eu-green-claims-directive-2023-ohana-public-affairs

EU Green Claims Directive: A Deep Dive

A lot has already been written about the EU Green Claims Directive (GCD), both before and since its publication in March 2023. However, in the haste of reporting the latest news, many of these pieces can end up being a bit superficial in content, and overlooking important aspects of the proposal.

To make sure that you have easy access to the correct and complete information regarding the EU Green Claims Directive, we have prepared this special article. In it, we will not only detail what the legislation entails but also contextualise it, offering strategic insights to help you understand the relevance and the consequences of this game-changing European initiative.

Want someone with deep experience and connections in the EU to help guide your sustainability strategy? Get in touch!

What is the EU Green Claims Directive?

In this article we will be analysing the EU Green Claims Directive proposal as it was tabled by the EU Commission, and it’s important to know that changes are expected during the legislative process.

Moreover, before diving into the details of the GCD, it’s essential to understand how the proposal fits into the EU sustainability communication law landscape.

Contextualising the Directive

The EU understands that achieving climate neutrality by 2050 will require not only the involvement of European businesses but also of the general population. While companies must adhere to higher sustainability standards, the EU Communications Framework (as we call it at Ohana) will empower consumers to make well-informed purchase decisions.

The EU Communications Framework is a collection of legislative initiatives designed to protect European consumers’ interests through increased transparency requirements and to accelerate the EU green transition by fostering conscious consumption. Collectively, these initiatives address the concern of misleading commercial messaging within the Union, and seek to guarantee that consumers have easy access to trustworthy information regarding the products and services available on the market. As one of the initiatives that make up the Framework, the Green Claims Directive focuses specifically on eradicating misleading commercial messaging related to sustainability and environmental matters, also known as greenwashing.

How the EU Green Claims Directive complements the Unfair Commercial Practices Directive

When analysing the initiatives included in the EU Communications Framework, it’s important to point out the complementarity of the Green Claims Directive and the Unfair Commercial Practices Directive, and that both pieces of legislation should be jointly implemented by European organisations.

Although the rules outlined in both documents target greenwashing practices, the type of claims covered by each of them is different. While the Unfair Commercial Practices Directive encompasses all voluntary general claims, the GCD applies exclusively to voluntary explicit environmental claims, as explained in the section above.

Understanding the EU Green Claims Directive

The EU Green Claims Directive aims to eliminate greenwashing across EU markets by establishing the block’s first set of detailed rules for how companies can communicate their environmental impacts and performance, or that of their products/services.

As the EU Commission’s most relevant instrument against false environmental claims, the Directive states the following objectives:

Safeguarding both consumers and businesses against greenwashing practices;
Empowering consumers to make informed purchasing choices by relying on trustworthy environmental claims and labels;
Establishing common criteria on how companies should substantiate environmental claims;
Setting clear requirements to address the proliferation and credibility challenges of environmental labels;
Implementing systems that guarantee independent claim verification and support SMEs.

These objectives clarify that, although the Directive will demand a lot from brands, retailers and service providers, it should also deliver important benefits to these businesses. As mentioned in our previous update on the GCD, it’s essential not only for companies to monitor policy development but also to get involved in the EU co-decision process, to ensure that such proposals remain well-balanced for all stakeholders.

Scope of the EU Green Claims Directive

Companies of all sizes and sectors will be subject to the rules established by the Green Claims Directive, except for microenterprises, which are those with fewer than 10 employees and less than €2 million turnover.

Under the scope of the GCD are all voluntary explicit claims made by businesses to consumers regarding the environmental aspects, performance and impacts at a product, service and company level. This is valid for claims made in textual form as well as those included in labels. Environmental labels and certification schemes are also covered by the Directive, and must have their governance verified by independent parties.

The Claim Substantiation and Communication Process

According to the proposal, claims such as “eco-friendly formula” or ” made of 20% recycled material” need to be substantiated by widely-recognised scientific evidence, clearly identifying the pertinent environmental impacts and any potential trade-offs associated with them.

Claims must be verified before publication by independent and accredited entities, which should receive all the information required to substantiate the statement and to prove compliance with any relevant labelling schemes (should the claim be based on a label).

Once a claim is approved, it will receive a certification of conformity, which means that it can then be communicated to the public, along with its substantiation information package.

The legislative proposal also defines specific rules for label and certification schemes.

Finally, the Product Environmental Footprint, or PEF, could be recognised as a common methodology to measure the environmental performance of goods marketed within the EU. Its recognition and implementation will require further clarification through a delegated act. One condition for the apparel and footwear PEF is to add microplastics to the impact categories; a possibility currently being assessed by the Technical Secretariat.

Impacts of Non-Compliance and the Legislative Timeline

Although the fines for non-compliance will be defined at a national level, the proposal requires Member States to implement fines of up to 4% of the company’s annual turnover in the concerned country.

Revenues from transactions associated with the relevant products can be confiscated, and companies could be excluded from public procurement processes and public funding opportunities (including tendering procedures, grants and concessions) for up to 12 months.

Projected Legislative Timeline

Published by the European Commission on 22nd March 2023, we expect the political debate on the EU Green Claims Directive to take longer than expected due to the upcoming EU elections. Hence, the final legislation could be finalised in 2025. The end of 2026 is the projected deadline for transposition in national legislation, and companies would need to be fully compliant with national laws by mid-2027.

As we have continuously stated since our very first article on this topic, European businesses should not wait for the GCD’s final text to be confirmed to take action and immediately begin to rethink their sustainability communication strategies and marketing practices. To that end, our advice would be to start by performing a complete revision of the organisation’s communication materials, across all channels and formats (online, in-store, on labels, etc.), against the guidelines proposed by the Unfair Commercial Practices Directive in December 2021.

This recommendation of taking immediate action is valid not only regarding the Green Claims Directive but also for other key proposals, such as the Sustainable Product Initiative and the EU Strategy for Sustainable and Circular Textiles, since a loss in competitiveness could soon be the price paid by companies lacking proactivity on sustainability matters.