EU Greenwashing Directives II
Keith Mullin
35 years: Capital markets editorial
Discover how the Green Claims Directive is tackling greenwashing, ensuring environmental claims are trustworthy, science-based, and verified.
Discover how the Green Claims Directive is tackling greenwashing, ensuring environmental claims are trustworthy, science-based, and verified.
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EU Greenwashing Directives II
16 mins 21 secs
Key learning objectives:
Understand how the Green Claims Directive combats greenwashing
Outline the minimum criteria for environmental claims
Understand the impact of the Directive on environmental labelling
Overview:
The Green Claims Directive aims to tackle greenwashing by setting clear, legally binding requirements for environmental claims made by traders. This is necessary because many consumers do not trust environmental claims made by companies. Studies have shown that a large proportion of these claims are vague, misleading, or unsubstantiated. Before making an environmental claim, traders must meet strict transparency and credibility requirements.
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Summary
How does the Green Claims Directive combat greenwashing?
The Green Claims Directive aims to tackle greenwashing by setting clear, legally binding requirements for environmental claims made by traders. It ensures that any explicit environmental claims, whether in text or labels, are based on scientific evidence, are verified by third parties, and are not misleading. This is necessary because many consumers do not trust environmental claims made by companies. Studies have shown that a large proportion of these claims are vague, misleading, or unsubstantiated. By enforcing transparency and credibility, the Directive will protect consumers from deceptive marketing and help accelerate the green transition.
What are the minimum criteria for environmental claims?
Before making an environmental claim, traders must meet strict transparency and credibility requirements. Claims must be:
- Science-based and supported by up-to-date technical knowledge
- Comprehensive, considering all significant environmental impacts and the product’s life-cycle
- Clear about scope, specifying whether the claim applies to the whole product or just part of it
- Distinct from legal requirements, ensuring claims do not merely reflect what is already mandated by law
- Genuinely superior, demonstrating a significant environmental benefit beyond common practice
- Transparent about trade-offs, revealing if a positive impact in one area causes harm elsewhere
- Honest about offsets, clearly stating if greenhouse gas offsets are used and how they are applied
How does the Green Claims Directive impact environmental labelling?
Environmental labelling is a major focus of the Directive, as the current system is highly fragmented. The Commission found over 230 different ecolabels operating in the EU, many with weak verification processes or no verification at all. This lack of consistency has made it difficult for consumers to trust environmental labels. The new rules will:
- Ban self-certified labels that lack third-party verification
- Only allow labels under EU law to rate or score EU products or traders
- Prohibit new national or regional public schemes, preventing further fragmentation
- Introduce a validation process for private labelling schemes, requiring them to demonstrate added environmental value
What are the requirements for traders making environmental claims?
Traders must conduct thorough assessments to substantiate any environmental claims. These assessments must:
- Clearly state whether the claim applies to the whole product, a part of it, or specific aspects
- Use accurate information and scientific evidence, aligned with relevant international standards
- Prove that the claim reflects a genuine environmental benefit, not just legal compliance
- Assess whether the product performs significantly better than common industry practices
- Identify any negative environmental trade-offs, ensuring transparency in reporting
- Disclose any greenhouse gas offsets and how they are applied
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Keith Mullin
Keith is the founder and director of KM Capital Markets, a media and thought-leadership consultancy. He spent the past 35 years working in specialist capital markets media and has had a ring-side seat at all of the major market events. Prior to setting up KM Capital Markets in 2017, Keith worked at Thomson Reuters.
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