The EU recently unveiled an ambitious Green Claims Directive to protect consumers.

Author: Maria-Antoanela Ioniță – Sustainability Communications Specialist

To address surging greenwashing concerns and protect consumers, as well as the green transition agenda, the European Commission recently proposed the Green Claims Directive.

The claim would apply to most EU-based organizations that voluntarily make environmental claims, except for microenterprises (under ten employees and with a turnover lower than 2 million euros) and financial services companies with separate rules.

To meet the new rules described below, companies will likely need a robust sustainability communications strategy and data management. This may require additional resources, new capabilities and technologies, and operating model and team structure changes. However, companies will likely benefit from more robust sustainability communications by preventing reputational and litigation risks and increasing customer trust and loyalty.

Greenwashing is a fast way to erode trust

Around the world, more than half (60 per cent) of citizens say they do not trust climate communication, according to the 2022 Edelman Trust Barometer. The growing amount of greenwashing signalled by communication regulators, activists, and consumers may be at play. The EU identified that 53% of green claims “give vague, misleading, or unfounded information” and that 50% of green labels “offer weak or non-existent verification”.

Greenwashing refers to communications falsely portraying a company’s products, services, and projects as environmentally friendly to reap benefits from this positioning in the market. It can take various forms, depending on the communication means.

In addition to previous measures under the Unfair Commercial Practices Directive, the new proposal adds four new practices associated with greenwashing:

• Using a sustainability label that is not based on a certification scheme or not established by public authorities;
• Making a generic environmental claim without demonstrating recognized excellent environmental performance relevant to the claim;
• Extending the environmental claim to the entire product if it concerns only a particular aspect of the product;
• Presenting requirements imposed by law as a distinctive feature of the organization’s offer.

Greenwashing is a lose-lose-lose tactic. By confusing and eroding trust with consumers, as well as facing upcoming regulatory charges, greenwashing can ultimately damage organizations. In addition, it diminishes the efforts of consumers to make more responsible decisions towards the environment. Finally, it sabotages investors’ attempts to support, fund, and participate in the long-term success of more sustainable companies.

As a note, the reverse is also true. When they do not communicate sustainability efforts at all due to a fear of repercussions, organizations are engaging in greenwashing. In turn, greenwashing risks reducing the information available for consumers and investors to pinpoint sustainable products and companies.

Companies should still communicate sustainability efforts, regardless of their point in the journey – but they need to follow some steps:

• Know their audiences well;
• Pressure test with third parties to ensure that both storytelling and technical elements are meaningful;
• Make sure claims are transparent, science-based, and verifiable.

The Green Claims Directive aims to transform corporate sustainability communications

The new law on green claims takes action to address greenwashing, protect consumers, and help create a level playing field for environmental products and services.

The proposed Directive focuses on the central issues identified by the Commission regarding environmental communications: misleading, unfounded, or unsupported claims, unverified labels, and the lack of transparency. This proposal complements and further operationalizes the Directive on empowering consumers in the green transition, which we discussed in a previous article.

One key goal is to ensure environmental claims about the company and its products, which are voluntary and not currently covered by other EU rules, are reliable, comparable, and verifiable.

Consider claims such as “packaging made of 70% recycled plastic” or “have reduced the company’s environmental footprint by 20% since 2015”. Nothing is wrong with these statements, but according to the proposal, they must be substantiated, i.e. accompanied by supporting scientific evidence.

To that end, the company must do a complete assessment of the claim, which includes the following:

• Ensure the claim relies on recognized scientific evidence;
• Demonstrate the importance and extent of impacts, aspects and performance from a life-cycle perspective;
• Demonstrate that the claim is not equivalent to requirements imposed by law;
• Provide information on whether the product performs environmentally significantly better than what is common practice;
• Make sure that there are no hidden trade-offs resulting in negative environmental impact elsewhere;
• Require that greenhouse gas offsets be reported transparently;
• Include accurate primary or secondary information.

In this way, regulators hope to prevent the use of generic claims such as “eco-friendly”, “climate neutral”, “green”, or “net zero” without any evidence.

The Directive also specifies new rules for sustainability labels by banning self-certifications and providing additional safeguards to improve the quality of ecolabelling schemes. As such, it requires label schemes to have the following:

• Transparency and accessibility of information on ownership, decision-making body, and objectives,
• Criteria developed by experts and reviewed by stakeholders; 
• A complaint and resolution mechanism; 
• Procedures for dealing with non-compliance and the possibility of withdrawal or suspension of labelling in case of persistent and flagrant non-compliance.

You can read the New Green Claims Directive in its entirety here.

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