On January 17, 2024, the European Parliament formally endorsed its provisional agreement with the Council on the Directive Empowering Consumers for the Green Transition through Better Protection against Unfair Practices and Better Information (“Greenwashing Directive”).  The Council is now expected to endorse the provisional agreement after which the Directive will be published in the EU Official Journal and enter into force.

The Greenwashing Directive aims to contribute to the EU’s green transition by empowering consumers to make informed purchases using reliable sustainability information about products and traders.  To do so, the Directive amends Directive 2005/29 on Unfair Business-to-Consumer Practices (“Unfair Commercial Practices Directive”) by introducing specific rules on sustainability and environmental claims.  The Greenwashing Directive is intended to work in tandem with the proposed Directive on substantiation and communication of explicit environmental claims (the “Proposed Green Claims Directive”), which we reported on here. 

Companies should keep a close eye on the transposition of this Directive, as it will have a significant impact on how they communicate about their sustainability, environmental, and social or ethical efforts.  Covington can help companies with navigating these regulatory requirements while meeting their business objectives.

What is new?

The Greenwashing Directive intends to create a harmonized set of rules on sustainability claims applicable to all companies operating in the EU/EEA by amending certain key provisions of the Unfair Commercial Practices Directive.  

1. Scope

The Greenwashing Directive covers all sustainability claims that relate to a product, a brand, a company, or a service made in a business-to-consumer (“B2C”) context.  Under the Directive, sustainability claims cover both environmental or  “green” claims and so-called “social characteristic” claims.  Thus, in addition to “greenwashing,” “bluewashing” issues also fall within the scope of the Greenwashing Directive.

The Greenwashing Directive introduces a definition of “environmental claim” that is very broad.  In particular, it states that it covers:

• any message or representation which is not mandatory under Union law or national law, including text, pictorial, graphic or symbolic representation, in any form, including labels, brand names, company names or product names, in the context of a commercial communication; if it…
• states or implies that a product, product category, brand or trader has:
  • a positive impact on the environment;
  • no impact on the environment;
  • is less damaging to the environment than other products, brands or traders, respectively; or
  • has improved its impact over time.

This broad definition of environmental claim may cover claims related to climate change, energy efficiency, circularity, pollution or biodiversity, among others.  It remains to be seen whether related claims, such as “natural” or “clean” are considered as environmental claims. 

Recital 3 provides guidance on how to define claims on “social characteristics” as it states that these should be considered to have “a broad meaning including […] social aspects, impacts and performance.”  The recital explains that the social characteristics of a product, company or service can among others relate to:

1. the quality and fairness of working conditions of the involved workforce (e.g., “no forced labor”, “fair wages”);
2. the respect for human rights (e.g., “no child labor”, “ethically sourced”);
3. equal treatment and opportunities for all (e.g., “woman-owned”, Pride-related claims, DEI commitments);
4. contributions to social initiatives (e.g., donation campaigns); or
5. ethical commitments (e.g., animal welfare).  

The reference to animal welfare as a “social characteristic” claim is interesting, as this type of claims are already regulated for the cosmetics sector – but not other sectors such as the fashion industry or the food sector.  It is likely that the claim “vegan” and similar claims will also be considered to be social characteristics claims.

• Misleading advertising

As to the requirements applicable to environmental and social characteristic claims, the Greenwashing Directive amends the provisions on misleading advertising of the UCPD to cover them.  In particular, under the Greenwashing Directive:

• A claim will be considered misleading if it:
•  Contains false information; or
• Contains correct information but it deceives or is likely to deceive the average consumer regarding, among others, the main characteristics of the product, such as its environmental or social characteristics; or
• Advertises irrelevant benefits that do not result from any feature of the product or business.
• A comparative claim will be considered misleading if it is not accompanied by the information about (i) the method of comparison; (ii) the products compared; and (iii) the suppliers of those products.  This may make it more difficult to make comparative environmental claims, which often are made without specifying the products compared (e.g., “more sustainable,” “better for the environment”). 
• An environmental claim related to future environmental performance of a company or product (so-called “future claims” or “forward-looking claims”) will be misleading if it does not include: (i) clear, objective, publicly available, and verifiable commitments set out in an implementation plan; and (ii) measurable and time-bound targets.  In addition, the objectives and implementation plan should be verified by an independent third party and made available to consumers (e.g., through QR Codes or links). 
• Prohibited practices

The Greenwashing Directive also includes a list of claims that are always “unfair,” and thus prohibited, whether misleading or not, namely:

• The display of “sustainability” labels that are not based on an independent, third-party certification scheme, or established by public authorities.  Sustainability labels include any voluntary public or private trust mark that sets apart a product, process or business in reference to environmental or social aspects, or both.  It may cover labels related to e.g., recyclability or re-use, but also labels related to e.g., forced labor, ethical sourcing and trading, or diversity and inclusion. 
• Environmental claims that relate to an entire product or business when it actually concerns only a specific aspect of the product or specific activity of the company’s business. 
• The use of so-called “generic” environmental claims (i.e., broad, unspecific claims that are not contained in a sustainability label) such as “green,” “environmentally-friendly,” unless these are based on recognized excellent environmental performance (e.g., under the EU Ecolabel Regulation, or under an officially recognized ISO 14024 ecolabeling scheme).  The use of generic claims that encompass environmental and social aspects, such as “sustainable,” “conscious,” or “responsible,” cannot be substantiated only on the basis of environmental aspects (i.e., to make these claimscompanies have to demonstrate that their product, service, or company has a recognized excellent environmental and social performance). 

In principle, this prohibition does not extend to social impact claims (e.g., “fair trade”, “ethically sourced”), but we cannot exclude that Member State authorities may consider generic social impact claims as misleading (e.g., due to lack of clarity). 

• A claim that a product has a neutral, reduced, or positive impact on the environment in terms of greenhouse gas emissions, when this is based on the purchase or cancellation of so-called carbon credits (e.g., carbon offsets from forestry-based removal projects).  Thus, many carbon neutrality claims that are currently made will soon be prohibited.  This reflects the enforcement reality at Member State level, where we have seen a dramatic uptick of successful NGO and consumer organization-led enforcement against this type of claims.
• Claims that merely reflect compliance with a legal requirement (e.g., a company cannot advertise its anti-deforestation, such as “deforestation-free,” “rainforest friendly”, as a positive environmental action unique to that company and its products unless the company goes beyond the requirements of the EU Deforestation Regulation).  Given the barrage of new legislation imposing environmental and social obligations on companies that the EU has recently adopted or plans to adopt, companies will need to carefully consider whether any of the claims they are making simply reflect compliance with the new rules (e.g., the recently-agreed Corporate Sustainability Due Diligence Directive will require companies under its scope to adopt a climate change mitigation plan, meaning companies required to do so won’t be able to advertise their efforts to achieve climate neutrality by 2050).  

What’s next?

Once the Greenwashing Directive is published in the Official Journal of the EU and enters into force, Member States will  have 24 months to transpose the Directive into their national legislation.  However, we expect that some Member States, such as France, Germany, and the Netherlands, will implement these rules earlier, as their regulators, NGOs and consumer organizations and courts have already started to enforce against greenwashing. 

Companies should keep a close eye on the transposition of this Directive, as it will have a significant impact on how they communicate about their sustainability, environmental, and social or ethical efforts.  Covington can help companies with navigating these regulatory requirements while meeting their business objectives.

Finally, Covington is also monitoring the legislative developments of the Proposed Green Claims Directive, the Greenwashing Directive’s sister legislation that focuses solely on environmental claims (see our blog on it here).  While the European Parliament and Council are currently in the process of considering the Proposed Green Claims Directive for adoption through the ordinary legislative procedure and its text is not yet final, the proposed text already gives a good sense of where the EU is heading.  And in the United States, Covington is assisting companies on compliance with the FTC Act and related environmental marketing claims guidance, as well as California’s Voluntary Carbon Market Disclosures Act (see our blog on it here), which applies to climate-related claims as well as the use of carbon offsets.