80 pages of the EU’s proposed Green Claims Directive summarised so you can read it over a sustainably-sourced coffee

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Update: On 17th Jan 2024, the proposed legislation described in this article was approved by the EU Parliament by a vote of 593 to 21.

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According to the EU, 53% of environmental claims cited by brands are based on “vague, misleading or unfounded information”. That makes for a highly confusing environment for consumers and means that brands and products that are genuinely leading on environmental performance don’t get the competitive advantage they deserve.

The EU’s new proposal for a Directive on the substantiation and communication of explicit environmental claims (ie. the Green Claims Directive), published last week, aims to change all that. If adopted, it could mark the start of a new era of consumer trust in environmental claims. It will also create a complex new operating environment for sustainability, marketing and communications professionals, requiring a lengthy substantiation and verification process before any claims can be communicated within the EU market.

If you’re still trying to understand exactly what the regulations say, how they impact your business, and when they come into effect, I’ve read the 80-page proposal, adjacent EU Directives, and a bunch of related reports so you don’t have to. Below is my 9-minute digest.

[For a quicker read, see ‘10 things you need know about the proposed EU rules on “Greenwashing” claims and how they could affect you’]

Background to the proposal: How it relates to the EU Green Deal

Approved in 2020, the EU Green Deal set out a vision for the EU of being climate neutral by 2050 and seeing a reduction of greenhouse gas emissions by 50–55 percent by 2030 compared with 1990 levels.

One of the legislative proposals that came out of the Green Deal strategy was the 2022 Directive on Empowering Consumers for the Green Transition, which aimed to provide consumers with information on products’ sustainability, in particular durability and reparability, at the point of purchase. It also aimed to ban false and misleading green claims (‘greenwashing’) and certain types of premature obsolescence of products.

This latest proposal on “substantiation and communication of explicit environmental claims”, also called the Green Claims Directive, goes deeper on environmental claims specifically. It lays out regulations to ban unverified environmental claims and specifies how substantiation must be made for any claims that are communicated to consumers. It does not cover any claims around social impacts, working conditions, durability, repairability or anything that isn’t specifically related to the environment.

Scope: What counts as an environmental claim

The proposal on empowering consumers for the green transition defined an environmental claim 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 data: What pushed the EU to take action on claims and labels

The commission carried out a 2020 study which found that a majority of environmental claims (53.3%) provide “vague, misleading or unfounded information” about products’ environmental characteristics across the EU and across a wide range of product categories. In many cases, authorities had difficulties identifying whether the claim covered:

• the whole product or only one of its components (50%)
• the company or only certain products (36%)
• which stage of the product’s lifecycle it covered (75%)

It also found that a proliferation of labels (over 230 in Europe currently), combined with extremely varied governance and certification models, make it very difficult for consumers to know what to trust. It claimed that these labels, along with unverified claims, puts truly sustainable products and companies at a disadvantage as their claims cease to be product differentiators.

The objective: What the EU wants to achieve

The objectives stated in the new proposal incorporate environmental protection, consumer protection, and competitiveness. Specifically to:

• Increase the level of environmental protection and contribute to accelerating the green transition towards a circular, clean and climate neutral economy in the EU;
• Protect consumers and companies from greenwashing and enable consumers to contribute to accelerating the green transition by making informed purchasing decisions based on credible environmental claims and labels;
• Improve the legal certainty as regards environmental claims in order to level the playing field on the internal market, boost the competitiveness of sustainable operators, and reduce the cost of verifying claims across multiple EU States.

The highlights: What the proposal actually says

1. Claims used in communications will need to be substantiated, carry accompanying information, and have been issued a verification certificate by a state-appointed authority.

Article 5 sets out that, when communicated, all claims:

• can only cover environmental impacts, aspects or performance that meet the new substantiation requirements (see below)
• where relevant should include information on how consumers may appropriately use the product to decrease environmental impacts;
• should be accompanied by information on the substantiation that is accessible to consumers (including information on product or activities of trader; aspects, impacts or performance covered by the claim; other recognised international standards, where relevant; underlying studies and calculations; how improvements that are subject to the claim are achieved; the certificate of conformity and coordinates of the verifier).

All claims will need to have been substantiated and submitted for verification by an officially accredited body, designated in each Member State. Once the substantiation has been checked, the verifier will issue a certificate of conformity which will be valid for communications across the EU.

2. Substantiation of environmental claims must be based on scientific evidence, take into account the life cycle of the product, and not omit any other negative aspects of the product or company.

Article 3 focuses on how to substantiate claims. Substantiation will need to:

• specify if the claim is related to the whole product, part of a product or certain aspects of a product, or to all activities of a trader or a certain aspects of its activities;
• rely on recognised scientific evidence, international standards, and leading technical knowledge;
• demonstrate the significance of impacts, aspects and performance from a life-cycle perspective;
• demonstrate that the claim goes beyond what is required by law;
• provides information on whether the product performs environmentally significantly better than what is already common practice;
• identify whether the specific environmental claim could lead to significant worsening of another environmental impact that has been omitted;
• report greenhouse gas offsets in a transparent manner, including in regard to emissions reductions or removals;
• include accurate primary data where available or secondary information as needed.

3. Comparative claims must be substantiated with equivalent data for all products and companies — and across equivalent stages of the value chain.

Article 4 sets out further requirements for comparative claims (i.e. claims that state or imply that a product or business has less or more environmental impacts or performs better than its competitors on environmental impacts). In addition to those above, the substantiation must meet the following requirements:

• the use of equivalent information for the assessment of environmental impacts,aspects or performance of compared products;
• the use of data generated or sourced in an equivalent manner for the products or traders that are subject to comparisons;
• that the of stages of the value chain covered by the claim are equivalent for all products and traders compared, while ensuring that the most significant stages are taken into account for products and traders;
• the coverage of environmental impacts, aspects or performances is equivalent for the products and traders compared and ensures that those most significant are taken into account for all products and traders compared;
• for comparative claims on improvement of impacts (compared to earlier version of product) it should explain the impact of improvement on other aspects and impacts and stating the baseline year.

4. Offset claims will need to be more transparent and specify whether they relate to reductions or removals.

The proposal requires that greenhouse gas emissions should be reported separately to any offsets used, as additional environmental information. This information should also specify whether these offsets relate to emission reductions or removals and ensure that the offsets relied on are of high integrity and accounted for correctly.

5. Different claims will require different types and levels of substantiation (yes, this sounds a little subjective) but robust data and consideration of the product life cycle will be important.

• The proposal does not prescribe a single method and does not require conducting a full life-cycle analysis for each type of a claim. The assessment used to substantiate explicit environmental claims need to consider the life-cycle of the product or of the overall activities of the trader in order to prevent the omission of relevant aspects.
• For the assessment to be considered robust, it should include primary, company-specific data, for relevant aspects contributing significantly to the environmental performance of the product or trader referred to in the claim.

6. Rules on labelling schemes are being tightened and any new schemes will need to be validated by the EU first.

The new proposal bans labels based on self-certification, and provides additional safeguards to improve the quality of ecolabelling schemes. Article 8 further details requirements for environmental labelling schemes, as follows:

• requirements on transparency and accessibility of information on ownership, decision-making body and objectives,
• the criteria underlying the award of labels are developed by experts and reviewed by stakeholders;
• the existence of complaint and resolution mechanism;
• procedures for dealing with non-compliance and possibility of withdrawal or suspension of labelling in case of persistent and flagrant non-compliance

Additionally, the new proposal prohibits of establishment of new national or regional publicly owned schemes (ie. not at a Union level). Any new private schemes will need to go through a validation process to be used on products in the EU market and must demonstrate added value in terms of their environmental ambition, their coverage of environmental impacts, of product category group or sector and their ability to support the green transition of SMEs as compared to the existing Union, national or regional schemes.

Small businesses: How this impacts microenterprises and SMEs

Microenterprises (fewer than 10 employees and with an annual turnover not exceeding EUR 2 million) are exempt from the new regulation.

Governments will be mandated to provide support to SMEs to help them navigate the new regulations, including financial support, access to finance, specialised management and staff training as well as organisational and technical assistance.

Enforcement: What happens if companies don’t comply

Each Member State will assign its own authority to enforce the regulations. They are expected to perform regular checks on claims and labelling schemes in their internal markets.

Companies infringing the regulation will have 30 days to rectify the claim or stop using it. After that time, Member States will enforce penalties that should be “effective, proportionate and dissuasive”. These may include:

(a) fines which effectively deprive those responsible of the economic benefits derived from their infringements, and increasing the level of such fines for repeated infringements (up to a maximum amount of such fines being 4 % of the trader’s annual turnover in that Member State);

(b) confiscation of revenues gained by the trader from a transaction with the relevant products concerned;

(C) temporary exclusion for a maximum period of 12 months from public procurement processes and from access to public funding, including tendering procedures, grants and concessions.

Timeline: How long it would take to become law if approved

Now the proposal has been presented, the European Parliament and Council will consider it for adoption through the ordinary legislative procedure. This process will allow for amendments to be made and will take at least 18 months.

If it’s adopted, it will then need to be transposed into local law by each Member State. States have 18 months to publish the necessary laws, regulations and provisions — and those measures must come into force within two years.

So businesses have a few years to prepare and get their claims in order before it potentially becomes mandatory. It might be prudent to assume that within that period, we’ll see an increase in crackdowns on misleading claims, especially in countries like the UK and France, where legislation against “greenwashing” already exists to some extent.

[Thank you for reading, and a disclaimer: These are my personal interpretations of the proposed EU Directive. I am not a legal professional and apologise for any incorrect information included here. If you spot an error, please let me know on laura@laurajquinn.com so I can make appropriate revisions]