Unveiling the Green Claims Directive and Its Impact for Businesses

The Green Claims Directive seeks to promote sustainable products and services, facilitate a circular and clean economy, and foster the European Green Deal’s broader goals by combating greenwashing.The proposed Directive will apply to all companies in all sectors selling goods and services in the European Union (EU).

Therefore, in this blog post, we cover the Green Claims Directive from a variety of angles, including:

• The greenwashing challenges of ushering in a circular economy that the Green Claims Directive helps ease and/or eradicate.
• Providing an even playing field for companies supplying genuine green and sustainable goods and services by removing unfair commercial practices.
• The New Greenwashing Claims Directive initiatives by governments in the EU will support a green transition.

What is the Green Claims Directive?

The Green Claims Directive (GCD), officially known as the Directive on the Verifiability and Communication of Environmental Product Claims, is a legislative proposal by the EU to protect consumers and companies from greenwashing.

The GCD aims to regulate misleading environmental claims that companies make in their advertising and product labelling. Such misleading claims prevent consumers from choosing greener and more circular products and services. The Directive will create transparency by ensuring traders provide consumers with clear and understandable information about the environmental aspects and impacts of products, services, and companies. This will enable consumers to make informed purchasing decisions.

The Green Claims Directive promotes the European Green Deal’s goals by addressing greenwashing, early obsolescence, and unreliable, non-transparent sustainability labels.

The Green Claims Directive's Timeline

The EU Commission published the proposal for the Directive on March 23, 2023. On September 19, 2023, the European Council and the European Parliament reached a provisional political agreement on the Directive. This agreement maintains the Directive's main objectives while introducing some improvements, including more decisive measures against early obsolescence and the inclusion of unfair claims related to offsetting greenhouse emissions.

Future steps involve formal adoption by both the European Council and Parliament, scheduled in November 2023, with the process expected to be completed in early 2024. Individual countries must then adopt the GCD and start applying it 24 months later.

Why Do We Need The Green Claims Directive?

As of 2020, the European Union was using 230 ecolabels and 100 private green energy labels. Companies use terms like "green," "sustainable," and "eco-friendly" without clear definitions, making it challenging for consumers to assess the actual environmental impact of the products they buy. Many private ecolabels and environmental claims are self-declared by companies and have limited third-party verification.

"Green claims are everywhere: ocean-friendly t-shirts, carbon-neutral bananas, bee-friendly juices, 100% CO2-compensated deliveries, and so on. Unfortunately, way too often these claims are made with no evidence and justification whatsoever. This opens the door to greenwashing and puts companies making genuinely sustainable products at a disadvantage. Many Europeans want to contribute to a more sustainable world through their purchases. They need to be able to trust the claims made. With this proposal, we give consumers the reassurance that when something is sold as green, it actually is green."
Frans Timmermans, Executive Vice-President for the European Green Deal – 22/03/2023

The European Commission reported that in 2020, 53% of the environmental claims they examined were misleading, unfounded, or vague, and 40% were unsubstantiated due to the absence of rules to curtail greenwashing.

What Is Greenwashing?

Greenwashing is a practice where companies mislead consumers about their negative environmental practices or impacts and instead present only positive information about their organisation, products, or services.

Misleading environmental claims are a significant concern for consumers and traders alike. It can erode public trust in green or sustainability claims, making it difficult for consumers and businesses to make informed choices and hinder the transition to a green and circular economy.

Greenwashing is getting more sophisticated and taking insidious forms. Planet Tracker has identified six types of greenwashing that corporate sectors often use:

• Greencrowding: Some companies hide within a crowd or group, using the collective efforts of others to avoid scrutiny or responsibility for their unsustainable practices.
• Greenlighting: Companies emphasise a small, environmentally friendly aspect of their operations or products through communication and advertising to divert attention from other, less eco-friendly practices or activities.
• Greenshifting: Companies try to shift the blame for environmental issues onto consumers rather than taking responsibility for their unsustainable actions.
• Greenlabelling: This refers to the misleading use of terms like "green" or "sustainable" in marketing or labelling to make products or practices appear more environmentally responsible.
• Greenrinsing: Some companies continually adjust their ESG (Environmental, Social, and Governance) targets, which can give the appearance of progress without achieving any targets.
• Greenhushing: Corporations hide or under-report sustainability efforts to avoid negative feedback from consumers, investor scrutiny, high costs, or regulatory requirements. Companies are vague and give the impression of being greener by being "quietly conscientious." Greenhushing also reduces corporate commitment to sustainability and transitioning to a greener economy.

The new Green Claims Directive wants to combat all forms of greenwashing by amending the Unfair Commercial Practices Directive 2005/29/EC. The proposed measures address five common greenwashing practices listed below:

1. Displaying a sustainability label not based on any certification or public authority.
2. Comparing products without providing information on methods, using a sustainability information tool, or taking measures to keep data up-to-date.
3. Making generic environmental and social claims without demonstrating the positive performance of the product or company.
4. Claiming that the entire product has environmental benefits when only a specific part is sustainable.
5. Presenting legal requirements and common market practice for a product category as a distinctive feature.

The Green Claims Directive proposes regulations to reduce unfair business practices and sales methods to empower consumers and ensure a transition to greater overall sustainability.

How Can You Comply With The Green Claims Directive?

Some of the measures recommended by the Green Claims Directive to prevent greenwashing are Environmental Labelling Schemes, claims verification, and penalties by EU member states. So, claims and information about products, services, or the trader will become accurate.

Environmental Labelling Schemes

The Green Claims Directive has introduced specific requirements for Environmental Labelling Schemes (ELS), which are certification schemes that verify a product’s, process’s, or trader's compliance with environmental labelling requirements. The Directive also restricts the introduction of any new ELS unless established through EU law. Individual member states cannot introduce their new schemes.

Verification Procedures

Member States must establish procedures to verify that claims made by products or traders comply with the Green Claims Directive’s requirements. The "verifier" must be a third-party conformity assessment body accredited according to Regulation (EC) No. 765/2008. The accreditation must comply with Green Claims Directive requirements, including the most crucial ones listed below:

• Independence: Verifiers must be independent of the product or trader making an environmental claim.
• Expertise, Equipment, and Infrastructure: The verifier must have the expertise, infrastructure, and equipment necessary for the verification process.
• Qualified Personnel: The verifier should employ enough qualified and experienced personnel to carry out verification tasks.

Penalties for Infringements

The EU mandates that member states impose penalties for infringements related to environmental labelling schemes. The penalties must be proportionate, effective, and dissuasive to deter violations and be fair in their application.

Consumer Action

The Green Claims Directive also empowers consumers to take action against infringements of environmental labelling schemes, including group litigation. Consumers can thus be influential in ensuring that products and traders are truthful in their environmental claims.

Actions Required by Companies

The Green Claims Directive proposal will apply to voluntary claims and labelling relating to the environmental impact, performance, or aspect of a product or the trader itself.

• It concerns claims not currently covered by any EU legislation.
• The Green Claims Directive will not affect existing EU labels such as Ecolabel, organic farming, or energy efficiency labels.
• The Green Claims Directive will cover climate-related claims based on carbon offsets and credits and the use of terms like "carbon neutral," "100% CO2 compensated", etc.

Companies making voluntary green claims must follow minimum requirements for substantiating, communicating, and verifying environmental claims.

"Embracing the Green Deal Directive isn't just a commitment to sustainability; it's a visionary investment in a brighter, cleaner future. At Resourcify, we believe that the Green Deal is pushing business to be transparent and align with the Commission's greater objectives, not only protecting the environment but also paving the way for innovation, growth, and responsible corporate citizenship. Together, we can build a sustainable world where businesses thrive, and our planet prospers."
Gary Lewis, CEO of Resourcify

The Green Claims Directive applies to all industries and companies selling goods and services in the EU, and some special cases are considered below:

• Microenterprises with turnover under €2 million and fewer than 10 employees are exempt from complying with the Green Claims Directive.
• The Green Claims Directive applies to small and medium enterprises (SMEs), and member states should support SMEs with financial, organisational, and technical assistance in making legitimate green claims and joining the green transition.  
• The Green Claims Directive will apply to international trade partners outside the EU making voluntary environmental claims for EU consumers.

After the 27 EU member states approve the proposal and it becomes law, they will have 18 months to establish national laws adopting the Green Claims Directive. The member states then have 6 months to start applying the new rules. Each EU member state could produce its own variation of the Green Claims Directive, with some programs being more ambitious than others.

Find out how German companies promote and report sustainability in their business.

5 Tips To Prepare Your Company For The Green Claims Directive

Green Claims Directive regulations come into effect in early 2026, and you should ensure your company avoids greenwashing. Some tips to get started are listed below:

1. Back Claims With Scientific Evidence And Independent Verification

Companies making environmental claims must provide substantial, widely recognized scientific evidence that identifies relevant environmental impacts and trade-offs. Have your company’s sustainability claims verified by an independent verifier against the requirements of the Directive and obtain a certificate of compliance recognised across the EU.

2. Ensure Fair And Equivalent Comparisons

Gather data to ensure that your comparisons of products and/or companies are unbiased and based on similar information and data. This step avoids misleading comparisons that give an inaccurate perception of the environmental performance.

3. Remove Aggregate Scoring Claims

Claims or labels that use aggregate scoring to represent a product's overall environmental impact (e.g., on biodiversity, climate, water consumption, soil) are no longer permitted unless they align with EU rules. The Green Claims Directive favours more specific and transparent environmental claims rather than generalised scores.

4. Review Environmental Labelling Schemes

Review ELS to ensure reliability and choose EU-level schemes to standardise environmental labelling efforts. The Green Claims Directive bans new private labelling systems in the EU and from external partners.

5. Go for transparent and verified environmental labels

Environmental labels should be transparent, verified by a third party, and subject to regular reviews. Choose the EU Ecolabel when possible for a consistent and reputable approach to environmental labelling.

A More Transparent And Genuine Green Future

While the EU Green Claims Directive addresses sustainability at a broader policy level, it's not the only directive that the Commission has implemented to drive more transparency in the common market. The Corporate Sustainability Reporting Directive (CSRD), for example, zooms in on the corporate sector, aiming to ensure that companies provide transparent and comparable information about their sustainability practices and impacts. These directives complement each other in promoting a more sustainable and transparent business environment within the European Union.

The Green Claims Directive represents a significant step towards ensuring that environmental claims in advertising are accurate and meaningful, benefiting both consumers and businesses. Businesses will benefit from gaining consumer trust, avoiding penalties, and improving transparency. Also, the Green Claims Directive provides companies with an even playing field and will increase the trade of green and sustainable goods and services.

Download a helpful cheat sheet on the Green Claims Directive for your team.