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More and more consumers are striving to reduce their ecological footprint.
This change in mindset has led to environmentally friendly products becoming increasingly popular and the market for supposedly environmentally friendly products is growing rapidly.
Companies are using this as an opportunity and are increasingly advertising their products with terms such as “climate neutral”, “environmentally friendly” and the like.
However, many of these advertising claims and labels do not stand up to scrutiny.
According to an EU study conducted in 2020, 53.3% of environmental claims were vague, misleading or unsubstantiated and 40% of claims could not be substantiated.
The study also found that for the majority of the claims examined, it was unclear whether the claims related to individual components or the entire product, or whether the claim could be applied to the entire company.
It was also often not possible to determine which phase of the product life cycle the statement referred to.
For this reason, the EU wants to use the Green Claims Directive to take stronger action against misleading and unfounded environmental claims (so-called greenwashing) and create a uniform set of rules in order to provide consumers with more transparency and combat unfair competition.
When does the Green Claims Directive apply?
The proposal for the EU directive was adopted by the European Parliament in March 2024, the EU Environment Council’s assessment took place on June 17, 2024.
The final version of the Green Claims Directive is expected to be finalized in a few months based on the two positions.
Implementation in the member states is to take place by March 27 , 2026 and apply from September 27, 2026.
In Germany, the directive will be implemented within the UWG (Act against Unfair Competition).
Which companies are affected by the Green Claims Directive?
In principle, all natural and legal persons who sell products or provide services within the EU that are advertised as environmentally friendly, ecological, sustainable or similar are affected by the directive.
The directive covers all sectors and company sizes, but the various countries are to take measures to support SMEs in implementing the directive, e.g. financially, organizationally or through training.
In addition, micro-enterprises are to be given more time : Companies with fewer than 10 employees and an annual turnover of €2 million are expected to be given an extra 14 months to comply.
Companies that advertise with green labels, slogans etc. will therefore be subject to new obligations in any case.
Below we have compiled information on what companies can expect.
As the final version of the directive has not yet been adopted, changes can still be expected.
The following lists of requirements are based on the first draft of the directive (03/2023).
What are the requirements for explicit environmental statements?
According to the directive, European member states must ensure that companies carry out an assessment that substantiates the accuracy of the environmental claim.
At the moment, it is still unclear which authority is responsible for assessing the environmental claims.
This assessment requires, among other things:
- It must be made clear whether the environmental claim relates to the entire product, part of the product or only to certain aspects of the product.
It must also be made clear whether the statement refers to the company as a whole or only to parts of the company.
Example: A company advertises that it uses 10% less water through new measures, but conceals the fact that this only applies to the production process of a single product.
- The environmental claim must be assessed according to generally accepted scientific knowledge, accurate information and relevant international standards.
- The assessment shall demonstrate that the positive characteristics highlighted in the environmental claim are relevant during the life cycle of the product.
- It must be demonstrated that the environmental statement does not only refer to legal minimum standards that apply to a product or industry and must not present this as something special.
- When making statements on environmental performance, the assessment must take into account all aspects and impacts that are decisive for the assessment of environmental performance.
- The assessment must take into account whether the improvement of environmental characteristics in one area leads to a significant deterioration of environmental characteristics in another area.
Example: A product is made more durable and reusable by changing the materials, but is also much more difficult to recycle.
- In particular, it must be clear whether the compensation payment relates to the reduction of greenhouse gas emissions or to the removal of greenhouse gases from the atmosphere.
What are the requirements for comparative environmental statements?
The Directive also provides further assessment bases for comparative environmental claims.
Comparative environmental claims either claim or imply that a product or company achieves a better environmental performance or produces less negative environmental impacts than competitors or competing products.
Among other things, this is required:
- The assessment of the environmental aspects, environmental performance and environmental impacts of a product or company shall be based on the same information as that used in the assessment of the compared product or company.
- The data used for the evaluation must be collected in the same way as the data of the compared product or company.
- The stages along the value chains are taken into account in the same way, and in particular it is ensured that the most important stages are included.
- The consideration of environmental aspects, environmental performance and environmental impacts must be based on the same standards for the comparative product or the comparative company.
- If the comparison is made on the basis of a predecessor product, the justification of the environmental claim must explain the following: How does the improvement affect other relevant environmental impacts, environmental aspects or environmental performance of the product to which the claim relates?
The reference year on which the comparison is based must also be stated.
Re-examination
Furthermore, the company is required to carry out the assessment again if either material aspects of the assessment basis have changed or the original statement and the information provided are already 5 years old .
How should companies communicate environmental statements?
In principle, companies may only communicate environmental claims that are classified as significant for the product or company in question.
If the claim refers to an end product, the statement must contain information on how the consumer should use the product in order to achieve the expected environmental performance.
If an environmental claim refers to the environmental performance of a product or a company in the future, it must include a time-bound commitment for improvements in the company’s own activities and within the value chains.
In addition, information about the product or company about which the environmental claim is made and the justification for the environmental claim must be provided together either in physical form or in the form of a website, QR code or similar form.
The information must include at least
- The environmental aspects, environmental impacts or environmental performance that are the subject of the statement.
- The relevant Union standards or the relevant international standards.
- The underlying studies or calculations used for the valuation, unless they are trade secrets.
- A brief explanation of how the improvement is achieved
- The certificate of conformity and the contact details of the relevant inspection body.
- If available, the amount of greenhouse gas offsets and whether these offsets were used to reduce greenhouse gas emissions or to remove greenhouse gases from the atmosphere.
- A clear and comprehensible summary of the assessment and the previous points in at least one of the official languages of the Member State in which the environmental claim is advertised.
Environmental labels and environmental labeling systems
The Green Claims Directive also provides for more transparency in the existing eco-labeling schemes, which are often privately owned.
Among other things, the environmental labeling systems are required to disclose and provide the following:
- The information on the owner and decision-making body of the system must be transparent, free of charge, easy to understand and sufficiently detailed.
- Information on the objectives of the eco-label scheme and the requirements and procedures for monitoring compliance with the eco-label scheme must be transparent, free of charge, easy to understand and sufficiently detailed.
- The conditions for participation in the eco-labeling scheme must be appropriate in terms of the size and turnover of the participating companies so as not to exclude small and medium-sized enterprises.
- The requirements of the systems must be designed by experts with a scientific background and presented to a socially relevant group of different stakeholders for consultation.
- The system must have a complaints and dispute resolution mechanism and provide for the withdrawal of the label in the event of serious violations so that companies that violate the requirements do not get a free pass.
What sanctions can be imposed for violations?
Depending on the type and severity of the violation, sanctions can range from temporary exclusion from public procurement procedures to a levy of at least 4% of annual turnover, with repeat offenders being punished more severely.
The confiscation of products is also being considered.
Conclusion
Given the growing popularity of environmentally friendly products and increasing consumer awareness of environmental issues, it is crucial to take measures to combat greenwashing and strengthen the credibility of sustainability claims.
On the other hand, the entry into force of the European directive significantly increases the demands on companies’ sustainability.
For this reason, companies should take a critical look at their environmental claims now and develop concepts to substantiate them in the future.
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