Many consumers nowadays find it difficult to navigate the environmental labels on products. And not only consumers, but manufacturers often do also not know how to approach information on the environmental aspects of their products. A closer look at this issue is expected to be provided by the forthcoming Directive of the European Parliament and of the Council amending Directives 2005/29/EC and 2011/83/EU regarding consumer empowerment for environmental transformation through better protection against unfair practices and better information, the so-called green claims Directive, which was issued by the European Commission on 22nd March 2023.
This article includes the proposal for a Directive on green environmental claims and outlines the circumstances surrounding it.
What is greenwashing?
Greenwashing is a term based on a combination of terms “green” and “whitewashing” (covering up or justifying unfavourable facts to improve public opinion). In practice, it is the misleading or deceptive presentation of products, services, or businesses in general as environmentally friendly or sustainable, when in fact they are not. Such misinformation serves to improve the public opinion and image of the entity in question and thus makes it easier to win customers. However, these practices are becoming more familiar to consumers, leading to a gradual increase in consumer scepticism towards environmental claims in general.
We can encounter greenwashing, for example, in advertisements, where some companies are quite inventive. In some cases, they use green colouring or natural patterns on their packaging or in promotion campaigns.
If we are interested in supporting truly environmentally friendly producers, we need to be vigilant and verify the information.
How does the new draft Directive respond to this?
Although greenwashing is not a new concept, it has become even more widespread in recent years as consumer demand for environmentally friendly goods and services has been met. New regulations aim to discourage companies from using greenwashing to deceive consumers. Indeed, few people check the sustainability information presented thoroughly, so it is not surprising that greenwashing advertising messages usually work very well and confuses consumers.
The draft of Directive was last discussed in the legislative process in the EU Council on 26th October 2023.
It aims to strengthen consumer protection and impose stricter requirements on businesses that claim or want to claim that their products are environmental-friendly. How? By using the following key elements:
- Definition and standardisation of green claims
Establishing precise and clear definitions and standardising green claims and labelling will help consumers to understand and compare product and service information more easily.
- Transparency
By substantiating green claims with reliable evidence directly on the product or on its packaging with an environmental impact assessment, the credibility of these claims in the eyes of consumers will be enhanced. For example, it is common nowadays for fashion products to be labelled as ‘conscious’. However, when buyers ask what makes a product ‘conscious’ the answer is often vague. Therefore, when using recycled materials, the actors concerned should indicate which recycled materials the product is specifically composed of and whether recycled materials are predominant or negligible in the overall composition of the product.
- Specification and sustainability
Companies and organisations will need to specify whether the claim applies to the whole product or only a part of it. This means not only the production process but also transport, material efficiency, recycling, etc. This step can be simplified by, for example, using a QR code leading to a website where this information can be found.
- Penalties for non-compliance
The introduction of penalties at national levels and the participation of enforcement bodies in the event of breaches of the rules laid down in the Directive should strengthen compliance and enforcement.
Environmental certificates and labels
The Directive also regulates the activities of entities issuing environmental certificates using requirements for public institutions and private entities. These include, for instance, the Forest Stewardship Council’s FSC label, which identifies timber and timber products that come from sustainably managed forests.
Other brands include the better-known Fair Trade, which refers to products made under fair working conditions and for fair wages. Less well-known is the Cradle-to-Cradle certification, which focuses on the sustainability and recyclability of products and their packaging. The EU Ecolabel is the official label of the European Union.
The abovementioned labels and certifications should be more closely checked by a third party and should offer consumers a more certain option, thanks to their placement on the product. There are currently over 200 different eco-labels, which contribute to consumer confusion and a tendency to distrust these labels. In the event of non-compliance with the requirements imposed on the protective labels, there will be the possibility of withdrawing or suspending their use.
Sanctions
Once the draft of the Directive is adopted, EU Member States will have to ensure that the obligations set out in the Directive are verified and enforced. Sanctions should be regulated at the national level and will consist of fines, forfeiture of profits, exclusion from public procurement, or denial of access to subsidies.
Conclusion
The upcoming Directive is intended to ensure that eco-labels and claims are credible and allow consumers to make informed purchasing decisions. Greenwashing is a challenge both for the consumer and for retailers who offer products and services with eco-claims. A satisfactory solution requires a concentrated effort to develop rules and standards that will support truthful and credible environmental claims.
Given the growing awareness of ESG factors, their importance, and obligations under ESG legislation, we must continue to explore and develop these concepts. Only in this way we can ensure a lasting positive impact on our society, the environment, and future generations.
We will continue to monitor the development of the draft of Green Claims Directive for you.
If you have any questions regarding ESG legal issues, please do not hesitate to contact us.
Tereza Hrudková, legal assistant – hrudkova@plegal.cz
Rachel Kouklíková, legal assistant – kouklikova@plegal.cz
Mgr. Jakub Málek, managing partner – malek@plegal.cz
21. 11. 2023