The European Commission is preparing to propose a detailed set of rules that companies will have to follow to substantiate their green claims about products, ranging from “carbon-neutral” sunscreens to “biodegradable” plastic packaging – all of which will be included in the EU’s Green Claims Directive. The proposal has the potential to change the situation by reducing the number of green labels, making them more specific, and requiring companies to provide consumers with more information. This could make the use of “green” advertising significantly more difficult while highlighting companies that are implementing real change. However, NGOs are criticising the initial draft proposal for having serious flaws. This Q&A article provides answers to the most important questions about the upcoming legislative proposals, including what key aspects to watch out for and the next steps in the legislative process.
1. What is the problem the EU is trying to solve?
The number of retail products or services sold as “climate-neutral”, “low plastic” or “reusable packaging” is growing rapidly, as these are increasingly becoming a way for companies to gain a competitive edge. However, such environmental impact claims remain unregulated, which is why some refer to this as the “Wild West of green advertising”.
2. How will the European Union address this problem? The Green Claims initiative
The European Commission has promised to step up regulatory efforts to combat false green labels as part of the European Green Deal, the EU’s green growth strategy. “Companies making ‘green claims’ should substantiate them using a standard methodology to assess their impact on the environment,” the Commission stated. The “Circular Economy Action Plan 2020” stipulates that “the Commission will also propose that companies substantiate their environmental claims by using product and organisation environmental footprint methods”.
Experts argue that regulation is the main driver when it comes to sustainability, and the Commission is addressing the issue of green claims with two legislative proposals. The Directive on empowering consumers for the green transition, proposed in 2022, would ban generic and unsubstantiated claims.
The new proposal – the Green Claims Directive – would introduce rules on how to properly make a green claim, by providing more information on what methodologies should be used for its substantiation and what information must be provided to the consumer.
With this proposal, the Commission wants to “empower consumers to take informed purchasing decisions and to create a level playing field for market operators making green claims”, as stated in the published draft.
Margaux Le Gallou (Margaux Le Gallou), programme manager at the NGO ECOS, points out that if the proposal is designed correctly, it will ensure the visibility of credible statements so that products truly become more noticeable. “Today, companies that are making real changes often go unrecognised.”
3. What will the EC propose?
Several media outlets reported on a draft published in January 2023, which has likely been revised since. Key features from the draft:
A requirement for Member States to ensure that environmental claims about products or traders are substantiated based on a methodology that meets a list of criteria (e.g., based on widely recognised scientific evidence, taking into account all environmental impacts related to the product or trader, and accessible to any third party).
Companies can only report environmental aspects that have been assessed using the methodology. No positive environmental claims can be made if the aspect in question causes a “significant negative increase in any other environmental impact or aspect”. Along with the claim, companies must make information about the assessment available, for example, via a QR code. Environmental labels must be based on certification schemes that comply with the directive (e.g., requirements regarding methods).
It is expected that the methodology used to substantiate climate-related claims will include a requirement that greenhouse gas emission offsets used by traders must be reported separately as additional environmental information.
Member States will be responsible for verifying substantiation and must introduce “effective, proportionate and dissuasive” penalties. Initially, the Commission was expected to propose a regulation, which is a type of legal act directly applicable in all Member States. However, in January, information leaked about a directive, which is a legal act setting a goal that all EU countries must achieve. Each Member State must incorporate it into its national legislation. This means there could be slightly different rules regarding green requirements across the bloc.
4. What is the product environmental footprint method and what is its role in the proposal?
The Commission’s Joint Research Centre has developed the EU Product and Organisation Environmental Footprint (PEF and OEF) methods to help companies calculate their environmental performance based on reliable, verifiable and comparable information, and to ensure such information is accessible to other players (e.g., public authorities, NGOs, business partners).
They measure 16 environmental impact indicators (e.g., climate change, particulate matter, acidification, resource use) for a number of product groups and economic sectors throughout their life cycle. To date, PEF has been developed for, for example, beer, dairy products, dried pasta, bottled water, decorative paints, leather goods, T-shirts and thermal insulation.
In the Green Claims initiative, the Commission uses PEF as a reference, but does not make it mandatory. “Environmental footprint” methods are a robust and excellent methodology developed in full transparency with stakeholders and based on scientific consensus, and the Commission carefully considered stakeholder feedback while consulting on the green claims proposal. Therefore, the Commission considers it reasonable to leave companies greater flexibility regarding the methodology used to substantiate environmental claims, the draft states.
5. What are the key issues with the proposal?
Although the Commission offers PEF as a reference method, it does not specify one single method that must be used to substantiate claims. Le Gallou calls this a “missed opportunity”. According to her, the advantage of the PEF life cycle assessment method is that it is “quite prescriptive in the sense that it doesn’t allow you to choose which impacts you want to look at and include in your statements”.
However, Le Gallou also sees downsides to PEF: the way more specific rules were developed for each product category was “neither inclusive nor controlled, and for now, they are heavily influenced by industry and private interests”. She adds that PEF will not cover all environmental declarations. “Biodiversity is very poorly included, microplastics are not included, nor are positive things such as, for example, reuse.”
The EEB, the European Environmental Bureau, also criticises leaving the choice of methodology open. “This could open the door to the recognition of unreliable methodologies, without guaranteeing that they address the limitations of the PEF method,” the report says. “Instead, we need clear and uniform rules applicable across the EU for all types of claims available on the market.”
The EEB also criticises the proposal for failing to ensure proper civil society participation, for example in the process of developing assessment methods.
Both ECOS and the EEB have called for a ban on climate neutrality claims. They argue that these mislead consumers into thinking that products or services have no impact on the climate – something that will only be possible on a larger scale in the distant future. The published proposal would still allow such claims, requiring companies to use offsetting schemes based on robust accounting and that have a positive impact on the environment, such as the EU Carbon Removal Certification Regulation. NGOs consider this a missed opportunity in the proposal.
6. What happens next?
Examination of the proposal has been delayed several times, but the Commission planned to unveil it on 22 March. After that, it will go through the regular legislative process, where both the European Parliament and national governments in the EU Council will adopt their positions before reaching an agreement on the final version in joint negotiations. This could take several months. Thus, consumers are facing an opaque world, where sometimes convincing, but often misleading, irrelevant or even factually false claims are made, which in many cases are considered “greenwashing”.
A 2020 study by the European Commission found that about half of the environmental claims assessed “provide vague, misleading or unsubstantiated information about the environmental characteristics of products across the EU and across product categories (both in advertising and on the product itself)”.
A survey conducted by a German consumer advisory centre showed that products advertised as “climate-neutral” mislead consumers because most people have no clear idea of what this claim means. Some legal experts also argue that advertisements with unregulated climate claims are a barrier to real emissions reductions.
Existing consumer protection legislation, while having allowed for a series of significant climate “greenwashing” cases to be heard, is incomplete. Currently, companies can call their products “carbon neutral” without providing any additional information. Although such a claim can be challenged, market surveillance authorities face an overwhelming number of potential investigations.
Another problem the Commission is trying to address is companies that would like to report on their performance but do not know how to do so correctly.