Greenwashers Beware: EU’s New Green Claims Directive

    Stockholm (NordSIP) – A commitment to tackling false environmental claims by ensuring buyers receive reliable, comparable, and verifiable information has always been at the heart of the European Green Deal. Addressing the risk of greenwashing is undoubtedly a priority for EU regulators. On 22 March, the European Commission adopted a proposal for a Directive on substantiation and communication of explicit environmental claims (the Green Claims Directive). The new rules should help clear the EU market of unreliable and confusing green marketing by establishing what companies must do to prove and communicate their green credentials.

    “Being able to trust green claims and labels on products is important,” comments Virginijus Sinkevičius, EU Commissioner for Environment, Oceans and Fisheries, in a press release. He points out that there are 230 different ecolabels on the EU market. “The proposals tabled by the Commission today will protect businesses and consumers from harmful greenwashing practices and tackle the proliferation of labels. [] We should also advance on using common trustworthy labels like the EU Ecolabel, which is a mark of environmental excellence on our single market,” he adds.

    The proposal has been long in the making. A Commission study from 2020 found that 53.3% of examined environmental claims in the EU were vague, misleading, or unfounded, and 40% were unsubstantiated. It concluded that the absence of standard rules for companies making voluntary green claims leads to greenwashing and creates an uneven playing field in the EU market, to the disadvantage of genuinely sustainable companies.

    What is in the proposal

    The Green Claims Directive proposal establishes minimum rules for companies to substantiate their sustainability claims. It obliges them to provide independent supporting evidence alongside their green claims, a provision that market surveillance authorities will enforce with regular checks and severe penalties. Offending companies might have to pay fines or even have their revenues confiscated and will be temporarily excluded from public procurement processes and public funding.

    The Commission also proposes prohibiting product rating systems not based on EU-common rules. Sustainability labels should be subject to minimum transparency requirements, which an independent third party, such as the EU Ecolabel, must verify. It establishes a registry of the ecolabels that can be trusted.

    “With this proposal, we give consumers the reassurance that when something is sold as green, it actually is green,” says Frans Timmermans, Executive Vice-President for the European Green Deal.

    …and what isn’t

    It would appear, however, that some compromises had to be made for the proposal to be adopted. According to the critics, the proposed Directive fails to impose an EU-wide method to calculate the environmental impacts behind green claims. The regulators’ decision not to require one unique methodology to back all environmental claims but define substantiation criteria instead is seen as watering down the initial draft. “Sadly, without harmonised methodologies at the EU level, the new Directive will provide little clarity to consumers and business and will only complicate the job of market surveillance authorities,” says Margaux Le Gallou, Programme Manager for Environmental Information and Assessment at ECOS – Environmental Coalition on Standards.

    The EEB, Europe’s largest network of environmental citizens’ organisations, shares some concerns. The organisation regrets the lack of an explicit ban on carbon-neutral claims and the use of green claims on products that contain hazardous chemicals and urge the European Parliament and national governments to prioritise these provisions during the upcoming negotiations on the Directive.

    That said, Blanca Morales, Senior Coordinator for EU Ecolabel at the EEB, sounds optimistic about the progress. “The Green Claims Directive is a promising tool to wipe out the misleading claims that muddy the waters of sustainability and make it hard to distinguish between the companies who strive to reduce their impacts and those who just greenwash their products. It is now urgent to crack down on climate-washing claims and to ensure that products containing hazardous substances are not sold as green.”

    Following the ordinary legislative procedure, the Green Claims Directive proposal will now be subject to the European Parliament’s and the Council’s approval.

    Image courtesy of Guillaume Perigois on Unsplash
    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.
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