Members of the ENVI Committee in the European Parliament have rejected a crucial amendment on carbon offsetting in the draft Empowering Consumers in the Green Transition directive. The amendment would have clarified the law by introducing a ban on carbon offsetting claims, said environmental law charity ClientEarth.\r\n\r\nThe EC proposed the directive last March. It is designed to provide better information on the durability and reparability of products to consumers. It also aims to bolster consumer protection against unfair commercial practices that prevent sustainable purchases, in areas such as:\r\n\r\n \tGreenwashing practices (misleading environmental claims).\r\n \tEarly obsolescence practices (i.e. premature failures of goods).\r\n \tThe use of unreliable and non-transparent sustainability labels and information tools.\r\n\r\nWhen announcing the directive, commissioner for justice Didier Reynders said: \u201cWhile most consumers are willing to contribute, we have also seen an increase in \u2018greenwashing\u2019 and early obsolescence practices. To become the real actors of the green transition, consumers must have a right to information to make sustainable choices. They must also be protected against unfair commercial practices that abuse their interest in buying green.\u201d\r\n\r\nBut ClientEarth believes the directive is being watered down as it grinds through the European legislative process.\r\n\r\nJohnny White, lawyer at ClientEarth, said: \u201cWhile it\u2019s great to see an anti-greenwashing directive taking shape at EU level, it\u2019s missing the mark so far. The current draft excludes a ban on the marketing fiction that is carbon offsetting. Greenhouse gas emissions can\u2019t be neutralised with carbon credits alone. Carbon credits are donations towards climate-friendly projects \u2013 pretending they can \u2018offset\u2019 the climate impacts of the high-carbon items and services that companies sell us is confusing and misleading to consumers and small businesses alike.\u201d\r\n\r\n\u201cThis marketing fiction can make the highest-carbon products seem \u2018green\u2019. It\u2019s an existential threat to the green transition and it must not be given regulatory credibility in the anti-greenwashing directive,\u201d he added.\r\n\r\nRegardless of the directive, leading European multinationals such as Shell, Total and KLM are facing legal action for allegedly greenwashing their CO2 claims. Even if the directive is watered down, risk managers and their legal colleagues need to take a close look at exposures.\r\n\r\nLast September, ClientEarth published a paper entitled Carbon offsets: an emerging legal risk that underlined the legal and reputational risks faced by multinationals that choose to massage the truth about their green credentials.\r\n\r\n\u201cThe fiction of carbon offsetting is attracting increasing legal risk \u2013 risk of non-compliance, shareholder action, litigation and regulatory enforcement. In the Netherlands, Shell has found itself reprimanded twice in succession, first for advertising \u2018CO2- neutral\u2019 car petrol, then for trying a different claim that carbon credits mean \u2018CO2 compensation\u2019,\u201d explained ClientEarth.\r\n\r\n\u201cOn both occasions, the company was unable to persuade the Dutch advertising watchdog that the offsets advertising was substantiated by the evidence. The airline KLM is facing a court action, supported by ClientEarth, for breaching consumer law with its CO2 compensation marketing. In Germany a claim is being brought against a list of eight companies, including TotalEnergies, for misleading \u2018carbon neutral\u2019 claims. Legal academics say that using offsets in marketing claims breaches European consumer law standards,\u201d continued the charity.\r\n\r\nClientEarth\u2019s report focuses on the legal and insurance implications facing companies from the campaign against greenwashing.\r\n\r\n\u201cGiven the legal and reputational risks associated with the reliance on offsets in corporate transition plans, and advertising based on claims of \u2018CO2 compensation\u2019 or \u2018carbon neutrality\u2019, company directors will need to consider if such strategies are compatible with their duties to act in the best interests of the companies they serve,\u201d it states.\r\n\r\n\u201cRisk of liability means companies will be considering the viability of insurance coverage for losses and for legal costs. Directors\u2019 and officers\u2019 liability insurers consider climate to be a \u201cnew and major issue\u201d, with underwriters keeping a close watch on legal action for climate-related misstatements,\u201d continues ClientEarth.\r\n\r\n\u201cInsurers are even checking themselves whether directors\u2019 corporate net zero strategies have been independently reviewed, because inadequate strategies are expected to drive liability risk. At the same time, insurers may exclude coverage for climate claims, inflating climate litigation risk because costs must be borne by the company itself, or its directors,\u201d adds the charity.