Protecting EU Consumers against Greenwashing

    Stockholm (NordSIP) – Addressing the risk of greenwashing is undoubtedly a priority for EU regulators these days. On 19 September, the European Parliament and EU Council announced another milestone in this direction, reaching a provisional agreement for a sweeping ban to combat the misleading of its citizens through unsubstantiated sustainability claims. The proposal aims to enhance consumers’ rights by amending the somewhat outdated Unfair Commercial Practices Directive (UCPD) and the Consumer Rights Directive (CRD), adapting them for the green transition.

    “With the compromise reached today, consumers will have the necessary information to make the right green choices and will be better protected against greenwashing, social washing and other unfair commercial practices,” comments Alberto Garzón Espinosa, Acting Spanish Minister for Consumer Affairs. “This is essential to allow them to play an active role in the common struggle for a greener and fairer Europe.”

    The new law has been long in the making. A European 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.

    Earlier this year, the Commission adopted a set of proposals to amend the existing rules protecting consumers from unfair commercial practices such as unsubstantiated or aggressive advertising and providing them with relevant product sustainability information. The latest development is part of a package of four proposals, together with the ecodesign regulation and the directive proposals on green claims and the right to repair.

    Among the important improvements introduced by the new law, we note the following:

    • sustainability labels will have to disclose the key elements of the certification scheme they apply, which should improve their credibility;
    • claims related to future environmental performance should be transparent and subject to monitoring;
    • unfair claims based on greenhouse gas emissions offsetting will be included in the list of banned commercial practices;
    • traders will be liable in cases of information (or lack of information) on early obsolescence, unnecessary software updates or the unjustified obligation to buy spare parts from the original producer;
    • a harmonised label with information on the commercial guarantee of durability will be introduced to be displayed prominently in shops and websites.

    The law, which still requires formal approval by EU countries and the parliament’s plenary assembly, will be enacted in 2026, giving EU countries a sufficient grace period to adopt the changes.

    Image courtesy of NordSIP
    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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