EU Proposes New “Green Claims Directive” Targeting Greenwashing in Consumer Products

On March 22, 2023, the European Commission (EC) published a proposed Green Claims Directive (the “Proposed Directive”), which would impose specific rules for the substantiation of environmental claims relating to consumer products sold in the European Union (EU). The Proposed Directive would also establish standards for environmental labeling and certification schemes, and it would require that the substantiation and communication of environmental claims and labels be verified by an accredited third-party verifier. These new substantiation and verification requirements could result in significant costs for companies wishing to make environmental claims for products sold in the EU market.

Background

In 2019, the EC established the European Green Deal, which includes a range of proposals relating to climate, energy, and the environment, including the transition to a greener, circular economy. As part of this program, the European Green Deal set out a commitment to address false and misleading environmental claims (commonly referred to as “greenwashing”) by ensuring that buyers receive reliable and verifiable information about the environmental impacts of their product choices. 

In 2020, the EU published its New Circular Economy Action Plan and New Consumer Agenda, which both reiterated the need to address greenwashing. A 2020 study found that 53.3% of environmental claims included vague, misleading or unfounded information about products’ environmental characteristics, and that nearly half of environmental product labels were either not verified or only weakly verified.

The EU’s longstanding Unfair Commercial Practices Directive broadly regulates misleading practices in business-to-consumer transactions, but it currently lacks specific provisions addressing environmental claims. The Proposed Directive aims to fill this gap by amending the Unfair Commercial Practices Directive to add specific rules for environmental claims and labels.

Substantiation and Communication of Environmental Claims

The Proposed Directive would require that environmental claims relating to products (goods and services) available on the EU market be substantiated using a robust assessment methodology. “Environmental claims” would broadly include “any message or representation, which is not mandatory under [EU] law or national law . . . in any form, including labels, brand names, company names or product names, in the context of a commercial communication, 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 other products or traders, respectively, or has improved their impact over time.” The Proposed Directive would require that any such environmental claims be substantiated using an assessment that:

• relies on recognized, scientific evidence and state-of-the art technical knowledge;
• demonstrates the significance of impacts, aspects, and performance from a life-cycle perspective;
• takes into account all significant aspects and impacts to assess the performance;
• demonstrates whether the claim is accurate for the whole product or only for parts of it (for the whole life cycle or only for certain stages, for all the trader’s activities or only a part of them);
• demonstrates that the claim is not equivalent to requirements imposed by law;
• provides information on whether the product performs environmentally significantly better than what is common practice;
• identifies whether a positive achievement leads to significant worsening of another impact;
• requires greenhouse gas offsets to be reported in a transparent manner; and
• includes accurate primary or secondary information.

The Proposed Directive would also place certain restrictions on the communication of environmental claims. Traders making such claims must ensure that the claims:

• only cover environmental impacts, aspects or performance that are assessed in accordance with the Directive’s substantiation requirements;
• where relevant, include information on how consumers may appropriately use the product to decrease environmental impacts; and
• are accompanied by information on the substantiation (either in physical form or via a weblink or QR code).

Labeling and Certification Requirements

The Proposed Directive includes new requirements for environmental labels on products, in response to the current “proliferation of environmental labels and the ensuing consumer confusion, market fragmentation, and increased burden from complying with [labeling] requirements in different Member States.” The Proposed Directive would prohibit environmental labels based on self-certification (i.e., not based on a certification scheme or not established by public authorities). It would also prohibit the establishment of new national or regional publicly owned labeling schemes. 

New labeling schemes established by private operators would need to be assessed and validated by national authorities to ensure that they “demonstrate added value in terms of their environmental ambition, their coverage of environmental impacts, of product category group or sector and their ability to support the green transition.” This includes ensuring that any private labeling schemes have:

• transparent and accessible information about the labeling scheme’s ownership, decision-making body and objectives;
• criteria developed by experts and reviewed by stakeholders;
• a complaint and resolution mechanism; and
• procedures for dealing with non-compliance and possibility of withdrawal or suspension of labeling in case of persistent and flagrant non-compliance.

Independent Verification 

The Proposed Directive would require that the substantiation of environmental claims and labels be verified by an officially accredited third-party verifier before being used in commercial communication. This requirement aims to ensure that “every claim that the consumer will be exposed to had been verified to be reliable and trustworthy.”

Verifiers must be independent bodies accredited under the EU’s existing accreditation program for product marketing (Regulation No. 765/2008). Once a verifier has carried out the verification of a submitted environmental claim or label, it will issue a certificate of conformity allowing the company to use the claim in commercial communication to consumers across the EU market.

Enforcement

The Proposed Directive would require each EU Member State to designate a competent regulatory authority to enforce these new requirements within its borders. Member States would have the authority to start investigations or proceedings, to require traders to adopt remedies and take action to end an infringement, to adopt injunctive relief where appropriate, and to impose penalties for noncompliance. Member States would also be expected to perform regular monitoring of claims and labeling schemes.

Conclusions and Next Steps

The Proposed Directive demonstrates the EU’s commitment to addressing greenwashing, with a focus on environmental claims and labels in the consumer product space. Companies selling products in the EU market would be required to substantiate and obtain third-party verification of environmental claims and labels, which could impose substantial cost, particularly for claims dealing with life cycle environmental impacts such as greenhouse gas emissions. 

The Proposed Directive will next be considered by the European Parliament and Council. This lengthy review process, which can take upwards of 18 months, will include a public comment period and may result in further amendments to the Proposed Directive. Companies selling products in the EU should closely track the Proposed Directive and other EU developments relating to consumer products. The Proposed Directive may also encourage similar developments in the United States and elsewhere, and could influence ongoing revisions to the Federal Trade Commission’s Green Guides targeting greenwashing.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Hannah Y. Chanoine, an O'Melveny partner licensed to practice law in Massachusetts and New York, John Rousakis, an O’Melveny partner licensed to practice law in New York, Eric Rothenberg, an O’Melveny of counsel licensed to practice law in New York and Missouri, Chris Bowman, an O'Melveny associate licensed to practice law in California, and Jasmin Cohen, an O'Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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