EU Green Claims Directive: What Businesses Need To Know

In the current landscape, a staggering 75% of products on the EU market carry an implicit or explicit green claim. However, the European Commission estimates that more than half of these claims fall prey to vagueness, deception, or lack of substantiation, and 40% have no supporting evidence.

Enter the forthcoming EU Green Claims Directive, a milestone piece of legislation poised to stem the flow of greenwashing with universal verification and substantiation standards, and significant penalties for non-compliance.

What are the guidelines?

Defining 'Green Claims'

The Directive casts a wide net in its definition of green claims, including in its scope both ‘environmental claims’ and ‘social characteristics’, indicating its aim to crack down on ‘bluewashing’ as well as greenwashing. 

An ‘environmental claim’ is defined as any communication, be it textual, pictorial, or symbolic, within commercial contexts, that implies a positive environmental impact, absence of impact, comparative environmental friendliness, or progressive improvement. 

The definition of ‘social characteristics’ extends to working conditions (e.g. “no forced labour”, “fair wages”), respect for human rights (e.g., “no child labour”), equal treatment and opportunities (e.g., “woman-owned”, Pride-related claims, DEI commitments), contributions and donations to social initiatives and other ethical commitments. 

Requirements for 'Green Claims'

The EU Green Claims Directive stipulates a number of criteria for claims to pass muster:

• Claims must be based on recognised scientific evidence and current technical knowledge
• Claims must demonstrate whether the claim is accurate for the whole product or only for parts of it. When the latter, claims should clearly specify the aspect of the product or the company's operations that the environmental claim refers to
• Claims must consider the product's entire life cycle, demonstrating that the environmental benefits are significant not just in isolation but across the product’s entire lifespan
• Claims must take into account all significant aspects and impacts to assess the performance. 
• Claims must not be merely equivalent to requirements imposed by law
• Claims must provide information on whether the product performs environmentally significantly better than what is common practice
• Claims must identify whether a positive achievement leads to significant worsening of another impact
• [Carbon offsetting] claims must stipulate whether the offsetting relates to the reduction or elimination of carbon emissions and how this offsetting is achieved

Making information accessible to consumers

The legislation also notes that consumers must be able to easily access information behind the claim in question. This data should be accessible physically or through a weblink, QR code, or similar method, providing detailed substantiation of the claim.

Which businesses are implicated?

• The Green Claims Directive applies to any business operating in the EU
• Exclusions apply for microenterprises (businesses with fewer than 10 employees and an annual turnover below €2 million)

Penalties and Enforcement

How will the Directive be enforced?

The Green Claims Directive will be enforced at both an EU-level and national (Member State) level. Member States are required to implement the directive into their own national laws and to put the necessary enforcement infrastructure in place. Independent, accredited verifiers will be responsible for checking the compliance of green claims against the directive's standards, which may include routine monitoring and audits.

What are the penalties for non-compliance?

Non-compliance may result in:

• Fines up to 4% of annual turnover in affected Member States
• Revenue seizure from related transactions, ensuring that businesses do not profit from misleading consumers
• Exclusion from public procurement and funding for up to 12 months
• The confiscation of non-compliant goods
• Public naming and shaming

Fines for non-compliance are intended to be proportionate to the severity of the offence and the size of the company. This approach ensures that penalties are fair and significant enough to discourage misleading practices.

How will the complaint process work?

1. Individuals or organisations recognized by the European Union can file complaints if they believe a business is not complying with the Directive. These organisations may include non-governmental groups focusing on health, environment, or consumer protection.

2. Authorities will review submitted complaints, conducting inspections and hearings if needed to verify them.

3. Authorities will promptly inform the complainant of their decision and reasons, following relevant national laws.

4. Complainants have the right to seek review by a court or impartial public body to challenge the authority's decisions. These review processes must be fair, timely, and accessible, offering effective remedies if needed.

5. Member States must ensure the public has access to information about the administrative and judicial review processes.

Implementation timeline

The Green Claims Directive was presented by the European Commission in March 2023, and passed a key hurdle when MEPs voted overwhelmingly in favour of passing the directive.

Once the directive is approved by both the Parliament and the Council, it will be formally adopted and published in the Official Journal of the European Union. This marks the directive's entry into force at the EU level. Member States will then have a designated period - typically 18 months - to transpose the directive into their national laws.

It’s therefore likely that the Directive will be enshrined in law by Member States in early 2026.

However, businesses should account for a possible acceleration of this timeline. Considering the urgency of addressing greenwashing and the need for clear regulations, the legislative process could potentially be expedited.

What should businesses be doing now?

With product launch cycles being protracted affairs, initiating compliance measures promptly is imperative.

1. Take stock of your claims today

A good place to start is to conduct a thorough review of all your current environmental claims, both brand- and product-level. For eligible multi-brand retailers, Provenance is now offering an AI-powered greenwash assessment tool that analyses the risk of non-compliance in retailers’ online marketing claims – get in touch to find out more‍

2. Establish a process for substantiating and verifying claims

Set up a process for substantiating all sustainability claims, and securing third-party verification wherever possible. This involves identifying and partnering with accredited verifiers who can certify the compliance of the claims‍

3. Invest in sustainability

For many businesses, the two steps above may reveal some hard truths about where you are on your sustainability journey. If so, that’s OK – but it’s likely time to invest more resources into sustainable practices to meet the directive's standards and keep pace with the market

The opportunities

For brands and retailers, the EU’s Green Claims Directive isn't purely a regulatory hurdle. The legislation promises a much-needed levelling of the playing field – one that will deliver deserved rewards for companies making progress on sustainability, and assure consumers that green claims aren't just lip service.

At a time when sustainability-marketed products are growing 2.7x faster than the rest of the market, businesses that embrace the legislation stand to greatly strengthen their market position, as well as mitigating legal risks and streamlining their sustainability claims management processes.

‍Provenance is already helping brands and retailers deliver against the Directive’s requirements by automating, validating and amplifying sustainability claims. To learn more, click here.