Out-Law News 4 min. read
27 Mar 2023, 8:58 am
Businesses could face tougher rules when making claims about their or their products’ environmental impact in future as a consequence of proposed new rules presented by the European Commission, but might also profit from greater harmonisation to the way greenwashing claims are assessed across member states, legal experts have said.
Dr. Fabian Klein, Johanna Weißbach, Angelique Bret, Tadeusz Gielas and Franziska Mauritz of Pinsent Masons were commenting after the European Commission published proposals for a Green Claims Directive, which envisage the establishment of new minimum standards on how businesses making environmental, or ‘green’, claims substantiate and communicate them.
Under the draft Green Claims Directive, before companies communicate certain types of green claims to consumers, the claims would need to be independently verified and based on “widely recognised scientific evidence”. Negative trade-offs on other environmental aspects would also need to be disclosed, and environmental labelling would be regulated. Apart from microenterprises, the rules would have to be observed by practically all companies doing business in the EU, unless they fall under more specific regulations.
The draft Green Claims Directive adds to similar initiatives pursued by national competition and consumer authorities in the UK, Netherlands and other European jurisdictions
Dr. Fabian Klein, expert on advertising and unfair competition at Pinsent Masons, said that on the one hand, the harmonisation of requirements around green claims should be welcomed by businesses, but he warned there would be increased burdens of compliance that could impact on business’ appetite and ability to seek market differentiation by espousing green credentials.
Klein said: “The Commission wants consumers to make green choices when buying products. The Green Claims Directive – together with separate proposals – wants to ensure that consumers are provided with reliable information, and also create a level playing field throughout the internal market. From this, particularly companies active in more than one member state should profit.”
“There is, though, a very relevant risk that the Commission is asking too much from traders. Specifically, the proposal foresees that every environmental claim a company wants to use has to be verified and certified by an independent third party before it is used towards consumers. Considering especially that a very broad range of statements would constitute ‘environmental claims’ under the proposal, this does not seem to bode well for how advertising claims are created and implemented in practice, especially in fast-moving sectors or fast-moving advertising formats like online,” he said.
“Also, companies will have to provide a large amount of information to consumers together with the product – so much information that the Commission itself requires that an easily understandable summary is provided as well. This seems almost absurd. At least the Commission is realistic enough to allow this information to be provided digitally via a weblink or QR code,” he said.
Franziska Mauritz of Pinsent Masons added that environmental labelling practices will be impacted: “There are currently more than 200 eco-labels on the market, all based on different measurement principles and methods. With the Green Claims Directive, a harmonised certification scheme is to be established with which eco-labels may only be used under certain conditions. Private eco-labels will thus be put to the test, and labels that companies invent for themselves should disappear. This will have a large impact on packaging designs and advertising.”
Johanna Weißbach, litigation expert at Pinsent Masons with special expertise in the field of environment-related litigation, said the draft Green Claims Directive has been proposed in the broader context of increased climate-related litigation risk for businesses.
“Litigation in relation to alleged greenwashing has become a major trend in climate litigation during recent years,” Weißbach said. “Companies continuously run the risk that their green claims are challenged in front of courts, not only in one but in different jurisdictions. The outcome can differ significantly in each case as it depends on national legislation, jurisprudence and case law. This legal uncertainty poses a significant risk. The proposed new Green Claims Directive aims at providing more legal certainty and making cross-border trading easier – a welcomed development. But the strict requirements foreseen might turn out to hold various pitfalls.”
Angelique Bret, competition and consumer law expert of Pinsent Masons, said tackling greenwashing has also been a growing focus of regulators across Europe.
“The draft Green Claims Directive adds to similar initiatives pursued by national competition and consumer authorities in the UK, Netherlands and other European jurisdictions,” Bret said. “For example, the UK’s Competition and Markets Authority (CMA) published its green claims code in September 2021 and since then launched two consumer law enforcement cases in the fashion and FMCG sectors. In the Netherlands, the Authority for Consumers and Markets published its greenwashing guidance in January 2021.”
“Non-EU multinational businesses, and EU-based businesses exporting outside the EU, will also need to deal with different and increasingly complex national rules intended to tackle greenwashing,” she said.
Bret said that some regulators across Europe can turn to either competition law or consumer protection law powers to address concerns relating to environmental sustainability. She said the CMA is set to obtain strengthened consumer law enforcement powers to match its existing powers of enforcement under the competition law regime and that European competition authorities are increasingly focused on environmental sustainability in the context of competition law.
Tadeusz Gielas, competition and consumer law expert at Pinsent Masons said: “There has been particular interest in collaboration agreements between actual or potential competitors that pursue sustainability objectives. The European Commission, as well as UK, Dutch, Greek, and Austrian authorities are particularly focused in this area. The CMA is currently consulting on far-reaching competition guidance in the UK, while final updated EU guidance and rules on horizontal cooperation agreements will come into force at the end of June 2023.”
The proposed Green Claims Directive will therefore impact companies in multiple ways. Klein said traders should therefore not see this as something for only their marketing department to have in mind, but to see this as one puzzle piece in the holistic approach of the EU to tackling climate change that will impact various parts of the business.
Businesses should also expect more detailed regulation in relation to green claims to emerge in future as the draft Green Claims Directive provides the European Commission with powers to adopt additional delegated acts.
The draft legislation is part of a wider package of sustainability-related initiatives pursued by the Commission and was published alongside further proposals that seek to reduce waste by enhancing existing consumer rights to, and improving consumers’ further options around, the repair of goods (31-page / 558KB PDF).
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