Proposal for a Directive on the substantiation and communication of environmental product claims (“Green Claims Directive”)

On 22 March 2023, the European Commission published a proposal for a new Directive on substantiation and communication of explicit environmental claims (“Green Claims Directive”). The proposed Directive is intended to further advance the European Union's project to update European consumer law, to complement the Unfair Commercial Practices Directive (Directive 2005/29/EC) as a lex specialist, and to fulfil the obligations imposed on the European Commission under the European Green Deal of 2019 (COM(2019) 640 final).

Objectives of the Directive

The purpose of the Directive is to establish a consistent regulation for the EU market on the verifiability and communication of voluntary, explicit environmental claims made by traders and in this way to prevent so-called greenwashing. Consumers will be enabled to make informed purchasing decisions based on trustworthy environmental claims. At the same time, the competitiveness of those market participants who strive to increase the environmental compatibility of their products and activities will be strengthened.

Key content of the proposed directive

The proposed Directive lays down rules on explicit and voluntary environmental claims, i.e. claims made by companies relating to environmental impacts, aspects or performance of a product or of the trader itself, for which Union law does not provide specific rules, such as labelling the product as “climate neutral”.

Traders must demonstrate that environmental claims made by them are accurate and communicate this to consumers correctly. The environmental claims must be based on accepted scientific knowledge and the current state of the art, and must furthermore

• indicate whether the claims refer to the product as a whole or only to a part of the product,
• clarify whether the environmental performance of the product concerned is actually better than that of normal products in the product group concerned, and
• indicate whether the improvements achieved in environmental impacts or aspects covered by the environmental claim are not offset by any negative environmental impacts.

The information supporting an environmental claim shall be made available to consumers, for example, by printing a QR code or a web link on the product concerned. Where the environmental performance of the product depends on the consumer's use, the information provided by the trader shall also refer to how the product is to be used.

The environmental information and its evidence should be verified before publication by an independent accreditation body, which issues a so-called certificate of conformity. However, according to the proposal, this certificate of conformity should not make any statement as to whether the environmental claim is compatible with the Directive on Unfair Commercial Practices (cf. Art. 10 para. 8 of the proposal).

In addition, the environmental claims must be updated on an ad hoc basis and checked for accuracy after 5 years at the latest.

So-called micro-enterprises, which have less than 10 employees and whose annual turnover does not exceed EUR 2 million, are to be excluded from the scope of the Directive (see Art. 3 para. 3, Art. 4 para. 3, Art. 5 para. 7 of the proposal).

Administrative measures and sanctions

According to the proposed Directive, the competent authorities should be able to act against companies if

• an infringement is identified during regular monitoring of all environmental claims on the common market, or
• a complaint is lodged by a natural or legal person or organization having a legitimate interest under Union or national law.

In the event of an infringement, it should be possible to engage the trader to take all appropriate corrective measures within 30 days.
Art. 17 of the proposed Directive provides a catalogue of sanctions for infringements, i.e.

• fines, the maximum amount of which is to be at least 4% of the annual turnover in the member state concerned
• the confiscation of the revenue earned by the trader from a transaction involving the products in question, and
• exclusion from public tenders for a maximum period of 12 months (including tender procedures, grants and concessions).

Representative actions possible

According to Recital No. 73 of the proposed Directive, the Directive on substantiation and communication of explicit environmental claims is to be included in Annex I to the Directive on representative actions for the protection of consumers’ collective interests ((EU) 2020/1828), thus extending the scope of application for bringing a representative action throughout the Union (cf. Art. 2(1), first sentence of Directive (EU) 2020/1828).

In Germany, however, associations entitled to bring an action may do so even without the extension of Annex I to Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC, OJ. The EU Council Directive on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (OJ L 409, 4.12.2020, p. 1) (“Collective Redress Directive”) provides the right to bring such collective actions for damages or for declaratory relief (remedies or model declaratory relief) or actions for injunctions under the UKlaG (see article on EU Collective Redress).

The draft law of the Federal Government of 29 March 2023 on the implementation of the Directive on Collective Redress (see article on EU Collective Redress) provides a broad scope of application for bringing collective redress actions and model declaratory actions. Thus, collective redress actions should be possible in (all) “civil disputes concerning the claims and legal relationships of a large number of consumers against a trader”.

Outlook

The implementation of the proposed Directive will not only entail high administrative and financial costs for traders, but also the threat of severe official measures and sanctions, as well as the risk of claims being made by associations entitled to sue (qualified entities) in the context of a representative action (remedial or model declaratory action) or injunctive action under the UKlaG. The certificate of conformity confirms that the environmental claims or environmental labelling system is based on evidence. However, it does not exempt from the obligation to regularly review and update this information. Failure to update the environmental claim can therefore have significant financial consequences for the company concerned.

Finally, the challenge will be to ensure that the verification of the environmental claims and the issuance of the certificate of compliance are carried out in a timely manner. Otherwise, the competitiveness of the traders could be affected.