Out-Law / Your Daily Need-To-Know
After the EU Council of ministers suggested changes to the Green Claims Directive, an advertising regulation expert has advised businesses to prepare now for implementing the new rules.
The EU Council of ministers has adopted its position on the green claims directive. Germany abstained from the vote.
The directive is intended to prevent greenwashing and ensure that consumers only see claims that are genuine and reliable. The European Commission had proposed the directive in 2023, after a study found that more than half of the environmental claims are vague, misleading or make unfounded claims. As a result, the EU proposed two new directives, the so-called Empowerment Directive, which was adopted in February, and the Green Claims Directive.
"Both directives aim to prevent greenwashing and force companies to make only substantiated and substantive environmental advertising claims", Fabian Klein, intellectual property and advertising expert at Pinsent Masons, said. He has followed the evolution of both legal acts closely.
"The Council's position is different to the proposal of the Commission", said Klein. Among other things, the Council added several support measures to help small and medium sized enterprises (SMEs). The Council aimed to simplify the verification process, the most debated part of the Green Claims Directive.
Klein said: "The verification process would require that each and every environmental claim that is made orally or in writing would have to be verified by an independent third party prior to being made. This would be a real change for advertising law, where usually companies only have to be in a position to proove their claims once they are attacked, but don't need to have them approved beforehand".
Stakeholders had criticised the fact that the obligation to have a product certified in advance by external bodies before it can be advertised as "green" would overburden SMEs in particular and hamper green innovations.
The proposal of the Council therefore includes a simplified procedure for eligible companies. These would be able to prepare a technical document rather than going through the full verification process. "These measures appear to be similar to the CE accreditation, where producers have to ‘audit’ themselves", Klein adds.
While microenterprises will be subject to verification under the general approach, according to the Council they shall also have 14 months more than other businesses to comply with those rules.
Claims around carbon neutrality continue to be a focus of the regulations. The Council wants to include new requirements on the substantiation of claims related to climate, and especially to carbon credits. These include the obligation to provide information on the type and number of emission credits and whether they are permanent or temporary. It distinguishes between emission credits as a contribution to climate protection and emission credits to compensate for a share of emissions.
"While reduction measures are of course brilliant, offsetting programs are generally under the suspicion of being greenwashing", Klein said. "They will therefore continue to be in focus".
But Klein also points out that the Council's position may be problematic elsewhere: "Companies may only claim to have a reduced greenhouse gas impact if they have an overall net zero strategy and are on track to meet this target. The Council apparently wants to introduce the requirement for companies to have mandatory transition plans."
The Council’s general approach will form the basis for negotiations with the European Parliament on the final shape of the directive. Negotiations are expected to begin in the new legislative cycle.
"The council also opens the door for many additional regulations to come by referring to delegated acts the Commission shall prepare", Klein highlights. "At a time when the industry – especially in Germany – is complaining about the exorbitant bureaucracy in general, and the maelstrom of ESG-related regulations in particular that makes it hard to keep track of, the Council seems to live on a different island.”
Yet, the probability that the requirements will be further limited is close to zero according to Klein: "This ship has clearly sailed. These new standards and the verification requirement will come, even if slightly modified. The best things to do are to prepare on how to implement the requirements now, not only in 36 months’ time, and to think of this as one piece of the overall ESG and climate initiatives within the company, not an isolated requirement."
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