EC to crack down on greenwashing via Green Claims Directive

The EC is expected to table its Green Claims Directive (GCD), a long-awaited law that will regulate how companies substantiate and communicate their green claims, on 22 March, according to the European Environmental Bureau (EEB) group that represents 180 citizen organisations in 38 countries. The EEB said that this law could bring some order to the “wild west market environment” of green advertising and help protect EU consumers from misleading claims. “For the first time, legislation will oblige companies to make supporting evidence available alongside a green claim,” said the EEB. Leading law firm Hogan Lovells warned in a recent note that the rules would inevitably lead to collective actions against firms that break the new greenwashing rules under the EU’s Collective Redress Directive. The Brussels-based EEB said that a leaked legislative proposal in January indicated that legal obligations would apply to all claims and labels displayed on products, by services or by companies at both physical and online points of sale across the EU single market. It hopes that such a broad scope will be retained in the final proposal, as well as the strong focus on market surveillance. The EEB added that the leaked proposal “rightly” addressed the limitations of the Product Environmental Footprint (PEF) method, designed by the EC’s Joint Research Centre to provide a complete picture of product sustainability but that, in its view, failed to set clear common rules for companies across the EU. The EEB believes the Green Claims Directive matters because over half of EU consumers shop with sustainability in mind and so green marketing has been proliferating. It said that 75% of products on the market in 2014 carried an implicit or explicit environmental claim. However, a recent study by the EC found that more than half of green claims are vague, misleading or unfounded. In addition, almost half of the 230 ecolabels available in the EU have very weak or no verification procedures, claims the EEB. “The Green Claims Directive is a key piece in the puzzle of the Sustainable Product Initiative presented by the commission one year ago. While the original aim was to oblige companies to substantiate their environmental claims using the PEF method, the commission has now expanded its scope to regulate all types of green claims, including those not covered by the PEF,” explained the group. The EEB said that the new law should work hand in hand with the Directive on Empowering the Consumers for the Green Transition (ECGT) that is currently under scrutiny by the European Parliament. The ECGT Directive will rule what companies cannot do while the GCD will establish how they can operate, explained the EEB. Blanca Morales, senior coordinator for EU ecolabel at the EEB, said: “The proliferation of greenwashing is hampering the green transition: it hinders consumers’ ability to make informed sustainable choices and makes it harder for the companies that strive to reduce their environmental impacts to differentiate themselves from free riders. We need clear EU rules to wipe out greenwashing claims, and we need companies to provide the evidence behind their credentials: no data, no claim.” The GCD offers another route to sue companies that break the rules, notably using the coming Collective Redress Directive. Hogan Lovells explained that the GCD proposal contains its own enforcement rules, which are independent of those in the Unfair Commercial Practices Directive. The Hogan Lovells team explained that enforcement shall be based on monitoring by competent authorities and will also allow third parties to file complaints about green claims. “Once the authorities determine that a green claim does not comply with the Green Claims Directive Proposal, they will notify the company of their findings. Companies shall then be required to provide a response within the short period of ten business days, otherwise the authorities may take proportionate corrective actions to stop the non-compliance. The corrective actions will have to be implemented within 30 business days by the respective company; further non-compliance will be sanctioned with penalties,” explained the law firm. “The Green Claims Directive proposal – similar to the UCP Directive – provides for third parties who have sufficient interest or whose rights are infringed to call a local court, unless national law requires the exhaustion of administrative procedures before judicial proceedings are initiated. Either way, such complaints may lead to injunctive actions, including the immediate stop of the communication of non-compliant Green Claims. If the enforcement rules remain as they are planned now, companies will need reliable and fast-working legal representatives to defend against unfounded complaints,” continued Hogan Lovells.

EC to crack down on greenwashing via Green Claims Directive

Firms must prepare for legal action under Collective Redress Directive

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