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The Substantiation and Communication of Environmental Claims

The European Union (EU) Directive on the Substantiation and Communication of Explicit Environmental Claims

Unveiling the Green Claims Directive

In March 2023, the European Union introduced the proposed Directive on the Substantiation and Communication of Explicit Environmental Claims, also known as the “Green Claims Directive”. This initiative is part of the EU’s comprehensive Green Deal, a legislative package focused on sustainability.

Tackling green misinformation | The Directive’s ambition

The primary goal of the Green Claims Directive is to end the malpractice of greenwashing and misleading consumer claims. As awareness and interest in sustainability have grown over recent years, the fashion industry, in particular, has benefitted from making green claims that have been inaccurate, misleading, or false. According to the EU, the fashion industry creates the most green claims (24%), followed by the cosmetic industry (17%). Greenwashing (the act of deceptively marketing products as more sustainable than they truly are) and a plethora of ambiguous eco-labels have led to consumer scepticism. The EU seeks to rebuild trust by standardising the criteria for making green claims. The directive lays out specific guidelines for claims’ substantiation, communication, and verification. The legislation is expected to be ratified in 2024, and fully implemented by 2026, allowing member states two years to adopt the changes. It is worth noting that as this legislation is a directive, the approach to achieving the legislation may differ from each member state. This is because a directive is a legislative act that sets out a goal that all EU countries must achieve, while permitting individual approaches to achieve the target.

Provisions of the EU Green Claims Directive

Under the directive, businesses must follow new rules to achieve compliance

Claim Clarity; Businesses must be explicit about what their environmental claims refer to
Evidence Basis; Support claims with scientifically accepted evidence
International Compliance; Adhere to international standards
Verification; Undergo third-party verification
Holistic View; Consider the entire life cycle of a product when making a claim
Competitive Comparison; Provide data when stating better performance than competitors
Emission Communication; Follow rules around the communication of greenhouse gas emissions offsetting
Label Restrictions; Ban on new environmental labels based on self-certification

The claim and its substantiation need to be made available to the consumer at the point of purchase, with the claim in “a physical form or in the form of a weblink, QR code, or equivalent”. Here, the EU strives to achieve the green transition using digital transformation. Several recent initiatives published under the Green Deal utilise digital tools to reach environmental goals.

Global perspectives and other initiatives

In parallel, other organisations and countries are taking action. The Netherlands Authority for Consumers and Markets (ACM) has its own Guidelines for Sustainability Claims and outside the EU, the USA’s Federal Trade Commission (FTC) is expected to revise its Green Guides over the coming months. The Green Claims Code is already in force in the UK with the Consumer Market Authority (CMA). There have already been cases brought against high-profile fashion retailers, such as ASOS, Boohoo, and Asda, with household retailers set to follow. According to a CMA litigation director, there will be a “big uptick” in cases brought against flouting businesses. This is because the CMA’s powers are due to be extended to allow them to determine if a business has breached the rules without a court proceeding.

On the whole, the EU & UK green claim legislations have similarities, but the UK’s Green Claims Code extends its scope to business-to-business interactions, unlike the EU’s focus on business-to-consumer relations.

Penalties and regulatory consequences

Penalties for non-compliance differ between jurisdictions. While the EU may impose fines, seize revenues, and restrict access to public funding, the UK’s CMA can impose fines amounting to 10% of a company’s global turnover.

An unintended consequence of this tightening regulatory landscape might lead to “greenhushing”. This is when companies stop publicising their genuine sustainability efforts to avoid the risk of fines. However, it may be that greenhushing is on borrowed time as the EU’s Ecodesign for Sustainable Product Regulation (ESPR) requires all products sold on the market to state the percentage of recycled content used in the product. To be able to state this percentage, the claim will need to be verified, or risk breaching the EU’s Green Claims Directive. Therefore, this could create a fast upward trajectory in demand for green claim assurance.

Future Outlook | Bridging digitisation with compliance

In the coming years, more stringent checks by EU authorities are anticipated. The ESPR mandates the adoption of Digital Product Passports (DPP). The DPP is hoped to become a single instrument to verify compliance, and market authorities will be able to check compliance with several different legislations by accessing information via the DPP.

Eurofins is closely monitoring the developments around the Green Claims Directive, and wider sustainability legislation. If you have any queries regarding green claims or sustainability, please contact our sustainability services team using the link below.