New EU rules on greenwashing

Author: Špela Arsova

On 26 March 2024, the new Directive (EU) 2024/825 empowering consumers for the green transition[1] (“new Directive“) entered into force. Its aim is to ensure that consumers are able to make informed purchasing decisions and thus contribute to more sustainable consumption patterns.

As awareness of environmental concerns is growing among consumers and society in general, their decision to buy a particular product often depends on the impact that product has on the environment and society at large. Consequently, manufacturers and retailers use a wide range of marketing claims or representations which can refer to the sustainability of the product, service or businesses in general, and whether they are environmentally and socially friendly. For consumers to be able to make a real contribution to advancing the green transition through their purchases, such claims by product providers need to be clear, relevant and reliable. To this end, the new Directive amends the Unfair Commercial Practices Directive[2] and the Consumer Rights Directive[3] .

In addition to direct consumer protection, the new Directive also aims to reward those companies that are actually able to provide more sustainable products. The new Directive will allow these companies to gain a competitive advantage over companies offering less sustainable options.

Which companies are affected by the new Directive?

The provisions of the new Directive concern consumer relationships and repeatedly use the terms ‘producer’ and ‘trader’. However, the rules of the new Directive also apply to other businesses that might not intuitively be considered as addressees, such as providers of financial products. Similarly, the new rules also apply to business practices of providers of services and not just products. Finally, when implementing the new Directive, individual Member States may decide to apply the rules not only to consumers (B2C) but also to business-to-business (B2B) relations.

The new rules therefore cover a wide range of companies, which will have to ensure compliance of their practices. As an example, below are some of the claims that have already been addressed by the competent authorities[4]:

• • Labelling clothing items as “made from organic cotton” when the garment contains only part organic cotton.
  • Labelling a product as ‘compostable’ without further explanation as to whether all or part of the product is compostable.
  • Labelling a product as “eco-friendly” on the packaging can be misleading if it does not explain what the claim refers to – the contents or the packaging.
  • CO2 claims should take into account the whole supply chain and not, for example, just production without transport.
  • A dishwasher with a claim of “30% less energy consumption”, which is only true if the energy-saving washing programme is used.
  • Labelling coffee as “sustainable” is not precise enough as it does not tell the consumer what the sustainability claim refers to – sustainability in coffee production methods, fair pay for workers or better working conditions for workers.

Amendments to the Unfair Commercial Practices Directive

The amendments to the Unfair Commercial Practices Directive address unfair commercial practices that mislead consumers and prevent them from making sustainable choices. This includes practices related to early obsolescence of goods, misleading environmental claims (i.e., greenwashing), misleading information about the social characteristics of products or traders’ operations, or non-transparent and non-credible  sustainability labels.

More specifically, the new Directive broadens the definition of commercial practices that can in individual cases be considered misleading under the Unfair Commercial Practices Directive, so that it now also includes:

• • the potential to mislead consumers about the environmental or social characteristics, circularity aspects such as durability, reparability or recyclability of a particular product;
  • claims relating to future environmental performance if they are made without clear, objective, publicly available and verifiable commitments and targets. Commitments and targets should be set out in a detailed and realistic implementation plan that specifies how they will be implemented and include the necessary technical and financial support for such plans. The plan must be regularly verified by an independent third-party expert; and
  • advertising benefits that are irrelevant and not directly related to any feature of a particular product or business and which could mislead consumers into believing that they are more beneficial to consumers, the environment or society than other products or traders’ businesses of the same type.

The new Directive also adds transparency requirements to the Unfair Commercial Practices Directive in respect of presentation of product comparisons on environmental and social characteristics or circularity aspects such as durability, reparability or recyclability.

Finally, the New Directive adds 12 new unfair commercial practices to Annex I to the Unfair Commercial Practices Directive, which are considered unfair in all circumstances:

1. 1. Displaying a sustainability label that is not based on a certification scheme or set by public authorities.
   2. Generic environmental claims for which the trader is not able to demonstrate recognised excellent environmental performance relevant to the claim.
   3. Environmental claims about the entire product or the trader’s entire business when itconcerns only a certain aspect of the product or a specific activity of the trader’s business.
   4. A claim, based on a greenhouse gas emissions offset, that a product has a neutral, reduced or positive impact on the environment in terms of greenhouse gas emissions emissions.[5]
   5. Presenting requirements imposed by law on all products within the relevant product category on the EU market as a distinctive feature of the trader’s offer.[6]
   6. Withholding information from the consumer about the fact that a software update will negatively impact the functioning of goods with digital elements or the use of digital content or digital services.
   7. Presenting a software update as necessary when it only enhances functionality features.
   8. Commercial communication relating to a good containing a feature introduced to limit its durability despite information on the feature and its effects on the durability of the good is available to the trader.
   9. False claims that under normal conditions of use a good has a certain durability in terms of usage time or intensity.
   10. Presenting a good as allowing repair when it does not.
   11. Inducing a consumer to replace or replenish the consumables of a good earlier than necessary for technical reasons.
   12. Withholding information concerning the impairment of the functionality of a good when consumables, spare parts or accessories not supplied by the original producer are used, or falsely claiming that such impairment will happen.

Amendments to the Consumer Rights Directive

The new Directive introduces a commercial guarantee of durability in the Consumer Rights Directive, which regulates the producer’s commercial guarantee that the goods will remain durable under normal use for the duration of the guarantee. If producers apply such guarantee, the traders must explicitly draw consumers’ attention to such guarantee and point out that it is offered by the producer in addition to the legal guarantee of conformity. Producers and traders will be required to use a harmonised label to indicate a commercial guarantee of durability. To avoid confusion among consumers in distinguishing between the legal guarantee and the commercial durability guarantee, the new Directive provides for a harmonised notice to inform consumers about the legal guarantee. The design and content of the harmonised label and notice will be determined by the European Commission.

In addition to harmonised label and notice, the new Directive also provides for:

• • An indication of the time period during which software updates will be available for a specific product.
  • Providing information on the existence and conditions of after-sales services, including repair services where such services are provided. The information must be provided to the consumer prior to making the purchase.
  • Informing consumers about the possibilities of environmentally friendly delivery options of purchased goods.

Green Claims Directive

The new Directive is closely linked to the Proposal for a Directive on the substantiation and communication of explicit environmental claims (Green Claims Directive), which is still pending. The Green Claims Directive is expected to contain further specific rules on green claims and will complement the rules of the new Directive.

What businesses can do today to get ready for the new Directive?

The new Directive entered into force on 26 March 2024. Member States must transpose its requirements into national law by 27 March 2026 at the latest and apply them by no later than 27 September 2026. As the new rules will have far-reaching implications for the way businesses operate, it is advisable for businesses to familiarise themselves with the requirements of the new Directive during the implementation period and, if necessary, adapt their business practices accordingly. When checking compliance the companies should focus in particular on environmental claims, sustainability labels, practices related to the early obsolescence of goods, and information provided to consumers before they conclude a transaction or make a purchase. The new Directive leaves Member States with a certain amount of freedom in implementing the new rules, therefor we advise companies to closely monitor the implementation process in all EU countries where they operate.

[1] Directive (EU) 2024/825 of the European Parliament and of the Council of 28 February 2024 amending Directives 2005/29/EC and 2011/83/EU as regards consumer empowerment for a green transition through better protection against unfair practices and better information, available here.

[2] Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (Unfair Commercial Practices Directive).

[3] Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council.

[4] Guidelines Sustainability claims of the Dutch consumer and market authority (Autoriteit Consument & Markt), available here, and CMA guidance on environmental claims on goods and services of the UK Competition & Market Authority, available here.

[5] However, this prohibition does not prevent companies from advertising their investments in environmental initiatives, including carbon credit projects, as long as they provide this information in an appropriate manner.

[6] However, this ban does not prevent advertising of EU products that are subject to stricter standards than non-EU products.