The European Commission strikes again and this time, it is going after greenwashing. The Green Claims directive is fresh off the printing press and causing a lot of fuss over media, so, what does this directive entail?

Let's start with the basics: the Green Claims directive is published by the EU, however, this is not a binding regulation until it is adopted at the national level by members of the Union as part of their legislation. In this case, they have 18 months to do so, and after 24 months false claims will be subject to penalties in the form of up to 4% of their annual revenues in the member state or member states concerned.

The objective of the initiative is to contribute to the acceleration of the transition towards a green, circular, clean and climate-neutral economy in the EU. It also aims at protecting consumers from greenwashing and enabling them to contribute to the transition by allowing them to make purchasing decisions based on credible claims and labels. This will level the playing field in the internal market and boost the competitiveness of companies making efforts to increase the sustainability of their products.

This initiative is based on the fact that companies profit from calling products “green” or sustainable. It has become a competitive factor since green products have registered greater growth than standard products. This aligns with the growing concern from consumers, especially gen z, of consuming in a responsible way. As a result, the directive aims at boosting this behavior to promote the transition towards a greener economy, this is only possible if the claims are actually true.

In order to achieve this, the directive goes on for a whopping 80 pages, and we understand that you do not have time to read all of that, so let's go to the main points:

Substantiation of explicit environmental claims

The claim must be based on scientific evidence and take into account the life cycle of the product. It must also specify if the claim is based on the whole product, part of it, or just certain aspects. Furthermore, when making a claim on environmental performance, it must also take into consideration all environmental aspects which are significant to assess the performance, not just those that are convenient to highlight. Also, there must be information regarding the performance of the product compared to products within its group or sector - a sort of benchmark of the environmental performance of similar products. Finally, the claim must make a distinction between GHG offsets used and if they relate to emission reduction or removal.

Companies must identify if improving the environmental impacts of the product will lead to negative externalities in other aspects such as resource consumption and circularity, sustainable use and protection of water and marine resources, pollution, biodiversity, and ecosystems. For those paying attention, this particular clause is very similar to the Does Not Significantly Harm (DNSH) requirement of the EU Taxonomy, including its alignment with the different categories. A good example of this is the use of recycled polyester coming from plastic bottles. While this seems “green” since it is recycled, plastic bottles can be recycled perpetually, therefore, using the plastic from the bottles creates a non-recyclable product that ends up in a landfill. This then has two negative externalities: it breaks a circular model and creates non-biodegradable waste.

The disclosure remains extremely vague when referring to the technical methodology of how to actually measure these impacts and how to define elements such as, for example, “all significant environmental aspects”, in any standardized and comparable way. However, it does specify that consumers must have easy access to the information behind the claim. It does require the companies to make the information available through a QR code, or link. 

This information shall include:

• Environmental aspects, impacts or performance covered by the claim.

• Relevant international standards.

• Underlying studies used to measure and monitor the impacts.

• An explanation on how the improvements that are subject to the claim are achieved.

• Information on GHG offsets, and to what extent they rely on emission reduction or removal vs offsetting.

• A summary of the assessment in a way that is clear and understandable to the consumers targeted by the claim. (If only they had applied this requirement to their own directive).

This information needs to be verified by a third party, and all the information and labels used must be certified by said verifier.

What does this mean?

Making any claim on sustainability will now become extremely difficult for any company, and while it might deter greenwashing, it might also lead to greenhushing. There is also an ongoing argument that this will lead to the opposite of what the directive is aiming for. 

Because the directive is based on consumer behavior and the belief that consumer preferences will accelerate the transition, it is also putting the responsibility on the consumer to make sustainable decisions. In this economy, this might not be the case. On the other hand, if companies can no longer cater to their consumers who are willing to pay a higher price for the same product based on their sustainability claim, because of green-hushing, consumers might not have any information at all about the impact of products. There is an argument that questions if companies would feel any incentive at all to transform their business models to more circular and sustainable ones if they cannot communicate this to their consumers (1).

This brings us back to square one, where, rather than fostering transparency, there is a complete lack of information on which products are, comparably, more sustainable than others. Also, companies do not find financial incentives to transform their value chains, since sustainability no longer brings value for their brands. If the European Commission wants to accelerate the transition towards a circular economy, it is the companies and not the consumers that should be targeted. Relying on consumer behavior to curve the offer of products is not actually addressing the problem, since this does not force companies to produce in a sustainable way, it just changes the branding strategy.

It is then important to understand what other measures are being implemented as part of the EU Green Deal and the EU Strategy for Sustainable and Circular Textiles. These other directives include Labeling and the Eco-design Directive (to find out more about the EPREL, follow this link!). These initiatives aim at changing how companies produce, deliver, and dispose of their products so that there is a real transition towards more sustainable and circular value chains. Furthermore, the CSRD, along with the European Sustainability Reporting Standards (ESRS), aims at creating standardized, comparable and comprehensive disclosures that address transparency needs. This, however, is directed to companies as a whole, and does not deal with individual products.

At Lienzo, we believe that, while this is a step in the right direction, there is still a long way until the directive is adopted as a regulation that is enforceable at the national level and, let's be honest, realistic for companies to implement. We also believe that sustainability creates value in itself, not only as a marketable element of a product, and when dealing with production, sustainability should be implemented at every step of the way and not only as part of a strategy coming from marketing departments. We are hopeful about the overall landscape of EU legislation, and expect positive results from the implementation of directives such as this.

Sources:

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on substantiation and communication of explicit environmental claims (Green Claims Directive). Brussels, 22.3.2023 COM(2023) 166 final 2023/0085 (COD)

(1)BOF: The EU’s New Greenwashing Rules, Explained, by Sarah Kent. 24/03/2023. https://www.businessoffashion.com/articles/sustainability/european-union-sustainability-marketing-greenwashing-substantiating-green-claims-fashion/?utm_source=newsletter_sustainability&utm_medium=email&utm_campaign=Sustainability_240323&utm_content=intro