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Freshfields Sustainability

| 1 minute read

Impacts on businesses by planned Green Claims Directive

On 22 March 2023, the EU Commission published a draft directive on the substantiation and communication of environmental claims (Green Claims Directive), which is expected to be adopted and transposed into national law within four years. The Commission’s proposal primarily focuses on two main issues related to environmental claims:

  • due to a perceived lack of transparency of eco-labels and of the regulation of green claims, it can be difficult for consumers to make informed and sustainable choices and contribute to the ecological transition, and
  • due to a tangled web of inconsistent regulation at national level, it can be challenging for companies to identify the applicable requirements and they risk unnecessarily high compliance costs with different national regulation applying.

According to the EU Commission, companies that make an honest effort to comply with or develop reliable environmental labelling schemes are at a disadvantage compared to companies that use unreliable environmental labelling schemes as consumers often cannot tell the difference.

The draft Green Claims Directive aims to remedy those shortcomings by providing a single set of rules at EU level, complementing the already existing EU consumer protection rules in specific sectors, by:

  • setting minimum criteria for the substantiation of green claims and an independent verification mechanism to confirm compliance with these criteria;
  • regulating the communication of environmental claims; and
  • effectively limiting the proliferation of environmental labels and developing labelling requirements at EU level for the single market.

(Critical) comments from German industry associations

The draft has triggered a broad response from German industry associations. Although the Directive is generally considered to be an important step towards transparency of environmental statements and an effective measure to avoid greenwashing, some of the proposed regulations have been criticised by industry associations and interest groups. In particular, the financial burden on small and medium-sized enterprises, and the mandatory third-party verification is perceived as a barrier to communicating the environmental aspects of products and may therefore discourage such communication (to the detriment of consumers). The Federation of German Industries (BDI) claims that third-party verification is an infringement of the protected legal positions of companies. In addition, the BDI predicts that the proposed instruments will lead to over-regulation causing immense administrative and financial expenses, with the consequence of delays in the approval processes, which could ultimately harm, rather than benefit businesses and consumers.

Impact on businesses 

It is already clear that the Directive - even though the rather lengthy legislative process is still ongoing - will have a huge impact on companies, which they should prepare for at an early stage. Contact us for more information on how the proposed Directive will affect businesses.