GCD
Green ClaimsClaims Directive
What is the Green Claims Directive?
The Green Claims Directive is an initiative by the European Commission aimed at combating greenwashing and ensuring that environmental claims made by companies about their products or services are accurate, transparent, and verifiable. As part of the European Green Deal and the Circular Economy Action Plan, this directive seeks to promote sustainable consumption by providing consumers with reliable information to make environmentally conscious choices. By standardizing environmental claims, the directive aims to foster trust and transparency, prevent misleading information, and support the EU’s broader climate and environmental goals.
The European Union is moving to strengthen regulatory actions against false or misleading environmental claims, commonly referred to as “greenwashing.” To curb the increasing trend of companies exaggerating the environmental benefits of their products, services, or operations, and to foster a fair and sustainable market, regulators are proposing a ban on deceptive environmental claims. Companies intending to make environmental assertions will be required to conduct thorough assessments and provide substantiating evidence.
The purpose of the Green Claims Directive (GCD or the Directive) is to prevent deceptive advertising from obstructing the green transition. Under the GCD, only businesses that have verified their environmental claims can gain commercial advantage from using green assertions. The GCD and associated greenwashing regulations are likely to lead to a rise in greenwashing litigation globally.
The GCD targets explicit environmental claims made by companies about their products or themselves in business-to-consumer practices. It establishes conditions for how these claims must be verified and communicated, along with detailed requirements for the approval of environmental labels, third-party verification, and penalties for non-compliance.
On 12 March 2024, the European Parliament adopted its stance, outlining its views on the scope of covered claims, operational expectations, and the implementation timeline. The Directive will progress further following the European Parliament elections in early June. Should the European Parliament and the Council of the European Union reach an agreement, EU Member States will be required to transpose the directive into national law within 24 months, with enforcement to begin within 36 months.
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Scope of the Green Claims Directive
The Green Claims Directive applies to businesses operating within the European Union that make environmental claims about their products, services, or overall operations. This includes a wide range of sectors, such as:
- Manufacturing: Companies that produce goods and make claims regarding the environmental impact of their products, such as “eco-friendly,” “biodegradable,” or “sustainable.”
- Retail: Retailers who sell products that include environmental claims on labels or promotional materials.
- Financial Services: Financial institutions that offer green investment products or services labeled as environmentally friendly or sustainable.
- Hospitality and Tourism: Businesses in the hospitality sector making claims about the environmental impact of their services, such as “green hotels” or “eco-tourism.”
- Consumer Goods and Services: Any company that makes environmental claims about the packaging, use, or disposal of their products.
The directive covers both explicit and implicit green claims, including visual cues, such as eco-labels and certifications, as well as verbal or written statements. This comprehensive approach ensures that any form of communication that might influence consumer perception of the environmental impact is subject to regulation.
Timeline for Implementation
1. Proposal by the European Commission
The European Commission formally proposed the Green Claims Directive on March 22, 2023.
3. Approval by the EU Parliament
The European Parliament votes on the proposed directive, expected in late 2024 or 2025.
6. Transposition into National Law
EU Member States will have two years to transpose the directive into national law.
2. Public Consultation
The European Commission conducted a public consultation to gather input from stakeholders.
5. Adoption of the Directive
Once approved by Parliament and the Council, the directive will be adopted, likely in 2025.
Comply with the Green Claims Directive
| Step | Description | Action Items |
|---|---|---|
| 1. Understand the Directive’s Requirements | Familiarize yourself with the Green Claims Directive’s scope, objectives, and requirements. Review all explicit and implicit claims related to your business. |
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| 2. Conduct a Life Cycle Assessment (LCA) | A systematic analysis of the environmental impact of a product or service throughout its life cycle, from material extraction to disposal. |
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| 3. Ensure Claims are Specific and Transparent | Claims must be clear, precise, and backed by specific information related to the environmental benefits substantiated by the LCA. |
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| 4. Engage in Third-Party Verification | Independent verification is essential to demonstrate the validity of your environmental claims and compliance with the directive. |
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| 5. Develop and Implement Internal Policies and Procedures | Establish internal policies on environmental claims, assign responsibilities, and ensure training for employees involved in compliance. |
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| 6. Maintain Comprehensive Documentation | Proper documentation is critical to demonstrating compliance and will be essential during the verification process. |
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| 7. Stay Informed and Proactive | Monitor regulatory changes, engage with industry experts, and leverage tools to streamline compliance and stay ahead of new requirements. |
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Overview of the Green Claims Directive
The proposed Green Claims Directive (GCD) will enhance and implement the greenwashing ban recently approved by the European Parliament under the “Empowering Consumers for the Green Transition” Directive. This Directive aims to improve product information regarding durability and repairability, protect consumers from greenwashing and premature obsolescence, and promote repair services.
Under the GCD, businesses must substantiate any explicit environmental claims before making them public, ensuring that consumers receive transparent, reliable, and meaningful information. The Directive sets out detailed requirements for validating these claims, such as considering product lifecycle impacts, providing scientific evidence, and explaining any deviations from legal or industry standards.
Businesses must disclose this information alongside the product, often through a URL or QR code. The disclosed information is expected to include:
- Environmental aspects, impact, and performance referenced in the claim
- Relevant EU or international standards used for substantiation
- How improvements related to the claim were achieved
- Information on greenhouse gas (GHG) offsetting, if applicable
- Studies or calculations used to assess, measure, or monitor impacts
- Certificates of conformity
- Comparative data, in cases of comparative advertising
The rules emphasize the need for careful consideration of the environmental significance, balance, and accuracy of claims, to prevent businesses from publishing misleading or unbalanced environmental information.
Governance and Labels
The GCD also establishes mandatory governance criteria for environmental labels. These include transparency in the governance model, stakeholder inclusion, and ongoing processes for evaluating complaints, disputes, and handling noncompliance with labeling requirements.
Third-Party Verification
Environmental claims and labels will undergo third-party verification. EU Member States are required to set up procedures for verifying the validity and communication of these claims. Verifiers will issue certificates of conformity, confirming that claims comply with the regulation.
Although the verification process aims to ensure compliance, it does not provide immunity from civil liability or regulatory scrutiny. Public authorities will also perform regular checks and publish reports on companies’ compliance with the GCD.
Noncompliance Penalties
The GCD introduces a framework for handling appeals and complaints from individuals, organizations, and other stakeholders negatively affected by misleading environmental marketing.
For companies found noncompliant, potential penalties include:
- Fines: Fines must eliminate any financial gains from the violation, with a maximum fine of 4% of annual turnover, increasing for repeated offenses.
- Revenue Confiscation: Authorities may confiscate any revenue earned from products associated with false environmental claims.
- Temporary Exclusion from Public Procurement: Noncompliant companies may be barred from public procurement and funding opportunities for up to 12 months, including exclusion from tendering processes, grants, and concessions.
European Parliament Amendments
The European Parliament introduced several key amendments to strengthen consumer protection against misleading marketing:
- Noncompliant companies will have 30 days to take corrective actions, with the possibility of extension only in exceptional cases.
- Verifiers must evaluate claims and supporting evidence within 30 days, with simpler claims potentially qualifying for faster verification.
- Micro-enterprises remain exempt from the proposed rules, while small and medium-sized enterprises (SMEs) may receive an additional year to achieve compliance.
- The use of carbon offsetting as the basis for green claims remains restricted, although green claims for products containing hazardous substances are still permissible.
Scope:
Focuses on both product-level and company-level claims related to environmental performance.
Harmonization:
Ensures uniform criteria across the EU for evaluating environmental claims.
Sanctions:
Introduces penalties for non-compliance to deter false claims.
Transparency:
Requires companies to substantiate their green claims with scientific evidence.
Consumer Protection:
Aims to protect consumers from misleading or vague claims like "eco-friendly" without proof.
Why should you work with T3 Consultants?
Proven Track Record
- T3 Consultants has a proven track record in regulatory compliance and risk management. Our expertise in the financial services sector translates into robust, reliable, and efficient compliance solutions for the Green Claims Directive.
Multidisciplinary Team of Experts
- Our team comprises regulatory experts, legal advisors, environmental scientists, and marketing strategists, ensuring a comprehensive approach to your compliance needs. This multidisciplinary expertise allows us to provide holistic solutions that cover every aspect of the Green Claims Directive.
Customized Approach
- We understand that each business is unique. Our customized approach ensures that our solutions are tailored to your specific business model, industry, and target audience, providing the best possible outcomes.
Commitment to Sustainability
- At T3 Consultants, we are committed to promoting sustainable practices. Our services not only ensure compliance but also help you position your brand as a leader in sustainability.
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