On 22nd March 2023, the European Commission published a proposal for a directive on Green Claims. This follows on from the European Green Deal, released on 16th March 2023, that sought to empower consumers to make more informed choices, and established a commitment to tackle the phenomenon known as ‘green washing’.
What is Green Washing?
Green Washing is a marketing practice that takes advantage of the growing consumer and investor interest in sustainable, environmentally friendly products and services. It can include things like using green, or ‘eco-friendly’ colour schemes to mislead consumers into thinking a product may be environmentally friendly or making vague statements about materials being sustainable.
An example of green washing is the recent H&M scandal where, in 2022, a civil case was brought against H&M in the U.S. claiming that the retailer “misleadingly, illegally, and deceptively” mislead customers to believe that one of their clothing lines was environmentally conscious. This relates to a line of clothing that H&M called “Conscious Choice” which included green labels suggesting that the clothing is eco-friendly. In reality, the clothes are made from polyester and recycled plastics. It remains to be seen what the outcome of this case is, but it is not the first time that H&M has been criticised for green washing claims, leaving a stain on their reputation.
Similarly, in the UK, the Advertising Standards Authority (ASA) banned an advertisement from Innocent Drinks, a subsidiary of Coca-Cola, finding that the advertisement was misleading. This was based on the fact that the advert in question claimed that the plastic bottles “fix up the planet” despite the fact that this claim had not been substantiated. As a result of this, the Innocent Drinks advert had to be removed from the air.
What is notable about green washing is that, whilst it may seem like an intentionally misleading act, and whilst it sometimes is – it is also possible for companies to use green washing without intending to mislead, doing it through negligence alone. This could often occur when companies do not pay real or meaningful attention to the claims they are making, and the implications they have. As currently reported, 75% of products currently on the EU market make an implicit or explicit green claim, with over 50% of these being misleading, vague, or unfounded. Therefore, there are likely to be a large amount of companies that could face legal scrutiny when the EU Green Claims Directive comes into force.
Given the increase in focus and scrutiny on companies by consumers, activists, NGOs, and investors, it is becoming more difficult for companies to get away with green washing, with companies facing reputational damage, civil action, and a loss of revenue. However, with the proposed EU directive on Green Claims, companies may soon be open to further legal requirements and repercussions.
What Does the Proposal Say?
In the introduction to the proposal, it states that “Claiming to be “green” and sustainable has become a competitiveness factor, with green products registering greater growth than standard products”. This makes it clear that the proposed directive has greenwashing directly in its sights, something that is not a big surprise given the significant rise of greenwashing claims, coupled with the EU’s fast expanding list of regulations aimed at increasing accountability and responsibility for businesses in the field of environmental and human rights issues, such as the EU forced Labour Ban and the EU draft Directive on Corporate Sustainability Due Diligence.
The proposal puts the onus on member states to ensure that companies substantiate any explicit environmental claims they are making. An explicit environmental claim needs to be substantiated where they “state or imply that a product or trader has less environmental impacts or a better environmental performance than other products of traders”.
Included in this substantiation assessment is a list of requirements in order to verify the accuracy of environmental claims that companies will need to follow in order for the substantiation to be considered credible. These requirements include:
- Specifying whether the claim relates to the entire product, or part of it.
- Using widely recognized scientific evidence and accurate information and taking into account international standards.
- Demonstrate that environmental impacts, aspects, or performance that are subject to the claim are significant from a life cycle perspective.
- Show that the claim is not equivalent to requirements imposed by law, for example, that the product isn’t presenting itself as more environmentally friendly if they are in fact just doing the legal minimum.
- Provide information on whether or not the product or trader relating to the claim performs better in environmental impact, aspects, or performance than what is common practice in its respective sector.
- Separate offset greenhouse gas emissions as additional environmental information and specify further information relating to this, and.
- Provide primary information relation to the environmental impacts, aspects, or performance which are subject to the claim, or secondary information where no primary information is available.
In essence, the proposed Green Claims Directive will prohibit any environmental or sustainability claims that cannot be substantiated according to the requirements laid out in the directive.
Similarly, member states should ensure that companies are required to communicate the substantiation of claims along with the claim they are making. For example, companies would need to state how a particular product is used in order to achieve it’s environmental performance, or to provide a time-bound commitment for ongoing environmental improvements in its own operations. This communication should be made available along with the claim either in physical form, in the form of a link, a QR code, or the equivalent.
What is the Scope?
The proposal suggests that the directive will cover all ‘explicit environmental claims made by traders about products or traders in business-to-consumer commercial practices’. This is currently quite vague, given that it doesn’t clarify how the directive will apply to third countries outside of the EU. However, it can be assumed that similar to the EU proposed forced labour ban, it will apply to companies outside of the EU where the environmental claims are made regarding products or commercial practices that are available on the EU market. It remains to be seen in future amendments whether or not this will be specified further.
Changing Legal Landscape
The proposed EU Green Claims Directive joins some pre-existing national laws such as the UK and France that have their own legislation about misleading green claims. Similar to the increase in mandatory human rights and environmental due diligence laws, it is likely that other countries will also adopt similar legislation. However, for now, the EU Green Claims Directive seems to be far more robust and wide-reaching than its French and UK counterparts.
What Can Businesses Do?
It is not clear exactly when the new Green Washing Directive will come into force, however businesses have time to review their policies surrounding how they market their products or services, and to ensure that they can substantiate any claims they are making, or implying, regarding the environmental impacts of these products or services. A few steps that businesses can take include:
- When making environmental claims, ensure you can back these up with data or evidence.
- Be transparent in non-financial sustainability reporting.
- Ensure that any marketing materials for products or services could not be perceived as misleading.
- If you are making a green claim, be as specific as possible as to the benefit the product or service has to the environment.
- Ensure that accountability for green claims is placed at the highest level of the organisation.
At Ardea International we have experience in supporting companies developing their due diligence frameworks and embedding the appropriate policies and procedures. Do get in touch with us if you want to know more: email@example.com
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