Environmental Law and Justice

Calum MacLaren

A recent European Commission report revealed that 53% of green claims by EU companies are misleading or vague, 40% lack substantive evidence and half of all green labels offer weak or non-existent verification. In response, the Commission has introduced the Green Claims Directive (GCD), a legislative initiative aimed at tackling these practices.

Working in tandem with the Greenwashing Directive, which more explicitly prohibits certain greenwashing activities, the proposed Green Claims Directive seeks to address the issue of greenwashing through a regulatory framework requiring businesses to substantiate their environmental claims with scientifically verified data, supported by independent third-party verification. The directive’s goal is to promote genuine sustainability, harmonise regulations across the EU, and hold companies accountable for their environmental marketing.

The GCD is meant to close gaps in unfair commercial practices law, which has thus far proven inadequate for handling the complexities of greenwashing. This shift towards stricter regulation is necessary, as the current framework has left many consumers vulnerable to misleading environmental claims. However, the overall effectiveness of the proposed measures remains subject to scrutiny.

Harmonisation and Third-Party Verification

The introduction of third-party verification is a welcome change and an integral part of the directive, aiming to create a more reliable system for ensuring the credibility of green claims. However, the directive leaves it to individual Member States to establish their own verification bodies. This decentralised approach could undermine the intended harmonisation across the EU. Diverging national standards may lead to inconsistencies, compromising the uniformity the directive explicitly aims to establish. Inconsistent implementation is an issue that already blights much of the environmental regulation in the EU, and a fragmented approach to verification will likely result in varying standards across Member States, leaving the door open for exploitative practices like regulatory arbitrage.

The Carbon Offsetting Debate

The proposed directive explicitly references carbon offsetting as a type of green claim that warrants closer scrutiny, yet it simultaneously legitimises offsetting as an acceptable form of environmental claim.

Critics argue that carbon offsetting often constitutes greenwashing, allowing companies to shift focus away from reducing their own emissions while still marketing their products as environmentally friendly. In its opinion on the directive, the European Economic and Social Committee (EESC) urged the Commission to ban claims based on carbon offsetting altogether. The directive itself acknowledges that offset methodologies vary widely, often lacking transparency, accuracy, and consistency. The directive also emphasises that companies should prioritise reducing emissions within their own operations and value chains, with offsets being used as a ‘last resort’ to cover residual emissions.

Despite these concerns, the directive still allows for marketing claims based on carbon offsetting, provided that they meet transparency requirements. It stipulates that such claims must clearly specify the proportion of emissions addressed, the nature of the offsets, and the methodologies used. By legitimising offsets in this way, the Green Claims Directive (GCD) permits the continuation of this controversial and damaging practice.

Enforcement and the Problem of Consistency

The GCD introduces penalties for companies that breach the rules, including fines of a maximum of at least 4% of a company’s annual turnover in the Member State concerned. This marks a significant departure from the previous, ‘slap on the wrist’ approach adopted regarding sanctioning misleading green claims. Even the landmark greenwashing litigation success of FossielVrij NL v. KLM amounted to a mere court declaration that similar practices must not be adopted by the company in future.

While this penalty system is a welcome development, the responsibility for imposing fines and ensuring compliance is again decentralised. Without uniform enforcement mechanisms, the risk is that some countries will adopt stricter measures than others, creating a fragmented regulatory landscape. Companies may exploit this by tailoring their marketing strategies to countries with weaker enforcement or by running different green claims in different EU markets. The lack of a clear framework for escalating penalties, particularly for repeat offenders, further limits the deterrent effect of the directive.

The Intersection with the Representative Actions Directive

The GCD’s overlap with the Representative Actions Directive (EU 2020/1828) presents a potentially significant avenue for addressing its enforcement challenges. The Representative Actions Directive allows consumer groups to bring collective actions on behalf of consumers affected by misleading green claims. This mechanism could help mitigate the inconsistencies in enforcement across the EU by allowing cross-border actions against companies that violate the GCD.

This collective action framework could ensure that companies cannot easily evade liability by exploiting the regulatory disparities between Member States. However, its success will depend on the ability of consumer organisations to coordinate these actions effectively, particularly in cases involving cross-border violations.

Conclusion

While the Green Claims Directive represents a significant step towards addressing greenwashing, it faces notable challenges in its implementation. The decentralised approach to third-party verification and enforcement threatens to undermine its goal of regulatory harmonisation. Furthermore, by allowing carbon offsetting claims to persist, the directive weakens its own position on tackling misleading environmental practices. The interaction with the Representative Actions Directive offers a potential solution to the enforcement gaps, but the ultimate success of the GCD will hinge on how consistently it is applied across the variable regulatory environments of EU Member States.