The Green Claims Directive: Impact on companies and their marketing claims

The Green Claims Directive: Everything companies need to know about the impact on their marketing claims. Find out how the directive prevents greenwashing and why it's important to comply with it.

Table of contents

What is the Green Claims Directive?

Timeline of the Green Claims Directive

Impact of the Green Claims Directive on companies

How companies can implement the Green Claims Directive

Common Questions about the Green Claims Directive

Conclusion and outlook

What is the Green Claims Directive?

The Green Claims Directive, also known as the Green Claims Directive, is a European Commission directive that deals with the regulation of environmental claims in advertising. It aims to prevent so-called "greenwashing", where companies make misleading or exaggerated environmental claims for their products or services.

In future, this will be regulated as follows:

• Claims must be substantiated with scientific evidence that is generally accepted Life Cycle Assessment (LCA), identifying the relevant environmental impacts and possible trade-offs between them.
• If products or organizations are compared with other products and organizations, these comparisons must be fair and based on equivalent information and data.
• Claims or labels that use an aggregated assessment of the overall environmental impact of the product, for example on biodiversity, climate, water use, soil, etc., must not be allowed unless specified in EU legislation.
• Environmental labeling schemes should be reputable and reliable. EU-wide schemes are encouraged, new public schemes, unless developed at EU level, are not allowed, and new private schemes are only allowed if they have a higher environmental ambition than existing ones and are pre-approved.
• Environmental labels must be transparent, verified by a third party and regularly audited.

This involves green claims such as the following:

• Packaging consists of 20% recycled plastic.
• The company's environmental footprint has been reduced by 20% since 2016.
• The CO2 emissions associated with this product have halved compared to 2021.
• Bee-friendly cultivation.
• More examples here.

The focus is on life cycle assessments (LCA) as an evaluation tool. Up to now, the "Product Environmental Footprint" (PEF) developed by the EU has mainly been discussed. However, PEF is not to be the sole assessment tool. It has not yet been finally determined which other standards can be used.

Definition of the Green Claims Directive

The Green Claims Directive stipulates that all environmental claims in marketing materials for products and services of companies must be clear, precise and verifiable. This means that companies must provide accurate information and data to support their environmental claims.

Aim and purpose of the Directive

The main aim of the Green Claims Directive is to protect consumers from misleading advertising while ensuring fair competition between companies. The Directive aims to ensure that environmental claims in advertising reflect the actual impact of products or services on the environment. A study conducted by the EU Commission in 2020 found that:

• 53% of all environmental claims provide vague, misleading or unsubstantiated information.
• 40% of all environmental claims have no supporting evidence.
• Half of all eco-labels are barely or not at all verifiable.
• There are 230 sustainability labels and 100 eco-energy labels in the EU with very different levels of transparency.

In a survey on consumers carried out by the BEUC (The European Consumer Org), the following picture on green claims emerged:

Timetable for the Green Claims Directive

Members of the European Parliament approved the agreement in January 2024 and adopted the report in March 2024. An amendment was adopted allowing the Commission to define residual emissions through a delegated act, establishing a method compatible with limiting global warming to 1.5°C, in consultation with the European Scientific Advisory Board on Climate Change.

The Council adopted its general approach on 17 June 2024, introducing a simplified procedure for less complex explicit environmental claims. This procedure exempts certain claims, such as those stating that a product or trader exceeds minimum EU requirements, from third-party verification or full substantiation assessment.

After adoption by the EU, the member states have 24 months to transpose the directive into national law. The start date is therefore February 2026 at the latest.

You can track the progress at the European Parliament's Legislative Train Schedule.

Impact of the Green Claims Directive on businesses

How will the proposal affect small and medium-sized enterprises?

The proposal protects small and medium-sized enterprises (SMEs) by exempting companies with fewer than 10 employees and less than €2 million turnover from the new requirements, unless they voluntarily choose to comply.

However, in order to motivate SMEs to participate in the green transition and support genuine environmental claims, Member States are to help EU SMEs to implement the requirements more easily by offering financial, organizational and technical support. The Commission will also help by providing funding for the provision of data and the development of calculation tools for SMEs.

What does the Directive mean for international companies not based in the EU?

Companies from outside the EU that make environmental claims to EU consumers will also have to comply with the new rules. This encourages participation in the green transition worldwide, especially for companies operating in the EU single market.

New eco-labels from private operators inside or outside the EU are prohibited unless they prove their usefulness to the EU market. These must be approved by the Commission.

Changes in marketing claims

The Green Claims Directive requires companies to review and, if necessary, adapt their marketing claims to ensure that they comply with the requirements of the Directive. This may require a revision of promotional materials and a reassessment of the environmental terms used. Life cycle assessments will also become part of every company's repertoire if they want to use "green claims".

Advertising platforms such as Meta have long operated with their own category for advertising, which considers and evaluates political or social issues separately.

"The days of inaccurate claims like 'environmentally friendly' are over," says Jonny White in an interview with the British Guardian, senior business director at AMV BBDO, an advertising agency that works with companies such as Diageo, Unilever and Bupa. "Misleading environmental claims are the focus of advertising regulators, consumer protection organizations and even governments. The risks of making mistakes here are enormous. Brands are publicly exposed if they are found to be misleading the public," he says.

Marketing departments and advertising agencies should therefore work closely with their legal departments when advising clients on their climate claims. In the UK, for example, the Ad Net Zero program was launched in 2020 with the aim of reducing the advertising industry's carbon footprint to net zero by 2030. Meanwhile, many agencies are forming internal teams to focus on campaigns that prioritize sustainability.

There is often a big disconnect between the marketing and sustainability teams within companies. These teams have different, sometimes conflicting goals and report their performance in very different ways. This is due to an inherent tension between the need to impress target groups with exaggerated storytelling and the sustainability teams' need to rely on the facts.

Risks of non-compliance with the directive

Companies that fail to comply with the requirements of the Green Claims Directive risk legal consequences, including fines and the withdrawal of advertising licenses. They can also damage their image and consumer confidence.

"Qualified organizations", such as consumer organizations, will namely be legally able to take legal action to protect the collective interests of consumers from greenwashing.

Benefits of compliance with the Directive for businesses

Compliance with the Green Claims Directive can help companies to strengthen their image as environmentally conscious and responsible actors. This can lead to a positive perception by consumers and increase brand reputation and sales in the long term.

The directive will also create a level playing field for all and companies that already operate in a truly sustainable way will also receive the marketing benefits they deserve for their efforts to preserve our livelihoods.

After all, if all brands can claim to be environmentally friendly, the incentive to attract consumers with superior environmental commitments will be removed. This will make it all the more worthwhile for companies to be or build an environmentally responsible brand.

A study done by McKinsey and NielsenIQ unveiled a significant and tangible connection across various sectors between ESG-related assertions and consumer expenditure:

How companies can implement the Green Claims Directive

Review and adapt marketing claims

Companies should carefully review their marketing claims and ensure that they comply with the requirements of the Green Claims Directive. If necessary, they must adapt their claims to provide accurate and verifiable environmental information.

Supply chains have been in a constant state of flux since Corona, which means that the social and environmental impacts of products are changing. In addition, scientific understanding and consumer expectations are also changing daily, so it makes sense to establish appropriate reporting mechanisms and data flows between marketing and sustainability.

Software will be an important part of the solution to help these teams work together: Dedicated software will allow brands to update data in one place to ensure they are properly and accurately sharing their latest sustainability progress across all channels. Because every word counts.

Companies should also train employees internally to understand and correctly use life cycle assessments (LCA) and other sustainability management methods such as the corporate carbon footprint or product carbon footprint.

The internal legal departments can also be helpful here, as they are familiar with the details of case law and can assess which statements a company is venturing onto the slippery slope with.

Use of certified environmental labels and logos

The use of officially certified environmental labels and logos can help companies to strengthen their environmental claims and gain consumer confidence. These labels and logos serve as proof of the environmental friendliness of products or services.

These logos will also need to be verifiable in the future, which will thin out the field and likely result in higher costs for valid logos and labels. Cheap reforestation projects will no longer be enough to label oneself "climate neutral".

Common Questions about the Green Claims Directive

Addressing common questions about the Green Claims Directive can provide clarity and guidance for businesses navigating its requirements.

• What is the Green Claims Directive?

The Green Claims Directive is a European Commission regulation aimed at preventing misleading environmental claims in advertising, also known as "greenwashing". It requires companies to substantiate any environmental claims with scientific evidence and ensures that these claims are clear, precise, and verifiable.

• Which companies are affected by the Green Claims Directive?

The Green Claims Directive applies to all companies that make environmental claims in their marketing materials, including those based outside the EU but targeting EU consumers. However, small and medium-sized enterprises (SMEs) with fewer than 10 employees and less than €2 million turnover are exempt, unless they voluntarily choose to comply.

• How does the Directive impact marketing claims?

The Directive requires companies to review and potentially revise their marketing claims to ensure compliance. This may involve updating promotional materials and reassessing the environmental terms used to avoid making vague or unsupported claims.

• What are the penalties for non-compliance with the Green Claims Directive?

Non-compliance can result in legal penalties, including fines, withdrawal of advertising licenses, and damage to the company’s reputation. Qualified organisations, such as consumer protection groups, can take legal action against companies for greenwashing.

• How can companies ensure compliance with the Green Claims Directive?

Companies should invest in life cycle assessments (LCA) and other sustainability management tools to substantiate their environmental claims. They should also ensure that any environmental labels used are officially certified, transparent, and regularly audited.

• What is the timeline for implementing the Green Claims Directive?

EU member states have until February 2026 to transpose the Directive into national law. Companies should start preparing now to ensure they are compliant by the time the Directive is enforced.

• What are the benefits of complying with the Green Claims Directive?

Compliance with the Directive can enhance a company’s reputation as an environmentally responsible actor, leading to increased consumer trust and potentially higher sales. It also levels the playing field by ensuring that all companies adhere to the same standards for environmental claims.

Conclusion and outlook

Summary of the most important points

The Green Claims Directive is an important European Commission directive that obliges companies to make their environmental claims in advertising clear, precise and verifiable. Compliance with this directive is crucial to gain consumer trust and avoid legal consequences.

Outlook for future developments in the area of the Green Claims Directive

It is expected that the importance of the Green Claims Directive will continue to grow in the future as consumers and regulators pay increasing attention to environmentally friendly and sustainable practices. Companies should therefore keep up to date with the latest developments. And as is so often the case, the well-known wisdom of ice hockey player Wayne Gretzky, who once said:

"I skate to where the puck is going to be, not where it has been."

Recommendations for companies to implement the directive effectively

Companies should review their marketing claims, train employees and use officially certified environmental labels to meet the requirements of the Green Claims Directive and at the same time strengthen their image as environmentally conscious players. They should also strengthen their own sustainability skills and put them on a firm footing. To understand more about how the Green Claims Directive interacts with other sustainability requirements, consider reading about double materiality in CSRD and the benefits of CO2 reduction versus compensation.

If you have any questions, suggestions or further information on the Green Claims Directive, please feel free to contact me at any time. As an expert, I am at your disposal and happy to help. Together, we can ensure that your company meets the requirements, that your image as an environmentally conscious player is strengthened and that you benefit from the advantages in the long term.