knowledge 12 March 2024 |

EU Green Claims Directive: the end of unsubstantiated greenwashing claims on products?

Introduction

Climate change continues to be an important issue for virtually all businesses and organisations. It is recognised as a truly pervasive issue affecting many sectors across multiple jurisdictions and all parts of the supply chain. There is a clear increase in legislation and regulation coming from the European Union (“EU”) which is having an impact on businesses attempting to grapple with this new legal landscape. Within this rapidly evolving and complicated regulatory and litigation backdrop there are several issues all entities should be aware of which potentially could have a significant impact in the short to medium term. 

We are already helping many of our clients navigate this journey and provide the best guidance for organisations who want to insulate themselves from future risk posed by some of the imminent changes coming down the track both in Ireland and further afield. 

EU legislative developments 

The EU legislation surrounding climate litigation is dominated by the European Climate Law, also known as the ‘European Green Deal’ which seeks to achieve climate neutrality by 2050. It is a legally binding agreement on all 27 Member States with an objective to reduce greenhouse gas emissions by 55% by 2030. There are various statutory instruments which stem from this ambitious target with the Green Claims Directive being of particular note.

Green Claims Directive

The Green Claims Directive (“GCD”) proposal was adopted by the European Commission in March 2023 and is expected to commence in the latter part of 2024. The wording of the GCD (which will have to be transposed into the law of each individual Member State within the next two years) has been agreed as of January 2024. The main objective of the GCD is to tackle the risk of consumers being misled by companies over the purchase of products with environmental claims. It aims to protect consumers from ‘greenwashing’ which is the process of conveying a false impression or misleading information about how a company’s product is environmentally sound.  Therefore, a consumer may be under a false pretence that they are buying a product which may help the effort to combat climate action. 

Scope

The GCD will cover all sustainability claims that relate to a product, brand, company, or service made in a business-to-consumer context.  Sustainability claims cover both environmental or “green” claims and so-called “social characteristic” claims. The GCD will only apply to voluntary claims made by businesses to consumers. Mandatory disclosures or labelling requirements under distinct EU rules and regulations will be unaffected.

Impact

Modern society has become increasingly aware of the importance of protecting the environment due to the revelation of climate change and other dangers associated with an unhealthy environment. This has been capitalised upon by large corporations who advertise their products as ‘eco-friendly’ or ‘net-zero’ to influence the consumer to buy their products. Unfortunately, many of these claims are unsupported or simply false. In the absence of harmonisation or regulation, companies have essentially had free reign to advertise their products as they please, without any negative consequences. The GCD aims to harmonise this area of law to protect the consumer when buying products with environmental claims.

The GCD will mean that terms such as “environmentally friendly”, “climate neutral” or “biodegradable” will be banned unless there is evidence to support such claims as being legitimate. Any sustainability claims will need to be certified or shown to be in compliance with the relevant competent public authorities in each Member State. Claims must be substantiated with scientific evidence identifying the relevant environmental impacts and noting any trade-offs between them. 

Vague green terms will no longer be acceptable with terms like “eco” and “green” to be forbidden on products except where those goods are truly greener than conventional products and certified by scheme such as EU Ecolabel. The environmental impact of a product or climate related claims will be subject to more stringent requirements – companies will need to verify the accuracy of claims made by reviewing them at least every five years from the date of the relevant underlying study. That information must be accessible to consumers in a physical form or via a weblink, QR code or equivalent (though there is an exception for businesses with fewer than ten employees and an annual turnover of less than €2m).

Enforcement

The GCD obligates regulators within Member States to set up verification and enforcement processes to be performed by independent bodies. It is proposed that Member States may designate a similar regulator as the one mandated in the Unfair Commercial Practices Directive which would mean in Ireland the Competition and Consumer Protection Commission (“CCPC”) assuming the responsibility of verification of claims and enforcement. Similarly, in respect of the Representative Actions Directive (EU) 2020/1828 the CPCC has been earmarked as a potential “qualified entity” for the purposes of bringing actions on behalf of consumers who have had their rights infringed under EU consumer protection laws. 

The enforcement element of the GCD would mean the CCPC can instigate investigations, impose sanctions, and pursue judicial proceedings against those in breach of it. At a less serious level there is a power to issue "corrective requests" requiring businesses to correct or cease their environmental claim within 30 days.

Future

The GCD is unlikely to come into effect until the final quarter of 2024 at an EU level and each Member State will need to implement the relevant elements described above within the two-year period. During that same period, we are likely to see the implementation of the Empowering Consumers Directive which will place a prohibition on generic environmental claims on an even broader basis than the GCD. The Empowering Consumers Directive will come into force on 26 March 2024 and gives a two year time frame for Member States to implement it. Notwithstanding that significant lead in time, in respect of both these directives, it would be prudent for businesses to familiarise themselves with the obligations that will be imposed and to take steps to ensure there is no commercial risk when the changes become applicable.   

Also contributed to by Joanne Reilly