How the EU's Green Claims Directive Will Make It Easier for Companies to Adopt Sustainability Strategies

Key Takeaways on How the EU's Proposal for Green Claims Directive Will Make It Easier for Companies to Adopt Sustainability Strategies

Suppose a company is looking for direction on how to adapt to an ever-changing regulatory landscape when it comes to sustainability. In that case, they will want to pay attention to the Proposal for a Directive on Green Claims (GCD) recently released by the European Commission. Officially announced on March 22, 2023, the proposed GCD aims to update earlier legislation that protects consumers from misleading green claims and gives them the power to “contribute actively to the green transition.” As part of the EU Green Deal, the proposed GCD complements a broader set of adopted proposals to make the EU’s “climate, energy, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels”. The proposal will make it easier for businesses to adopt sustainability strategies by providing clear guidelines on substantiating and communicating environmental claims.

It will also give a competitive advantage to companies that genuinely develop environmentally-friendly products and practices rather than just those looking to avoid liability. In this blog post, we'll discuss the key takeaways on how the proposal will impact businesses and help them become more sustainable in the long run.

The Goals and Objectives of the Proposal for a Green Claims Directive

• Prevent greenwashing and stop companies from deceiving consumers through false or misleading environmental claims.
• Improve consumer protection and empower consumers to contribute to the green transition by purchasing from companies with credible environmental labelling.
• Increase the competitiveness of businesses dedicated to enhancing the sustainability of their products and operations.
• Implement cost-saving benefits for companies with broad supply chains prioritising environmental sustainability.
• Expedite the shift to a circular, clean, and climate-neutral economy.

The proposed GCD isn’t coming out of nowhere. There have been preceding regulations, such as the UK green claims code and last year's decision by the Norwegian Consumer Authority on misleading environmental claims in marketing. Global citizens have spoken, and the demand for transparency isn’t a trend; it's timeless.

“94% of Europeans surveyed believe that protecting the environment is important to them personally, and 68% agree that their consumption habits adversely affect the environment in Europe and globally (Special Eurobarometer 501). In order for consumers to be able to change their consumption habits, they need reliable, verifiable information.”

Key Takeaways From the Green Claims Proposal

• Prohibition on Greenwashing. The proposal prohibits companies from making unsubstantiated, false or misleading claims.
• Substantiation. Companies (other than microenterprises) voluntarily making environmental claims must substantiate them. A third party must verify the claims to ensure they are accurate before a company can communicate them (more on this below).
• Certification. Once successfully verified, a company will receive a ‘certificate of conformity,’ confirming that the claims adhere to all the legal requirements. This certificate will assure businesses that their certified claim will not be challenged across the EU.  
• Requirements for Comparative Claims. Companies need to ensure that their environmental claims can be objectively compared to other products or services within the same category.
• Fulsome Framework. The Proposal and the proposal amending the Unfair Commercial Practices Directive (UCPD) aim to establish a fulsome policy framework to assist in the green transition. The proposal amending the UCPD also covers greenwashing and untransparent sustainability labels.
• Transparency for Offsets: Companies should focus on reducing emissions in their own organisation/value chain and transparently report if they offset their greenhouse gas emissions. Claims related to greenhouse gas emissions, such as "climate neutral" or "net-zero" are specifically identified in the proposal to “be particularly prone to being unclear and misleading.” Read our exposé on offsetting here, where we build on the statement that “[t]he methodologies underpinning offsets vary widely and are not always transparent, accurate, or consistent.”
• Identify and Communicate Trade-Offs. According to the proposal, companies need to pinpoint any potential negative effects or environmental trade-offs on the environment. This includes cases where a positive impact in one aspect of production results in a negative impact on another. For example, if a brand promotes a new material that drastically reduces water consumption but leads to a notable increase in carbon emissions, the brand must disclose this.
• Enforcement and Penalties. Member states will be responsible for enforcing the proposal and implementing penalties for infringement, including fines, mandatory corrective actions, or other legal consequences. The proposal recommends imposing fines and consequences based on the “gravity of the infringement,” such as confiscation of products or revenue gained from transactions affected by the infringement.
• Collective Legal Action. Consumer representatives will be able to bring legal measures to protect the collective interests of consumers.

Key Considerations for Making and Verifying Environmental Claims

What is considered a “Green Claim”?

• A “Green Claim” is any claim that is made relating to the environmental impact or performance of the product, including the adaptation of a lifecycle approach, such as “packaging made of 30% recycled plastic", “bee-friendly juice,” or “200 trees planted with this purchase”.

How does verification of a claim work?

• EU member states must ensure that companies in their country meet minimum requirements for substantiation and communication and establish independent and accredited verifiers to verify and enforce these standards.

• Companies must ensure their environmental claims are reliable and communicate them transparently to comply with the proposal.
• Comparisons between products must be fair and based on equivalent information and data. The requirements include comparative claims covering comparable stages along the value chain and ensuring that the coverage of the environmental impact of products is the same. e.g., impact calculations would need to be based on the same criteria, like dyeing, electricity, or water usage.
• For claims regarding the improvement of impact, companies must explain the impact of improvement on other aspects and impacts with an established baseline year.

What is meant by “Third-Party Verifier”?

• 3rd party verifications and certifications must be completed before the claim hits consumers to ensure every claim the consumer will be exposed to has been verified to be reliable and trustworthy.
• The verifier must be an officially accredited independent body with no conflicts of interest and must have sufficient expertise, staff, and technical know-how to conduct the verifications properly.
• There does not appear to be anything set up by the commission to become a “verifier,” but this will likely occur once the proposal moves from proposed legislation into law.

What are the criteria for new environmental labelling?

• We have been following along closely with the Digital Product Passports (DDP) as part of the EU’s Ecodesign for Sustainable Products Regulation (ESPD)  – we wrote about this and other influential global directives here. The proposed GCD is meant to act in conjunction with the ESPD and improve the information flow of substantiated environmental claims between the two.
• One goal of the GCD is to stop the proliferation of public and private environmental labels on products that include misleading information and ensure that product labels are transparent and clear. Due to this, new private product labels will only be allowed if proven that they are more environmentally ambitious than the previous labels used and have been pre-approved.
• And, of course, environmental labels must be verified by a third party, transparent, and regularly reviewed.

What will the proposal mean for international trade partners?

• Businesses based outside the EU that market, sell, or propose products for EU consumers will also have to follow the requirements.
• New environmental labelling schemes by private companies in the EU or external partners in the EU will be banned if they fail to prove the added value of their environmental claims or impact assessments.

What about small businesses?

• The proposed GCD covers a lot. So to protect small and medium-sized enterprises (SMEs) from a disproportionate impact, SMEs or any company with fewer than ten employees and less than €2 million turnover are exempt unless they wish to use the rules. Is this you? Check out our free Shopify Impact calculator here.
• Since the proposal aims to promote participation in the green transition, EU member states are asked to help SMEs meet the requirements by providing them with access to financial support and technical assistance. The EU Commission takes it further with a pledge of “providing funding to support companies in developing calculation tools and providing data to support credible claims.”
• Decarbonizing a company's value chain isn't an easy task. With most environmental impact tools on the market relying on manual data entry and a specialised understanding of life-cycle assessments, this is far out of reach for the average SME. At Arbor, we have designed an accessible, automated, user-friendly tool to help you understand the environmental impact of your products for businesses of all sizes. Interested in learning more? Sign up for a demo here!

Data and Traceability:

Arbor’s Accurate Environmental Claims

To ensure environmental claims are not misleading, they will be evaluated based on certain criteria, and some requirements must be met to support the claims. Here's how Arbor can help:

• “To substantiate an environmental claim, it must be backed by scientific evidence and supported by innovative and up-to-date technology.” Arbor's automated dashboard and proprietary AI technology can help substantiate green claims by comprehensively assessing an apparel & footwear company's environmental impact from cradle-to-gate for each product. You can read more about Arbor’s data and methodology here.
• “Be able to prove the claim is accurate for the whole product or parts of it.” The amount of recycled fibres must be clearly stipulated if a product is made of recycled material. These criteria can easily be implemented into our dashboard. We also generate emissions reports and a transparency page for each product, or range of products, to share with regulators or stakeholders.
• “If the process is not run by the trader making a claim and primary data is not available, secondary data should be permitted, even for processes that contribute significantly to the environmental performance of the product or trader.” Primary data is “directly measured or collected data representative of activities at a specific facility or set of facilities”, as defined by the European Commission. Secondary data, on the other hand, is “data that is not directly collected, measured, or estimated, but rather sourced from a third-party life-cycle-inventory database.” Arbor uses, and encourages, the use of primary data in LCA calculations; however, it can be quite difficult to collect all the data required from primary sources. Arbor has an extensive list of secondary data sources to help companies fill in missing data points, including Arbor’s Country Specific data sets. Through hot spot analysis, Arbor can determine which stages in a product’s journey account for the most emissions. Arbor’s Data Quality Rating system then takes these hot spot analyses, calculates the weighted average of primary and secondary data, and communicates this to relevant stakeholders through the product transparency pages.

The Next Steps: A Need for Digital Solutions

The Urgent Need for Digital Solutions in Meeting The Green Claims Directive

Following the ordinary legislative procedure, the Proposal for a Green Claims Directive will first be subject to the European Parliament's and the Council's approval. This process gives the Parliament time to introduce any amendments and should take approximately eighteen months. Once approved, the EU Member states will have 18 months to adopt their national implementing measures, and the obligations will apply 24 months after the proposed GCD enters into force.

Arbor's automated dashboard and carbon impact calculator can help apparel brands substantiate their carbon emissions claims and ensure environmental claims are accurate, clear and transparent. To enable companies to substantiate their claims with reliable and verifiable information, Arbor’s digital solutions provide an unbiased comparison with other products in the same category. Eighteen months isn’t far away, and apparel brands should be proactive to ensure compliance. The saying isn’t “pollute first, and ask for forgiveness later.”

It’s time to act.

Have questions about how this will impact your brand or organisation? We are happy to help!

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