In September 2023, the Council and the European Parliament reached a provisional agreement to enhance the EU Green Claims Directive. This directive, proposed in March 2022, is part of the EU’s broader efforts to empower consumers in the sustainability transition. The directive targets “green claims,” marketing assertions implying a product or service’s environmental benefits. However, many of these claims lack substantiation, leading to consumer skepticism. To address this, the directive mandates stringent standards, requiring businesses to provide independent verification and robust scientific evidence for environmental claims. It is crucial for businesses in Asia to pay attention to these standards while doing business in the EU.
The provisional agreement introduces several key enhancements, including criteria for sustainability labels, improved transparency, prohibition of unfair claims, and clarification of trader liability. While these enhancements represent progress, the directive’s full impact depends on finalization and implementation by Member States, expected around 2026. Similar to the EU Green Deals, California’s Climate Disclosure Law also underscore the importance of corporate responsibility in mitigating climate change.
Scope and Applicability
The Green Claims Directive significantly impacts EU businesses, except for microenterprises meeting specific criteria. It mansdates compliance for businesses targeting EU consumers, aiming to establish a global standard for environmental claims, ensuring transparency and consumer trust. Vietnamese companies must adhere to its standards when engaging with the EU market, substantiating claims and obtaining verification to mitigate legal and reputational risks.
The directive aims to combat greenwashing by enforcing stringent verification standards for environmental claims, ensuring they are backed by robust scientific evidence. Member States oversee these processes, promoting fair product comparisons and transparent environmental labeling. Despite initial concerns, the European Commission views the directive as fostering competitiveness and trust in genuinely eco-friendly companies.
Timeline and Implementation
The Green Claims Directive takes effect at the EU level 20 days post-publication in the Official Journal, with Member States allotted 18 months to enact corresponding legislation. Enforcement is expected 24 months thereafter, emphasizing the urgency of compliance. Key milestones include anticipated updates in 2023, with scheduled considerations and votes in late 2023 and early 2024, respectively. However, timelines may fluctuate, necessitating ongoing monitoring via resources like the European Parliament’s Legislative Train Schedule.
Overseeing implementation falls to the European Commission, which collaborates with Member States in establishing verification procedures and competent authorities. Additionally, the Commission plans to conduct an evaluation five years post-implementation, ensuring alignment with environmental goals. This centralized oversight underscores the EU’s commitment to harmonizing environmental standards and bolstering consumer confidence in green claims.
Impacts on Asian exporters
This directive essentially sets rules for companies making environmental claims about their products in the European Union (EU). For Asian companies looking to sell products in the EU, this means they’ll have to meet these strict criteria if they want to make any environmental claims about their products.
Firstly, they’ll need solid evidence to back up their claims, and they can’t just make vague statements. They have to be clear about what makes their product environmentally friendly, and they’ll need certificates to prove it. Asian companies will also have to look at their products’ entire lifecycle, from production to disposal, to understand their environmental impact fully. This might involve assessing things like energy use, emissions, and waste generation.
While the EU has suggested methods for companies to measure their environmental impact, they’re not forced to use one specific method. Instead, they can pick what works best for them. However, whatever method they choose, they need to ensure it meets the EU’s standards. Overall, Asian companies exporting to the EU will have to up their game in terms of understanding and communicating the environmental impact of their products. This could involve investing in research, certifications, and possibly changing their production processes to meet these standards.
Enforcement and Compliance
Enforcing the Green Claims Directive entails a structured process detailed in Article 16, “Complaint-handling and access to justice.” Individuals or organizations with a “legitimate interest” can submit substantiated claims to designated national authorities. Member states establish competent authorities and verification procedures, mandating company-specific data to support green claims. The complaint process involves submission, assessment, and corrective action orders if non-compliant, with potential penalties including fines up to 4% of annual turnover, revenue seizure, and exclusion from public procurement and funding for up to 12 months.
Consumers play a role in accountability by supporting “qualified entities,” like consumer groups, authorized to legally challenge companies over questionable green claims. While consumers lack actionable rights under the directive, they benefit from reliable environmental information for informed purchasing decisions. Additionally, the directive fosters market fairness, reducing costs for cross-border businesses and accelerating the green transition, ultimately enhancing environmental protection and consumer welfare.
Criticisms, Updates, and Future Directions
During the creation of the Green Claims Directive, stakeholders provided feedback through public consultations, online surveys, and workshops. Business associations advocated for independent certification and flexible communication of environmental information, while environmental NGOs emphasized leveraging existing tools like type 1 ecolabels. Public authorities and citizens also supported independent certification, highlighting the importance of trusted ecolabels such as the EU Ecolabel.
Critics have raised concerns about the directive’s enforcement, narrow focus on carbon emissions, methodology gaps, and diluted guidelines due to industry lobbying. They argue that without robust enforcement, the directive may fail to curb misleading claims effectively. Suggestions for improvements include banning carbon neutrality claims, limiting future claims to the company level, strengthening criteria for future claims, introducing pre-approved certification schemes, and aligning EU methods with global standards.
Despite criticisms, the Green Claims Directive presents significant opportunities for businesses. It can spur market opportunities, enhance product quality, increase credibility, prevent greenwashing, and create a level playing field. Ultimately, the directive aims to reward genuine sustainability efforts, foster innovation, and drive market growth while ensuring accountability for environmental claims.
Potential for third-party verification under the directive
To become a third-party verifier under the Green Claims Directive, a company must meet specific EU criteria. Verifiers must be officially accredited bodies, independent from the businesses they verify, responsible for assessing environmental claims and issuing recognized certificates.
Essential steps include obtaining accreditation, ensuring expertise in environmental assessment, understanding directive requirements, adhering to national laws, staying updated on changes, documenting processes, preparing for enforcement, and building networks for effective compliance. These steps are pivotal for upholding the integrity of environmental verification processes. Each step requires careful consideration and meticulous execution to ensure that verifiers maintain credibility, adhere to regulatory standards, and foster transparency in the marketplace.
Conclusion
The EU Green Claims Directive marks a crucial stride in fostering environmental accountability in the EU market. With rigorous verification standards and transparency measures, it combats greenwashing, builds consumer trust, and drives genuine sustainability efforts among businesses. Its impact extends to enhancing credibility, empowering consumers, and advancing environmental sustainability, setting a precedent for future regulatory initiatives in promoting transparency and a greener economy.
Lead Author:
Hieu Dinh Founder, CEO Email: hieu.dinh@nuoa.io
Mr. Hieu Dinh is a senior business leader with experience across multiple industries. His past experience included development policy consulting, circular economy investments and corporate actions. He earned his MBA from INSEAD, which is globally reputable for sustainable business and innovation. Hieu completed Bachelor of Economics and Finance with High Distinction at RMIT University under full scholarship.
Co-Author: Linh Tran Business Analyst – Nuoa.io Email: linh.tran@nuoa.io
