In recent years, consumer concerns about climate change and environmental sustainability have reached unprecedented levels, leading buyers to seek out products and services that align with their eco-conscious values. This growing demand has led to an upsurge in environmental claims made by businesses. However, not all such claims are genuine, leading to the emergence of a phenomenon known as greenwashing. To combat this deceptive practice and promote transparency, the European Commission proposed the Green Claims Directive in March 2023. Below, we consider the key aspects of this directive and its potential impact on environmental claims.

Greenwashing refers to misleading or exaggerated environmental claims made by businesses to appear more environmentally friendly than they actually are. Such claims often deceive consumers who are eager to make environmentally responsible choices. Recognizing the harm caused by greenwashing, the European Commission is taking significant steps to address this issue.

On March 22, 2023 the European Commission unveiled its proposal for the Green Claims Directive. The directive’s primary objective is to combat greenwashing by establishing clear guidelines for companies on promoting environmental claims to consumers. The directive requires businesses to substantiate their environmental claims with a comprehensive assessment. This means that companies must provide credible evidence to support their assertions, ensuring that consumers are not misled.

In addition to demanding substantiated claims, the directive also introduces stricter rules for the approval of new environmental labels. Environmental labels are valuable tools for consumers seeking eco-friendly products and services. By enhancing the approval process, the directive aims to ensure that labels are reliable indicators of environmental performance. This will empower consumers to make more informed choices and reward businesses that are genuinely committed to sustainability.

On May 3, 2023 the Council adopted its negotiating position on the proposed Green Claims Directive. A noteworthy development is the Council’s proposal to extend the implementation period to 24 months from the original 18. This extension recognizes of the complexity involved in implementing such comprehensive reforms. It will also ensure a smoother transition by allowing businesses more time to adapt to the new requirements.

The next crucial step in the process is the negotiation between the Council and the European Parliament. These negotiations will commence once Parliament adopts its position. The final directive will emerge from these discussions and will have far-reaching implications for businesses operating within the European Union.

Adding to the momentum against greenwashing, on June 1, 2023 the European Supervisory Authorities (ESAs) published their progress reports on greenwashing in the financial sector . These reports establish a common high-level understanding of greenwashing applicable to market participants in financial markets, banking, insurance, and pensions. This collective approach aims to ensure that the financial sector also adheres to transparent and sustainable practices.

Possibly more litigation in the short term

The proposed Green Claims Directive represents a significant step forward in addressing greenwashing and promoting transparency in environmental claims made by businesses. By requiring companies to substantiate their claims and tightening the rules for environmental labels, the directive aims to empower consumers to make more informed choices and reward genuine sustainability efforts. As negotiations between the Council and the European Parliament progress, the future of environmental claims in the EU looks set to become clearer and more trustworthy. Moreover, progress reports from the ESAs signal a broader commitment to combating greenwashing across various sectors, further solidifying the EU’s dedication to environmental responsibility.

While awaiting the formal issuance of the directive and its subsequent transposition into each member country, it is worth noting that greenwashing disputes have exponentially increased. In the EU and in Italy in particular, there are already some signs indicating that litigation on these issues – also through a class action procedure – may experience a significant increase in the short term. One on the most important ratings companies has already observed an increase in litigations across various sectors and a growing impact of environmental lawsuits against companies – with a double-digit upward trend.