June 2023 – On 22 March 2023, the European Commission published a proposal for a Directive on Green Claims. The proposed Directive aims to tackle false environmental claims by ensuring that consumers receive reliable, comparable and verifiable environmental information on products and services across the European Union.
By laying down clear criteria on how companies should evidence environmental claims, along with mandating an EU labelling scheme and new enforcement procedures to secure compliance, the Directive on Green Claims is designed to enable better environmental decision-making by consumers and to reduce so called “green washing” (spurious environmentally friendly claims).
However, it will likely still be some time before the draft Directive on Green Claims becomes effective law. In any event, green washing as an unlawful practice is already regulated to some extent via Member State national laws across the EU.
ESG at Kinstellar
At Kinstellar, ESG (Environmental, Social, Governance) represents the everyday world of compliance, risk-assessment, litigation, deal-making and proactive strategy building – one in which we have, we believe, excelled for years. Below is a brief description of selected issues in the field of green claims and the current legal framework that our colleagues in Bulgaria, Croatia the Czech Republic, Hungary, Romania,Slovakia and have encountered in their recent day-to-day legal practice.
Green claims and existing laws in Bulgaria, Croatia, the Czech Republic, Hungary, Romania, and Slovakia
In general, no laws in Bulgaria, Croatia, the Czech Republic, Hungary, Romania, or Slovakia are presently in place to properly deal with the phenomenon of deceptive or spurious claims of environmental friendliness by manufacturers. Instead, such countries have hitherto relied on existing consumer protections, unfair competition regulations and rules on advertising. Although existing EU directives set only minimum standards and are based on the principle of requiring a minimum level of harmonization with respect to national particularities, national rules evidently do not differ significantly within these six jurisdictions.
Under the existing framework, environmental claims are required to be accurate, truthful and substantiated by relevant evidence, such as research, studies, test results and other certified and reliable data. Moreover, such claims must be transparent, verifiable, relevant to significant aspects in terms of the environmental impact of the given product or service, and not misleading, ambiguous or attempting to downplay negative effects on the environment, for example by highlighting only a specific characteristic of a product or service. The relevant national authorities have tended to assess compliance in these respects on a case-by-case basis.
In Romania, misleading environmental claims may be assessed on a case-by-case basis by the National Authority for Consumer Protection (“ANPC”) based on the national law transposing the Unfair Commercial Practices Directive, which contains general provisions that can be applied to environmental claims in business to consumer transactions when they negatively affect consumers’ transactional decisions.
According to its annual report, in 2020, ANPC assessed the accuracy of offers, advertisements or other statements by which online traders of clothing, cosmetics and household equipment led consumers to believe that a good or a service had a positive impact on the environment, was less harmful to the environment or was more durable/sustainable than competing goods or services. It was found that, in many cases, the trader did not provide enough information so that consumers could appreciate the accuracy of the claims, or the trader did not provide easily verifiable evidence to support the claim made.
In addition to laws, EU guidelines and non-binding soft law instruments, such as interpretative opinions by national authorities, are essential with respect to green claims. The following examples addressing key principles for self-declared environmental claims are worth mentioning:
In November 2022, the Hungarian Competition Authority began a detailed market analysis to determine the differences between the actual content of various green advertising messages and their interpretation by consumers. In February 2023, as part of this analysis, specifically focusing on “green” claims for clothing, cosmetics and cleaning products, as well as everyday consumer good packaging, the statements made by 60 domestic websites were reviewed. The analysis identified a number of common spurious claims and revealed that in many cases, advertising referring to sustainability was not accompanied by easily accessible reference data for customers.
Due to increasing regulatory tendencies in areas such as the environment, combined with an increasing public awareness of ESG-related topics, it is likely that similar investigations will be carried out in other EU member states in the future.
Should you wish to discuss in more detail the impacts on your business of existing national and EU-wide laws, and of the planned greenwashing EU Directive, or if you simply need help with aligning the many facets of ESG, our team of professionals at Kinstellar – combining in-depth legal expertise and a strong commercial focus – are standing by!