European Parliament approves new greenwashing directive

The proposed new directive focuses on improving product labelling and preventing companies from making misleading environmental claims. It is designed to enable consumers to make informed "green" choices when purchasing products or services and protect them from false statements.

In particular, the new rules will prohibit the use of vague environmental claims such as ‘environmentally friendly’, ‘natural’, ‘biodegradable’, ‘climate neutral’, or ‘eco’ unless these claims can be backed up by adequate evidence.

“The directive targets so-called ‘generic’ environmental claims,” said Dr. Fabian Klein, an expert in the law on unfair competition at Pinsent Masons. “This does not only cover slogans or word claims, but also pictures, symbols or similar elements that convey the message of being ‘environmentally friendly’. Displaying your product in a rainforest or together with a polar bear might be caught by the rules, for example. To make such claims, the trader must show evidence of ‘recognised excellent environmental performance’ either by having an ISO 14024 Type I certification or by meeting the EU Ecolabel standards.”

Tackling one of the most often-used environmental claims, the proposed new directive would specifically ban the use of the claim of ‘climate neutrality’ of a product or trader if this claim is based on offsetting measures.

“Banning the claim of ‘climate neutrality’ where this is based on offsetting rather than reduction was a clear political goal, but it is also a consequent evolution of recent case law,” said Klein. “Companies cannot simply ‘buy’ climate neutrality through offsetting projects but must at least in part work on reducing their own emissions. Still, offsetting projects are better for the environment than doing nothing. But if companies cannot use their projects in advertising, this might drive them away from investing in such projects altogether.”

A second focus is on limiting the widespread use of dubious sustainability labels. For this, the directive foresees that only sustainability labels that are based on approved certification schemes or established by public authorities will be allowed.

“The directive bans private sustainability labels that do not provide an objective certification scheme,” said Klein. “Although the directive tries to define what criteria have to be met for this – basing it on a transparent scheme developed in consultation with relevant experts, ensuring independent monitoring of compliance, being available to anybody under fair and non-discriminatory terms – a lot of questions remain as to what this specifically means. One thing that is certain, though, is that labels created by companies themselves will no longer be allowed.”

Companies will not have to change their products or advertising overnight to comply with the proposed new directive. The directive has still to be formally adopted by the EU’s other main law-making institution, the Council of Ministers. Only when that happens with the directive be published in the Official Journal of the EU, and member states will have two years after the directive comes into force to implement it in national law.

“Advertising and labelling activities that have a longer horizon need to be put to the test rather sooner than later – this applies to cooperations with environmental labels or recycling systems, long-term investment projects such as for sustainable farming or sourcing, but also, for example, where plans exist to change packaging from plastic to paper,” Klein said.

The proposed new directive is designed to complement other upcoming EU legislation set out in the proposed new Green Claims Directive, which will lay out more precise conditions for using environmental claims in greater detail. It will impose more severe conditions for companies’ communications about the environmental qualities of their companies or products. As currently drafted, the Green Claims Directive would require every such claim to be pre-approved and certified by an independent third-party verifier.

Klein said that this would put an enormous burden on companies and could lead to companies not communicating their environmental aspects at all and perhaps not taking such steps in the first place.

He said: “The air will therefore become thinner for both misleading greenwashing claims as well as environmental claims made in good faith and with best intentions.”