EU Green Claims Directive: its impact on business operations

The EU Green Claims Directive aims to enhance the credibility of environmental claims by establishing clear standards and requirements for companies. It mandates that businesses substantiate their green claims with scientific evidence and transparency while introducing regulations on labelling schemes to prevent greenwashing. With a timeline set for full implementation by February 2026, this Directive is crucial for fostering consumer trust and promoting genuine sustainability.

Curious to learn how this Directive might impact your business? Dive into our article for a deeper understanding!

Introduction to EU Green Claims Directive

Over the past decade, the EU has implemented stricter sustainability requirements for organisations, driven by policies like the European Green Deal. While many organisations now adopt environmentally friendly practices, greenwashing remains a significant issue.

European Commission reports reveal that 53% of green claims in the EU are vague or misleading, and 40% lack evidence. Loose legislation and unclear standards exacerbate the problem by creating a grey area, leaving room for interpretation, and thus making it difficult for regulators to address potential breaches of false environmental claims. To address this, the Commission proposed the EU Green Claims Directive in March 2023. This new Directive aims to set clear and enforceable standards for environmental claims, ensuring that consumers can trust the sustainability claims made by businesses.

 

 

Recognising the necessity for clear standards to regulate the aforementioned examples, the European Commission has advocated for stricter criteria to prevent misleading environmental claims.

Understanding the EU Green Claims Directive

The EU Green Claims Directive proposal is designed to complement the 2022 Greenwashing Directive. These initiatives empower consumers in the green transition by offering better protection against unfair practices and improving information transparency.

 

Difference between Greenwashing Directive and the EU Green Claims Directive

While the EU Green Claims Directive focuses on substantiating environmental claims, the Greenwashing Directive takes a wider approach. It aims to prohibit misleading sustainability claims across both environmental and social aspects, including issues like fair trade and forced labour.

Together, these directives establish a comprehensive framework for all sustainability claims within the EU, ensuring a unified and updated approach to combatting deceptive marketing practices. The overarching goal is to promote greater trust and reliability – environmental integrity – in green and sustainable products.

But what are the key elements of the new EU Green Claims Directive proposal?

 

What is the EU Green Claims Directive?

The EU Green Claims Directive aims to establish a standardised methodology for verifying the environmental impact of products, services, and companies.

Key provisions of the Directive proposal include:

Scope

The Directive regulates explicit – written or oral text – environmental claims and labels used by companies – with more than 10 employees and an annual turnover over EUR 2 million – to market their environmental friendliness and foresees a series of sanctions against economic operators making baseless environmental claims.

The approach makes a clear distinction between explicit environmental claims and environmental labels outlining different obligations and requirements for each. It requires companies to review the information on the labels of their products and ensure that both are fully aligned with the requirements of the new Directive.

That said, in some cases, companies are exempt from the Directive. Microenterprises with fewer than 10 employees and an annual turnover of less than EUR 2 million are not subject to the environmental claims’ requirements. Yet, they can obtain a Certificate of Conformity if they meet those standards.

Additionally, environmental claims and labelling schemes are excluded from the scope of the Directive if they are already governed by existing Regulations mentioned in the Directive, as well as claims related to financial services, financial incentives, and certified organic products.

 

Environmental label and labelling schemes

The Directive would prohibit self-certified labels and introduce safeguards to enhance ecolabel quality, requiring transparency and credibility checks on ownership, decision-making bodies, and objectives. It addresses both current and future environmental labelling schemes, whether public or private.

New eco-labels from public and private operators, whether inside or outside the EU, are prohibited unless they demonstrate their value to the EU market. Moreover, Member States must ensure companies review and update information substantiating environmental claims within 5 years. 

 

Substantiation of environmental claims

Companies must back their environmental claims and labels with clear criteria and up-to-date scientific evidence. These claims and labels should be straightforward and specify the environmental characteristics they address, such as durability or recyclability, for example through accepted Life Cycle Assessments (LCAs).

Special attention is put on climate-based claims involving carbon credits. Companies must provide detailed information about carbon credits, including type, quantity, methodology, and permanence. It distinguishes between contribution claims (credits for climate action) and offset claims (credits to balance emissions). Companies claiming to offset carbon must ensure all environmental claims, especially those related to carbon credits, are supported by up-to-date scientific data, such as LCAs, and that they use certified carbon credits that comply with recognised standards, such as those outlined in the Carbon Removals Certification Framework.

 

Communication requirements

The Directive specifies that environmental claims must cover only significant impacts assessed in line with the directive’s requirements. Claims should also inform consumers how to reduce environmental impacts when applicable. A QR code must be provided for details on claim substantiation, including product information, studies, and standards. Companies should begin collecting relevant data, including product information, studies, and standards, to ensure full transparency. This information should be consolidated on a single platform that is easily accessible via a QR code.

 

Verification and simplified procedure

The Directive mandates that independent third-party experts verify all explicit environmental claims and labels before publication, with Article 11 outlining the criteria for recognising bodies as verifiers. Following verification, the company will receive a Certificate of Conformity.

However, a simplified procedure allows certain claims to bypass this verification if companies complete a technical document beforehand. For instance, existing national or regional public labelling schemes and new schemes regulated by EU or national law can be exempt from third-party verification if they meet EU standards. Companies that have received an officially recognised EN ISO 14024 Type I ecolabel are not required to undergo the verification procedure by an independent party.

 

Enforcement of the provisions

The proposal assigns Member States the responsibility to designate the most appropriate competent authority for enforcing the Directive. If multiple authorities are designated, Member States must clarify their duties. In cases of infringements, Member States must define penalties based on the nature, gravity, extent, and duration of the infringement, as well as factors like intent, the financial strength of the responsible party, and any economic benefits gained. Non-compliance by companies can thus lead to fines, but more significantly, it can harm brand reputation and result in a loss of stakeholder trust.

By establishing such guidelines and provisions, the EU Green Claims Directive seeks to ensure that environmental claims are credible, transparent, and scientifically validated, fostering greater consumer trust, and promoting genuine sustainability efforts.

EU Green Claims Directive’s impact on businesses

 

Audit & verify your claims

The EU Green Claims Directive mandates that companies – with more than 10 employees and an annual turnover over EUR 2 million – review and, if needed, adjust their marketing claims to comply with its requirements. This may require companies to revise their promotional or marketing materials and to reassess the environmental terms used to identify any unsubstantiated claims through internal audits.

 

Make sure your claims can be substantiated in line with the proposed law

Internal audits can be conducted by companies to identify where or if new LCAs of their products may be necessary to support their use of green claims which will need to be verified by an independent third party before a claim can be used in marketing. Life Cycle Assessments (LCAs) offer companies a comprehensive view of their product’s entire life cycle, aligning with the principles of the Product Environmental Footprint (PEF) and Organisation Environmental Footprint (OEF). This will be important as failure to comply could result in legal consequences such as financial penalties, or reputational damage.

 

Set-up appropriate governance structure to streamline internal an external communication of your companies’ environmental claims

Businesses should start by clarifying who is responsible for coordinating efforts across departments like procurement, production, marketing, and sales to prevent greenwashing. It’s also crucial to assess their current risk of being accused of greenwashing.

This process serves two purposes: first, to identify any urgent issues where exaggerated or unsupported claims have been made, allowing for timely correction; and second, to gauge how developed the company’s existing prevention measures are compared to the ideal framework, ensuring environmental claims meet regulatory standards.

 

Monitor regulatory developments, devise a roadmap and set internal mechanisms to ensure future compliance

Moreover, internal coordination and collaboration among departments, including marketing, policy, implementation, and management, will be required to identify areas within the organisation that are most vulnerable to violations of the Directive. This approach can aid in developing a strategy – or roadmap – to address existing unsubstantiated claims and prevent future misleading green claims.

This may culminate in an internal mechanism where green claims are automatically flagged and addressed – a so-called anti-greenwashing measure in which continuous monitoring takes place and where internal standards, methodologies, and guidelines are developed.

Lastly, if external verification of environmental claims is required for the company, it must select an independent, accredited third-party verifier to validate its green claims.

It is important to note that third-country companies must oblige to the same rules as EU-based companies to ensure a level playing field. SMEs are exempted from green claim requirements, however, should follow the same standards if they want to obtain a Certificate of Conformity.

What’s next?

The European Parliament’s position was adopted in its first reading on 12 March 2024 and the Council adopted its general approach on 17 June 2024, allowing interinstitutional negotiations – trilogues – to start. Trilogues are expected to begin towards the end of 2024 and continue through 2025. German MEP Delara Burkhardt (S&D) will represent the European Parliament on behalf of the ENVI Committee during the trilogue negotiations as lead rapporteur.

Member States have 18 months after the Directive enters into force to transpose it into national law and must apply its measures within 24 months of that date (Article 25). The Directive will take effect 20 days after its publication in the EU Official Journal. The Commission will be required to evaluate the implementation of the Directive five years after its transposition.

Implementation of the EU Green Claims Directive by Member States

The EU Green Claims Directive must be transposed into national legislation by Member States within 18 months after entry into force. This could result in fragmented rules and inconsistent application across countries, meaning that certain information labels may be compliant in one Member State but not in another. Companies are advised to closely monitor the transposition and implementation process following the directive’s adoption. As this is a directive, companies can also influence its national application.

With negotiations set to begin in Brussels and subsequent transposition by Member States, it’s advisable to start preparing now to ensure your company stays ahead of the curve. Need assistance? Publyon EU is ready to support your business! Check the services we offer to companies or simply contact us via the form below.