On 20 February 2024, the European Council adopted the European Parliament's position on the Directive on empowering consumers for the green transition through better protection against unfair practices and better information (the "Directive"). The Directive was formally signed on 28 February 2024, by the president of the European Parliament and the president of the Council and published today, i.e. 6 March 2024, in the Official Journal of the European Parliament.

Key measures

The new Directive aims to ban greenwashing and misleading product information, in line with EU’s objectives regarding circular, green, and clean economy. Consumers shall be enabled to take informed purchasing decisions and therefore contribute to more sustainable consumption.

The new Directive will therefore enhance consumers’ rights and amend the Unfair Commercial Practices Directive (the "UCPD") and the Consumer Rights Directive (the "CRD"), in order to seek better consumer information, improved product labelling and more visible guarantee information.

The new Directive is part of the European circular economy package, steaming from the European Green Deal as well as the European Commission's New Consumer Agenda and the Circular Economy Action Plan 2020, which all aim to achieve the goal of EU climate neutrality by 2050. In whole, the Circular Economy Action Plan features more than 30 action items with the main focus on (1) empowering consumers, (2) targeting key sectors, (3) reducing waste and (4) ensuring the development of sustainable products and circularity in production processes.

The initial proposal of the Directive had been presented by the European Commission on 30 March 2022. As we explained in our contribution, the European Parliament already gave its final green light on 17 January 2024.

If you want to read more about the previous process and the current status and litigation risks for green claims in France, Germany, Spain, Italy and the Netherlands, please check out our article in this regard here:

Update on the proposal for the EU Directive empowering consumers for the green transition

Timeline

After its entry into force on 26 March 2024, i.e. on the 20th day of its publication, the European Member States will have to transpose the Directive into their national laws, regulations and administrative provisions within 24 months from adoption. Member States will then have to apply those provisions from 30 months from adoption. 

The Directive’s most important reforms

Scope: “Green Claims” and “social characteristic claims”

Firstly, it is important to note that the Directive covers all sustainability claims in commercial business-to-consumer (“B2C”) communication that relates to a product, a service, a company, or a brand. Under the Directive, sustainability claims cover both environmental or “green” claims as well as so-called “social characteristic” claims.

Green Claims, referred to as “environmental claims” are defined very broadly as any message or representation which is not mandatory under Union or national law, in any form, including text, pictorial, graphic or symbolic representation, such as labels, brand names, company names or product names, in the context of a commercial communication, and which states or implies that a product, product category, brand or trader has a positive or zero impact on the environment or is less damaging to the environment than other products, product categories, brands or traders, or has improved its impact over time.

Claims on the social characteristics are information relating, for example, to the quality and fairness of working conditions of the workforce involved, such as adequate wages, social protection, the safety of the work environment and social dialogue. Such information can also relate to respect for human rights, to equal treatment and opportunities for all, including gender equality, inclusion and diversity, to contributions to social initiatives or to ethical commitments, such as animal welfare.

Restrictions for sustainability labels: Prohibition of self-certification

The Directive considerably restricts the use of sustainability labels: displaying a sustainability label which is not based on a certification scheme or not established by public authorities will be black-listed and prohibited as unfair commercial practice.

In this context, sustainability label means any voluntary trust mark, quality mark or equivalent, either public or private, that aims to set apart and promote a product, a process or a business by reference to its environmental or social characteristics, or both, excluding any mandatory label required under Union or national law. Certification schemes are third-party verification schemes that certify that a product, process or business complies with certain requirements, that allows for the use of a corresponding sustainability label. The terms of the certification scheme, including its requirements, must be publicly available and meet the specific criteria set forth in the Directive, in particular with regard to transparency, fairness, expert involvement and procedure for monitoring and non-compliance.

Further extension of black-listed practices

In addition, the Directive extends the list of commercial practices which are to be considered unfair in all circumstances to include practices associated with the early obsolescence of products and greenwashing:

• Making a generic environmental claim for which the trader is not able to demonstrate recognised excellent environmental performance relevant to the claim; generic environmental claim means environmental claims made in written or oral form, including through audio-visual media, that are not included on a sustainability label and where the specification of the claim is not provided in clear and prominent terms on the same medium;

• Making an environmental claim about the entire product or the trader’s entire business when it concerns only a certain aspect of the product or a specific activity of the trader’s business;
• Claiming, based on the offsetting of greenhouse gas emissions, that a product has a neutral, reduced or positive impact on the environment in terms of greenhouse gas emissions;
• Presenting requirements imposed by law on all products within the relevant product category on the Union market as a distinctive feature of the trader’s offer;
• Withholding information from the consumer about the fact that a software update will negatively impact the functioning of goods with digital elements or the use of digital content or digital services;
• Presenting a software update as necessary when it only enhances functionality features;
• Commercial communication in relation to a good containing a feature introduced to limit its durability despite information on the feature and its effects on the durability of the good being available to the trader;
• Falsely claiming that under normal conditions of use a good has a certain durability in terms of usage time or intensity;
• Presenting a good as allowing repair when it does not;
• Inducing the consumer to replace or replenish the consumables of a good earlier than necessary for technical reasons; and
• Withholding information concerning the impairment of the functionality of a good when consumables, spare parts or accessories not supplied by the original producer are used, or falsely claiming that such impairment will happen.

Prohibition of misleading claims and additional information requirements

Moreover, the Directive updates the list of product characteristics which can be the subject of misleading actions under the UCPD, including "environmental or social characteristics" and "circularity aspects, such as durability, reparability or recyclability". It also updates the list of information to be regarded as material for product comparisons: where a trader provides a service which compares products and provides the consumer with information on environmental or social characteristics or on circularity aspects of the products or suppliers of those products, information about the method of comparison, the products which are the subject of comparison and the suppliers of those products, as well as the measures in place to keep that information up to date, must be regarded as material information:

1. Additional actions considered as misleading added

The Directive adds two commercial actions to the list of practices which are to be considered misleading if they cause or are likely to cause the average consumer to take a transactional decision that he/she would not have otherwise taken:

• making an environmental claim related to the future environmental performance without clear, objective and publicly available and verifiable commitments set out in a detailed and realistic implementation plan, that includes measurable and time-bound targets and other relevant elements necessary to support its implementation (e.g. allocation of resources) and that is regularly verified by an independent third-party expert, whose findings are made available to consumers;
• advertising benefits to consumers that are irrelevant and do not result from any feature of the product or service.

2. Extension of pre-contractual information to be provided

In addition, the Directive extends mandatory pre-contractual information to be provided to consumers under the CRD when concluding contracts to include information on the existence and length of a producer’s commercial guarantee of durability; the existence and length of the period during which the producer commits to providing software updates for goods with digital components, digital content and digital services; the reparability score of the good or other repair information, should no reparability score be available at EU level – such as information on the availability of spare parts and a repair manual. For distance and off-premises contracts additional information must be provided to consumers with regard to the arrangements for payment and delivery, including environmentally-friendly delivery options where available.

3. Harmonised notice/label re guarantees to be used

Finally, the Directive provides that, to ensure that consumers are well informed and can easily understand their rights throughout the EU, a harmonised notice must be used to provide information on the legal guarantee of conformity for goods. Additionally, a harmonised label must be used to provide information on any commercial guarantee of durability that is offered to the consumer at no additional cost and covers the entire good and with a duration of more than two years. The detailed design and content of the harmonised notice and harmonised label will be specified in implementing acts by the Commission that will be published 18 months after entry into force of the Directive, presumably by September 2025.

Sanctions in case of non-compliance

In terms of enforcement and sanctions in case of non-compliance, the already existing enforcement regimes of the UCPD and CRD apply which leave Member States considerable room to provide for appropriate measures. Member States must ensure that adequate and effective means exist to ensure compliance. Member States have to set forth effective, proportionate and dissuasive penalties for infringements and take all necessary measures to ensure that these are enforced. In addition, under the UCPD, enforcement must include legal provisions for persons or organisations, including competitors, regarded under national law as having a legitimate interest to (i) take legal action and/or (ii) to bring infringements before an administrative authority competent to decide on complaints or to initiate appropriate legal proceedings.

Connex to the Green Claims Directive

The Directive is intended to work as one instrument hand in hand with Proposal for a Directive on substantiation and communication of explicit environmental claims (the "Green Claims Directive Proposal"), which lays down specific requirements for making Green Claims. According to the explanatory memorandum to the Green Claims Directive Proposal, it is intended to apply as a lex specialis to the Directive on empowering consumers for the green transition through better protection against unfair practices and better information, i.e. it takes precedence and, at the same time, serves as an interpretative aid for the Directive.A study by the European Commission in 2020 called the Commission to take action: there are 230 sustainability labels and 100 green energy labels in the EU, with vastly different levels of transparency. The study found that 40% of green claims made by companies were “completely unsubstantiated” while 53% were found to be “vague, misleading or unfounded”.

According to the Green Claims Directive Proposal, Green Claims will be subject to review by independent verifiers, who will issue a certificate of conformity after evaluating compliance with the requirements laid down in the Proposal, including in particular the underlying scientific or other available technical information on the products’ sustainability. Further, according to the Green Claims Directive Proposal, Green Claims must include information about which part (whole product, part or aspects) of the product is the subject of the corresponding claim, how significant this is in the consideration of the entire life cycle of the product, or what effect the improvement of the environmental performance has on other areas in the product’s life cycle. This information, along with the certificate of conformity, will have to be made available to consumers.

Penalties under the Green Claims Directive Proposal are extended and specified to include exclusion from procurements, confiscation of revenues and a fine of 4% of the annual turnover.

The draft was adopted by the European Parliament’s committees on 14 February 2024. It will now be voted on at a forthcoming plenary session of the European Parliament and will constitute the Parliament's position at first reading.

For more information on the Green Claims Directive please read our article here: Green Claims update – Green Claims Directive Proposal, Green Claims Directive Proposal – The EU’s new approach to combat greenwashing

Outlook

The Directive together with the Green Claims Directive Proposal are intended to create a uniform consumer protection system in relation to sustainability and environmental claims and labels. Companies are well advised to review their marketing communication and products with on-pack claims for claims and labels to which the new rules are going to apply.

Supported by Felix Steltenkamp & Vanessa Fabula.

^{Hogan Lovells (Luxembourg) LLP is registered with the Luxembourg bar.}