The lack of clear rules relating to “Green” claims made on products means consumers can’t trust the information they are being given. In the EU, over 50% of claims were found to be misleading.
As a component of the European Green Deal and the Circular Economy Action Plan, the EU had proposed a Green Claims Directive (GCD). The intent is to bring clarity to consumers and to give producers a level playing field for them to describe the sustainability related merits of their products.
The regulation focuses on defining the process and mechanisms for verification and approval of product marketing claims. Working in conjunction with the Empowering Consumers for the Green Transition, it will help to encourage more sustainable consumption patterns in the EU.
Objectives of GCD
The Green Claims Directive looks to put an end to greenwashing within the EU. To achieve this, the directive requires companies to verify claims made about their products. The directive establishes a level playing field by harmonizing the approach to green claims.
Within the EU there are over 230 identified labels relating to green claims and the impact assessment for the directive discovered that every other claim made about products are vague, misleading or unfounded. With only every other claim being accurate, consumers can’t know what to believe and some companies are gaining an unfair advantage through misleading practices.
Consumers want to have better information about the environmental impact of products they buy. Across the union, the buying power of consumers has the power to help accelerate the transition to a more sustainable economy. Better and more trustworthy information will help with the acceleration.
Key Elements of the directive
The main focus of the legislation is to require companies to have claims independently verified and approved within 30 days. The scope addresses voluntary claims made about products for consumers and does not include claims made under existing regulated labelling schemes.
To substantiate any claims made, producers need to perform an assessment. This assessment must identify if the claim relates to the whole product or a specific part. It should use recognised scientific methods to substantiate or quantify the claim.
For comparative claims, the assessment should ensure that the comparison is made using identical methods. Across all claims, it should be identified if by achieving the claim, other environmental impacts are caused as a consequence.
In relation to the carbon footprint of products, or its carbon neutrality, it should be made clear where the use of offsets is employed to achieve the claims. Offsets are permitted, but only when used to address residual emissions. The purpose and type of offset used (removal or reduction) must be described on the label.
To provide consistency and accuracy of claims, independent verification is required. Each member state will have to provide independent verification mechanisms under the green claims directive.
SME and Micro Enterprise Impact
Smaller companies are protected by several measures. Microenterprises are not affected by the regulation. It will take an additional year for SMEs to comply with the directive. Member states are required to provide support to SMEs to help them comply, including funding, education, and clear guidance.
Enforcement
Regulators can enforce the delegate act if a claim is misleading or unverified. Producers have 30 days to correct such claims. Penalties for non-compliance include exclusion from public sector tenders, confiscation of revenue from misleading claims, and fines of at least 4% of annual turnover.
What Should Companies do now?
Each member state must now transpose the directive into their jurisdictions, which can take up to two years. The timeline for companies to act is still quite short.
A first action is to determine where claims are already being made on products. Performing an assessment to identify all claims on all products will help to establish the potential effects of GCD.
Once identified, an assessment per claim will be required once the directive comes into force. For many businesses, the information, in particular in relation to value chain scope 3 emissions is limited. Therefore starting a claims assessment early will give the maximum opportunity to substantiate the claims with data.
A further action is to define clear guidelines for future product marketing, thereby limiting the exposure of remedial work in the future. Establishing a framework for which claims can be substantiated and which cannot will give marketing teams the operational clarity they need to be compliant.
For many claims, the information is likely to be insufficient. In considering the broader requirements for the business to manage ESG related information such as CSRD, GCD may increase support to a business case for improved data management and governance across the company.
How we can help
We specialise in helping companies to turn regulations such as the Green Claims Directive into tangible action in their business. We help clients perform gap assessments to identify what’s required to achieve compliance. To ensure effective management and governance we also integrate the requirements into the operating model of the business. If you’d like to discuss how we can help your business, please get in touch.
