The Green Claims Directive draft proposal

The proposed Green Claims Directive aims to prevent greenwashing by introducing minimum requirements regarding the substantiation (i.e. validation or verification) and communication of explicit voluntary environmental claims. Voluntary environmental claims are defined as instances when a company markets the environmental impacts, aspects or performance of its products, services or the company itself, for which EU law does not already provide specific rules or regulations. Examples of voluntary environmental claims are labelling a product “environmentally friendly” or claiming that the CO₂ emissions linked to the development of a product have been halved since a baseline year. Having a sustainability report without a credible transition plan will also be considered as a claim.

The proposal also targets existing and future environmental labels, both public and private, by introducing governance criteria as well as rules for the validation of new labelling schemes.

The Green Claims Directive will apply to EU traders in all industries, i.e. companies and businesses that sell goods or services to consumers – as well as traders outside the EU that make voluntary environmental claims directed at EU consumers. The exemptions may apply to so-called micro-enterprises, which have less than 10 employees and whose annual turnover does not exceed EUR 2 million.

The proposed directive will require all voluntary environmental claims to be transparent, clear, accurate, reliable and comparable. Voluntary claims refer to claims that are not related to disclosure regulatory requirements already imposed by EU law.

Environmental claims must be based on a robust assessment by the trader and be backed by recognised scientific evidence. They must also:

• Indicate whether the claims refer to the product/service as a whole or only to a part of the product/service
  
• Clarify to what extent the product or service performs, in environmental terms, significantly better than what is common practice
  
• Disclose whether the claimed benefits result in an unjustified transfer of negative impacts to other stages of the life-cycle of a product or trader, or lead to the creation of or an increase in other negative environmental impacts

The directive also introduces transparency and credibility requirements (governance criteria) for environmental labelling schemes. The establishment of new national or regional publicly owned schemes will be prohibited unless the labels adhere to the validation procedure for new schemes established by private operators from the EU and third countries.

Voluntary environmental claims must be verified and certified by an officially accredited body before the claim is made public. The verifying body must have the required expertise, equipment and infrastructure, and must have no conflict of interest with the company making the claim.

The EU Council adopted its position (“general approach”) on the Green Claims Directive on 17 June 2024. This will form the basis for negotiations with the European Parliament on the final shape of the directive in 2025/26, expected to enter into force in 2027.

Companies will need to review and strengthen their internal and external control processes to ensure accurate communication and avoid greenwashing risks. Having a dedicated anti-greenwashing control framework (see link to webpage) in place can help effectively manage all external communications, both on the product and service level, but also corporate claims.

In the case of infringements, companies may face financial penalties and several sanctions. For example, they could be temporarily excluded from public tender procedures and access to public funds, face fines of at least 4% of their annual turnover or have the product in question and/or the associated revenues confiscated.

In addition to operational and financial consequences, implementation of the proposed directive will also lead to higher litigation risks. For the purpose of protecting the collective interests of consumers, consumers' representatives may be able to bring collective actions against traders not complying with the new directive, as foreseen by Representative Actions Directive (EU) 2020/1828.

Last but not least, there will be commercial implications: companies will have to ensure that the verification of the environmental claims and the issuance of the required certificates of conformity are carried out promptly. Otherwise, the competitiveness of the traders could be affected.

Understanding the implications

We do a screening of your sustainability report and further disclosures to identify the potentially in-scope environmental claims. Based on this screening, we conduct a thorough analysis of the new requirements’ implications for your products and services and the strategy you use to communicate them.

Health check and gap analysis

We run comprehensive health checks of your internal and external control processes to identify gaps and possible cases of greenwashing and corresponding claims, from upstream to downstream.

Setting up an anti-greenwashing framework

Based on our extensive experience, we can help you set up a dedicated anti-greenwashing framework across the relevant business areas, functions and divisions.

The EU’s proposed Green Claims Directive has extensive operational, regulatory and legal implications for companies in all industries, financial and non-financial, even if they’re not based in the EU.

Feel free to reach out to talk in more depth about how it may affect you or if you need support with implementing the directive.