The European Commission has proposed a directive on regulating so-called 'Green Claims', that lays down detailed rules on the substantiation, communication and verification of voluntary environmental claims and environmental labels used by traders that market products to EU consumers. The new directive would complement 2022 proposals to amend EU consumer protection laws to tackle unfair commercial practices that mislead consumers away from sustainable consumption choices, and may also be the basis of enforcement action and/or collective redress under the EU's 'New Deal for Consumers'.
A Complement to EU Consumer Protection Laws
On 22 March 2023, the European Commission ("Commission") published its proposal for an EU Directive on the substantiation and communication of explicit environmental claims ("Green Claims Directive"). The proposal would oblige Member States to enact domestic legislation which ensures that traders that make a voluntary, explicit environmental claim (i.e., "an environmental claim that is in textual form or contained in an environmental label"), substantiate and present such a claim accurately to the consumer. The Green Claims Directive is intended to complement the Commission's March 2022 proposal to amend the EU Unfair Commercial Practices Directive ("UCPD") and the Consumer Rights Directive. If adopted, that 2022 proposal would expand misleading and unfair commercial practices to include, inter alia, making an environmental claim which: (i) is generic and unsubstantiated; (ii) relates to future environmental performance unsupported by clear, objective and verifiable commitments and targets and an independent monitoring system; and (iii) presents as distinctive environmental features that are already required to be presented under existing laws. Furthermore, the 2022 proposal aims to address the practice of early obsolescence by requiring traders to inform consumers on durability and making a failure to inform on features that limit durability an unfair commercial practice. Against this context, the proposed Green Claims Directive would provide detailed rules on explicit environmental claims "as regards their substantiation, communication and verification". Once adopted, the Green Claims Directive would be a lex specialis that would prevail over the UCPD in case of conflict.
Substantiating and Verifying Green Claims
The Green Claims Directive would oblige Member States to enact legislation that ensures that traders can and should substantiate their "explicit environmental claims".1 More specifically, in making such claims, the traders would have to:
- Identify if the claim is related to the whole or part of the product or to all or only certain activities of the trader;
- Rely on widely recognized scientific evidence and use accurate information;
- Show that environmental impacts that are subject to the claim are significant from a life-cycle perspective;
- Take into account all environmental aspects which are relevant for the environmental performance assessment;
- Demonstrate that a claim is not equivalent to requirements imposed by law on products or traders;
- Ensure that information provided includes information on whether the product or trader performs significantly better regarding environmental aspects compared to common practice standards;
- Identify whether a claim that improves environmental aspects leads to a significant harm in relation to environmental impacts on, e.g. climate change or biodiversity;
- Separate any greenhouse gas emissions offsets used from greenhouse gas emissions as additional environmental information and should further specify and describe the offsets;
- Include primary information available to the trader on environmental impacts; and
- If no primary information is available, include relevant secondary information for environmental impacts, which is representative of the specific value chain of the product or the trader.
In making a "comparative explicit environmental claim",2 the trader would have to comply with additional requirements. For example, the data and information used for assessing the environmental impacts, aspects or performance of a product or trader subject to the claim must be equivalent to the information and data used for assessing the same in relation to the compared products or traders and must be generated or sourced in an equivalent manner.3
"Substantiation" of all environmental claims and labelling schemes would need to be independently verified, and Member States would need to adopt appropriate verification procedures for traders to be able to comply with their obligations under Articles 3-8 of the Green Claims Directive.4 Once the verification is completed, the verifier would need to draw up, when appropriate, a certificate on conformity saying that the explicit environmental claim or label complies with the Directive.5 Crucially, all "substantiated" environmental claims and labels would have to be independently verified and certified before any such claim could be used in a commercial communication (i.e., before the environmental claim is made public or the environmental label is displayed).6
Communicating Substantiated Green Claims to Consumers
Traders would have to communicate, next to the product information, any explicit environmental claim together with its "substantiation" in a physical form or in the form of a weblink, QR code or equivalent.7 The information provided would need to include, at least the certificate of conformity regarding the substantiation of the claim and the contact information of the verifier that drew up the certificate.8
Enforcement – Public and Private
In line with other EU consumer protection laws, the Green Claims Directive would be enforced by competent Member States' authorities. The Directive stipulates that competent authorities shall be empowered to: (i) require third parties to provide any information, data or documents, for the purposes of establishing an infringement; to start investigations or proceedings on their own initiative to bring about the cessation or prohibition of infringements of this Directive; (ii) require traders to adopt adequate and effective remedies and take appropriate action to bring an infringements to an end; and (iii) impose injunctive relief and/or penalties. When determining the penalties, national authorities would need to, for example, take into consideration "the nature, gravity, extent and duration of the infringement" and "the economic benefits derived from the infringement by those responsible".9 The penalties should include, inter alia: (i) fines which effectively deprive those responsible from any economic benefit derived from the making of a misleading or unsubstantiated green claim; and (ii) confiscation of the relevant product or of revenues gained from the transactions. When fines are imposed under the 'coordinated action' mechanism10 for widespread infringements or the widespread infringements with a Union dimension, the maximum fine should be set at least at the level of 4% of the trader's total annual turnover in the Member State(s) concerned.
In recognition of the increasing prevalence of European litigation brought on 'greenwashing' grounds – whether by regulators (i.e., national authorities competent for the protection of consumers' rights),11 NGOs and/or consumer groups,12 or competitors13 – the proposal also contains provisions on the handling of complaints and access to justice. It provides that natural or legal persons or organisations regarded under EU or national law as having a legitimate interest shall be entitled to submit complaints to competent authorities on alleged infringements of the Directive. For these purposes, NGOs or organisations promoting human health, environmental or consumer protection and meeting any requirements under national law shall be deemed to have sufficient interest.14
As with other EU consumer protection laws, the Green Claims Directive could also give rise to collective redress under the EU's recent Collective Redress Directive (see our alert on this topic here).
Green Claims vs. Corporate Sustainability Reporting
The Green Claims Directive expressly excludes from scope environmental information reported by undertakings that apply European sustainability reporting standards on a mandatory or voluntary basis in accordance with the EU Accounting Directive, as amended by the Corporate Sustainability Reporting Directive (see our alert on this topic here).15 However, if that same environmental information were to be repurposed in a "business-to-consumer" context, this could trigger the applicability of the Green Claims Directive.
Both the Green Claims Directive and the proposed amendments to the UCPD still have a long way to go in the EU legislative process. They are now subject to the approval (and possible amendments) of the European Parliament and Council - a process that can take around 18 months. Once the Green Claims Directive is adopted, Member States will have to transpose it into their national legal systems within 18 months after the Directive enters into force, and apply it within 24 months after the Directive enters into force.
Greenwashing cases have already been brought under the existing framework that prohibits misleading claims. In such cases, claimants have typically relied on national consumer laws that implement the UCPD, and these cases will likely continue to be brought in the future on that basis. The Green Claims Directive would further raise the bar, and complement the existing framework by introducing detailed requirements on substantiation and communication to consumers.
Mia Monas (White & Case, Trainee, Brussels) contributed to the development of this publication.
1 Article 3 of the proposed Green Claims Directive.
2 Comparative environmental claims are "claims that state or imply that a product or trader has less environmental impacts or a better environmental performance than other products or traders" (see Article 4(1) of the proposed Green Claims Directive).
3 Article 4(1)(a)-(b) of the proposed Green Claims Directive.
4 Articles 10-11 of the proposed Green Claims Directive.
5 Article 10(6) of the proposed Green Claims Directive.
6 Article 10(4) of the proposed Green Claims Directive.
7 Article 5 of the proposed Green Claims Directive.
8 Article 5(6)(e) of the proposed Green Claims Directive.
9 Article 17(2)(a) and (d) of the proposed Green Claims Directive.
10 Article 21 of the Revised Consumer Protection Cooperation Regulation (EU) 2017/2394.
11 See examples of greenwashing claims brought by a UK regulator: Advertising Standards Authority UK v Shell UK Ltd; Advertising Standards Authority UK v. Oatly.
12 See an example of a successful greenwashing claim brought by an Italian consumer group: Altroconsumo v. Volkswagen.
13 See an example of a successful greenwashing claim brought by an Italian company against a competitor: Alcantara SpA v Miko Srl.
14 Article 16(2) of the proposed Green Claims Directive.
15 Article 1(2)(o) of the proposed Green Claims Directive.