensuing confusion.”[ii]

Further, the commission wants to address the confusing situation at present relating to so-called ‘Ecolabels’[iii]. These are environmental labels on goods, which aim to inform consumers of a product's environmental credentials while also assessing the performance of the product’s producer. The EU Commission notes that at present, there are more than 230 different labels in use today, and to address issues around consumer confusion and distrust, new regulation will be put into place. This will see new public labelling schemes disallowed unless they are developed at EU level. In addition, any private schemes will need to show higher environmental ambition than existing ones and get a pre-approval to be allowed.

It follows a recent study by Changing Markets Foundation, which discovered that 51 claims made by food and drink companies over the last 12 months do not meet the Directive’s requirements. Furthermore, 80% of the breaches are related to the climate impact of products or businesses, including carbon and other greenhouse gases like methane.

The Foundation is calling for the EU to impose an outright ban on companies using terms such as ‘climate positive’, ‘carbon-neutral’ and Amazon’s ‘Climate Pledge Friendly’ filter. It is also calling for the EU to consider including imagery, as well as words, in the Directive, pointing to examples of dairy and beef companies picturing cows grazing when their own reports prove they are at least partly fed using man-made feeds.

Mixed reaction, with some arguing proposals have been ‘watered down’

The World Benchmarking Alliance’s head of EU policy Richard Gardiner acknowledged in an interview with Edie that the first step in countering business malpractice is to expose it. In his words, the “regulation is a welcome step to call out and combat greenwashing. It is vital that business claims on climate and related social issues are robust, clear and substantiated, to ensure companies are walking the talk. Consumers need to be able to understand, compare and trust information about what companies are actually doing”^[iv] However, he also noted concerns relating to accountability:

“The vast extent of global corporate power means that some businesses are more influential than entire countries – and it’s only with proper accountability that companies will take the urgent action needed to protect people and planet.”^[v]

Concerningly, Andrew Martin, executive vice president of the Sustainable Apparel Coalition (SAC), whom themselves were asked by the European Commission to coordinate brand participation in the methodology’s development, described it as a “missed opportunity” for the European Union to show leadership and provide a single, mandatory approach for companies. He added: “The initial look of it is that it lacks legal certainty. The very fact that it's a directive and not mandated also means that there is potential for different interpretations in different countries, which means it could actually undermine the single market.”[vi]

Margaux Le Gallou, programme manager for environmental information and assessment at the non-profit Environmental Coalition on Standards, told CNBC: “Tackling misleading green claims is crucial to ensure consumers get reliable information and are empowered to make sustainable choices. Sadly, without harmonised methodologies at the EU level, the new Directive will provide little clarity to consumers and business and will only complicate the job of market surveillance authorities. Today, most green claims are too good to be true and the proposal is … far from the real (green) deal.”[vii]