Written by: Nadine Mukhtar
As part of the EU’s Circular Economy Action Plan and the overarching EU Green Deal, the European Commission has recently proposed the Green Claims Directive, which aims to improve commercial practices in relation to the credibility and communication of environmental claims made by companies selling goods and services in the EU’s single market. The draft Directive would therefore directly impact UK companies operating in the EU, which are already subject to the UK green claims regime.
Complementing the Commission’s proposal in 2022 to enhance consumer protection through amending the EU Unfair Commercial Practices Directive and the Consumer Rights Directive, the Green Claims Directive will impose controls over the commercialisation of sustainability claims firstly, by ensuring the substantiation of green claims and secondly, by enhancing the transparency and credibility of environmental labelling schemes.
Substantiation of Green Claims
Part of the draft Directive addresses green claims made by a company in relation to the environmental impact of the company’s products or business. Green claims refer to any message or representation which ‘states or implies that a product or trader has a positive or no impact on the environment’ or is less damaging to the environment than competitor products or traders (Article 1(1) of the proposal to amend Directive 2005/29/EC). These claims must be adequately substantiated according to a minimum standard of assessment criteria using ‘recognised scientific evidence’ whilst also ‘demonstrating whether the claim is accurate’ in relation to the whole product or part of it. The substantiated claims should be communicated either through a physical form, weblink or QR code.
To further protect consumers from misleading commercial practices, the EU has proposed that a certificate of conformity be produced before a green claim is used, which can be obtained following verification by an independent third-party of the accuracy and credibility of the claims. This can be contrasted to the UK green claims regime, which although requires adequate substantiation of claims, does not require independent verification. Whilst this may impose an additional hurdle to the marketing of the sustainability of products or services, in light of the increasing greenwashing litigation brought by regulators (Advertising Standards Authority UK v Shell), NGOs/consumer groups, (Altroconsumo v Volkswagen) and competitors (Alcantara SpA v Miko Sri), independent third-party verification may potentially decrease the likelihood of successful claims brought against companies making green claims. This is especially so considering that claims must already be substantiated against a minimum set of criteria, demonstrating the dual protection that the proposed Green Claims Directive can offer for both consumers and companies amidst the growing prioritisation of sustainability in commercial practices.
To ensure compliance with the EU green claims regime, Member States are mandated to task an authority to regularly check green claims. Any infringement by a company would need to be rectified within 30 days. Infringing companies may also be subject to fines, confiscation of revenues obtained as a result of infringement and ‘temporary exclusion for a maximum period of 12 months from public procurement processes and access to public funding’. In addition to these financial penalties, which are more comprehensive than that of the UK green claims regime, companies may also be subject to private enforcement measures via NGO or consumer representative group claims which promote ‘human health, environmental or consumer protection’ (Article 16(2)).
Environmental Labelling Schemes
Environmental labelling schemes, or eco-labels, are voluntary measures in the form of a trust or quality mark or equivalent, that companies may use to distinguish their products/business by reference to their environmental credentials.
Mirroring the emphasis on scientific evidence with regards to green claims, the criteria underpinning eco-labels must also be developed by experts who can guarantee their scientific robustness. When utilising eco-labels, companies will be required to make the information about the ownership and decision-making of the bodies granting eco-labels transparent and accessible. Further, companies must provide a complaint and dispute resolution mechanism in relation to the environmental labelling scheme, which companies may use to their advantage by reducing litigation brought in relation to such schemes.
It is also interesting to note that the Green Claims Directive seeks to limit the creation of new private environmental labelling schemes once it has been adopted, serving to increase harmonisation in the internal market, potentially creating another added layer of protection for both traders and consumers by clarifying the multitude of regulatory rules that already exist for businesses operating in the EU.
Impact on Businesses
The Green Claims Directive will proceed under the normal EU legislative procedure, which may take around 18 months to receive European Parliament and Council Approval. Following its approval, Member States will be given 18 months to transpose the Directive into their national legal systems and 24 months to apply the Directive.
Given the range of private and public enforcement measures envisioned under the Directive, as well as the possibility of companies being directly fined for infringements, companies should closely monitor any amendments to the Directive in order to reassess whether their current regimes for the substantiation of green claims and the use of eco-labels require any changes. Moreover, UK companies operating in the EU will likely need to market green claims and eco-labels by reference to the stricter EU standards moving forth.