We all say that “honesty is the best policy”. In a world increasingly driven by environmental consciousness and sustainable choices, it is critical for consumers and investors to make well-informed decisions. Yet beneath the surface of environmental marketing in some cases lies a deceptive practice known as greenwashing.
While greenwashing may seem harmless on the surface, it can have serious reputational consequences for businesses. On the other hand, it is a significant barrier to tackling climate change. By misleading the public into believing that a company is doing more to protect the environment than it is, greenwashing calls into question real climate action and leads to a less sustainable economy. As the prioritisation of environmental, social and governance (ESG) standards continues to influence investment opportunities, greenwashing is becoming an issue globally.
Consumers are faced with a plethora of environmental claims about sustainable business that are not always transparent and credible – “eco”, “natural”, “green”, “sustainable”, “carbon neutral”, etc. The world is becoming more environmentally friendly and many companies are trying to promote themselves as ‘green’ by making false, unsubstantiated or downright misleading statements or claims about the sustainability of a product or service, or even about business operations more generally. Although businesses take steps to reduce their environmental impact, not all such claims are legitimate. A European Commission (EC) study conducted in 2020 found that 53% of verified environmental claims in the European Union (EU) were vague, misleading or unsubstantiated and 40% were unsubstantiated due to a lack of specific rules.
In response to growing concerns about environmental “washing”, the EC has presented a proposal for a directive on environmental claims. The regulation establishes clear guidelines for companies to follow when making environmental claims, including substantiation requirements, prohibitions on misleading statements and the use of standardised environmental labels. Under the proposed environmental claims directive, companies must have all covered environmental claims independently verified and supported by scientific evidence before communicating them. The verification process would be overseen and certified by third-party, independent bodies (“verifiers”). The Directive will apply to all products and services marketed in the EU, regardless of the company’s origin, and non-compliance may result in fines, penalties and product recalls.
What will be banned?
Generic environmental claims, unless companies can provide evidence of recognised environmental excellence linked to the claim, which may include compliance with official EU regulations or recognised eco-labelling schemes:
‘carbon neutral’, ‘climate neutral’, ‘environmentally friendly’, ‘eco-friendly’, ‘green’, ‘natural’, ‘biodegradable’, ‘carbon positive’, ‘energy efficient’, ‘bio-based’, ‘nature friendly’, ‘environmentally friendly’, ‘environmentally sound’, ‘environmentally friendly’.
The regulation also stresses that companies cannot make environmental claims for an entire product when it actually only relates to a specific aspect.
The directive is complemented by measures relating to product durability and warranties. Companies will have to declare the life expectancy of products, and the ban will also apply to the introduction of features that are designed to limit the durability of the product. Companies will also be required to be more transparent about the repairability and warranty of products, as well as software updates. This means that it will not be permitted to advertise products as repairable if they are not or to claim that software updates are necessary if they only improve functionality.
Requirements for substantiation and communication of environmental claims
The Directive requires all claims to be explicit and based on an assessment that meets selected minimum criteria to prevent claims from being misleading.
This assessment covers the obligation to rely on recognised scientific evidence and the latest technical knowledge, the obligation to prove whether the claim is accurate for the whole product or only for parts of it, for the whole life cycle or only for certain stages, for all of the trader’s activities or only for part of them, or the obligation to prove that the claim is not equivalent to the requirements imposed by the law. Sustainable claims for positive environmental impacts must also disclose whether they cause negative impacts in another area.
Positive aspects of third party verification
Third-party conformity assessment refers to a type of certification performed by a person or organization independent of the seller or buyer that provides the highest level of assurance. They provide industries with independent verification that offers transparency and helps to increase the credibility of environmental claims by regulators, public interest groups and consumers.
Compliance assessments can play an important role in helping organizations avoid inadvertent “greenwashing” when communicating their support for the UN Sustainable Development Goals (SDGs). Compliance assessment systems are a framework of common rules and methodologies, developed from international standards, that provide the foundation that allows all countries to create a sustainable infrastructure to drive economic development and innovation and implement global best practices for quality and risk management.
What’s next? To be turned into law, the proposal will need to receive final approval from the European Parliament and the Council, which is expected in November. When the Directive is approved, EU Member States will have 24 months to implement the changes and incorporate the new rules into their laws.