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Introduction
A landmark rule aimed at reducing firms’ deceptive sustainability claims was recently approved by the European Parliament, marking a big step towards promoting openness and environmental accountability. The law tackles the issue of “greenwashing,” which is the practice of companies inflating or misrepresenting their dedication to social and environmental responsibility. In order to empower consumers to make knowledgeable decisions and believe the sustainability promises made on items they buy, the European Union (EU) is taking a daring move.
The European Council declared that it has passed a directive that forbids the use of generic environmental terms like “environmentally friendly” or “biodegradable,” as well as claims based on emissions offsetting plans, in order to protect consumers against deceptive green claims and other greenwashing tactics.
With the legislative act’s recent acceptance in Parliament, this announcement is the final significant step towards its passage.
A new anti-greenwashing law was adopted by the European Parliament on Wednesday by a vote of 593-21. The law forbids a number of commercial practices, such as the use of generic, unproven product claims like “climate neutral” or “environmentally friendly” or the promotion of a product’s lower environmental impact through the use of emissions offsetting schemes.
The agreement comes after the EU Commission released a set of proposals in March 2022 to modify the EU’s current regulations protecting consumers from unfair commercial practices like deceptive or aggressive advertising and giving them information about products, including those related to the green transition. According to a recent Commission research, forty percent of green claims made by EU corporations were found to be wholly unfounded, and more than half of the claims were ambiguous or misleading.
Before becoming a law, the new legislation needs to be approved by the EU Council, which struck a provisional agreement with Parliament on the measures in September. Member states will have two years to incorporate the regulations into their national laws when they are published in the EU Official Journal.
The EU Commission has also proposed a “Directive on Green Claims,” which aims to create additional regulations forcing businesses to prove and verify their environmental claims and labels, in addition to the new law, in order to protect consumers from greenwashing.
Key Provisions of the New Legislation
The new legislation adopted by the EU Parliament is designed to counteract greenwashing effectively. It introduces clear guidelines and standards that companies must adhere to when making sustainability claims about their products.
- 1. Standardized Definitions and Criteria: The legislation mandates the use of standardized definitions and criteria for sustainability claims, ensuring that terms such as “eco-friendly,” “green,” or “sustainable” are accurately defined and uniformly applied across industries.
- 2. Verification and Certification Requirements: Companies making sustainability claims will be required to provide verifiable evidence to support their assertions. Independent third-party certifications and audits may be necessary to ensure the accuracy of the information provided.
- 3. Penalties for Violations: The law establishes penalties for companies found guilty of greenwashing. Fines and other sanctions will be imposed on businesses that fail to comply with the new regulations, sending a strong message that deceptive practices will not be tolerated.
- 4. Increased Transparency: The legislation promotes transparency by requiring companies to disclose their environmental practices and policies. This information will be easily accessible to consumers, empowering them to make informed choices based on accurate and reliable data.
- 5. Consumer Education Initiatives: The EU will also invest in educational campaigns to raise awareness among consumers about the potential pitfalls of greenwashing. By providing consumers with the knowledge to identify deceptive claims, the legislation aims to create a more informed and discerning market.
The adoption of the new act follows the release of a set of proposals by the European Commission in March 2022 to update rules protecting consumers from unfair commercial practices such as untruthful or aggressive advertising, including the unfair commercial practices directive (UCPD) and the consumer rights directive (CRD), to include green transition and circular economy-related aspects. A recent study by the Commission found that more than half of green claims by companies in the EU were vague or misleading, and 40% were completely unsubstantiated.
Key aspects of the new directive include rules aimed at making product labels clearer by banning the use of generic environmental claims not backed up with proof, and the regulation of sustainability labels to allow only the use of those based on official certification schemes or established by public authorities.
The directive also includes rules focused on product durability, requiring guarantee information on products to be more visible, and mandating the creation of a harmonized label to give more prominence to goods with an extended guarantee period, as well as banning unfounded durability claims, prompts to replace consumables earlier than strictly necessary, or presenting goods as repairable when they are not.
While maintaining the main objectives of the Commission’s initial proposal, the final text of the directive agreed upon by the EU Parliament and Council added several aspects, including banning claims based on carbon offsetting schemes that indicate that a product has a neutral, reduced or positive impact on the environment, strengthening the criteria around sustainability labels, and increasing monitoring of claims related to products’ future environmental performance.
With adoption complete, the directive will now be signed by the presidents of the Parliament and the Council. Once published in the EU’s Official Journal, member states will have 2 years to integrate the rules into national law.
Impact on Consumers and Businesses
The approval of this legislation marks a pivotal moment in the fight against greenwashing. While some businesses may face challenges in adjusting their marketing practices to comply with the new regulations, the overall impact is expected to be positive for both businesses and consumers.
For businesses genuinely committed to sustainability, the new law provides a level playing field. It ensures that companies adhering to environmentally responsible practices are not overshadowed by those making false claims. This will likely lead to increased consumer trust in companies that genuinely prioritize sustainability.
Consumers, on the other hand, stand to benefit from the increased transparency and accuracy of sustainability claims. With standardized definitions and verifiable evidence, they can make more informed choices aligned with their values, contributing to a more sustainable marketplace.
Conclusion
An important step forward in the global fight against greenwashing has been taken with the passage of the law by the EU Parliament that outlaws false statements about the sustainability of products. The EU is acting proactively to safeguard consumers and advance true sustainability practices by creating clear regulations, enforcing penalties, and encouraging openness. This legislative action encourages a more accountable and open approach to environmental stewardship in the corporate sector by setting an example for other regions to follow.