Combatting greenwashing: enabling sustainable choices to consumers

A proposal for a Green Claims Directive

How many times have you wondered about the clarity or even the trustworthiness of the environmental information given in products or services received? Probably many times. In fact, the EU Commission estimates that half of all green labels offer weak or non-existing verification. Claiming to be “green” and sustainable has become a competitiveness factor, with green products registering greater growth.

However, with a proliferation of different labels and methods it is difficult to establish if claims are trustworthy. If claims are not reliable, comparable or verifiable, consumers and other market participants cannot fully leverage their purchasing decisions to reward better environmental performance.

Aware of this and aiming to ensure that information to consumers about environmental and social impacts is not misleading and focusing on combatting greenwashing, the EU Commission has proposed on 22nd of March drafting a Directive on “Green Claims" (“Directive”).

The adoption of this Directive is one of the actions taken by the European Commission to implement the European Green Deal. Its objective is to set out the first set of detailed EU rules, applicable to all companies operating in the European Union, on the substantiation of voluntary green claims. Green or environmental Claims are any message or representation, not mandatory under applicable law, including text, pictorial, graphic or symbolic representation, labels, brand names, company or product names, which states or implies a positive impact on the environment.

The measures proposed would lead to further harmonization regarding the regulation of environmental claims, strengthening the market for more sustainable products, and would avoid market fragmentation due to diverging national approaches introduced in the absence of a proposal at EU level.

In order to make environmental claims, they will have to be substantiated on a methodology based on scientific evidence that allows the identification of all the environmental impacts. In addition, the Directive introduces specific requirements for labels and comparative claims, as comparisons should be fair and methodologically sound, for example based on comparable information and data. Moreover, there will be an obligation to review and update the substantiation of the environmental claims made, when there are circumstances that may affect the accuracy of the claim.

The proposal of this Directive also establishes the need for verification by independent verifiers for substantiation of environmental claims (made by traders in a business to consumer commercial relationship) in order to avoid greenwashing and enhance consumer protection.

The proposed Directive is now subject to the approval of the European Parliament and the Council. After approval, it requires transposition to national legislation in the EU member states. The proposal provides for the Member States to designate competent authorities and grant them full powers necessary for the investigation and enforcement to ensure compliance with the Directive and to establish a regulatory and sanctions regime.

During this transposition period companies should prepare for adopting national legislation  in their daily operations and need to ensure compliance to avoid potential sanctions and reputational risk that an inappropriate compliance could trigger. Companies will have to make an internal revision exercise in order to verify that the products that are currently being offered with environmental claims fulfil the requirements set up in the Directive. Also, the upcoming marketing strategies will have to be designed taking into account the new rules.

The proposal will also regulate environmental labels in order to stop the proliferation of labels as with at least 230 different labels currently confusion and distrust has been spread upon consumers. New public labelling schemes will not be allowed, unless developed at EU level, and any new private schemes will need to show higher environmental ambition than existing ones and get a pre-approval to be allowed.

With the proposed Directive, consumers will have more clarity and stronger reassurance that when something is sold as green, it is actually green. Failure to comply with the proposed Directive will not only trigger sanctions to companies but relevant legal risk from client complaints. Also, reputational risk may arise from the deterioration of the company´s public image and trust if a good or service offered as green, is found not to be in compliance. It is therefore a very relevant measure against greenwashing and misleading environmental claims establishing a level playing field when it comes to information about environmental performance of products. Hopefully in the near future we will the clarity and reliability of green claims.

In the coming months legislators throughout the EU will have to come with local laws and regulations and local authorities must implement a new regulatory supervision framework. The international KPMG Law teams will jointly continue to update and advise you on relevant developments in relation to the adoption and implementation of the Green Claim Directive throughout the EU.