12 February 2024

The Latest Step In The European Green Deal: European Parliament Approves New Directive That Will Reach All Companies Active In The EU Market

Finnegan, Henderson, Farabow, Garrett & Dunner, LLP


Finnegan, Henderson, Farabow, Garrett & Dunner, LLP is a law firm dedicated to advancing ideas, discoveries, and innovations that drive businesses around the world. From offices in the United States, Europe, and Asia, Finnegan works with leading innovators to protect, advocate, and leverage their most important intellectual property (IP) assets.
A recent vote by the European Parliament, while not unexpected, will have a massive impact on "green" advertising in the EU.
European Union Media, Telecoms, IT, Entertainment
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A recent vote by the European Parliament, while not unexpected, will have a massive impact on "green" advertising in the EU. The new requirements will apply not only to EU-based companies—but to any company active in the EU market.

Key Takeaways

  • New EU rules banning greenwashing and certain misleading product information will likely be implemented into national law by mid 2026
  • Environment-related claims such as "eco-friendly", "green" or "sustainable" will be prohibited if not fully substantiated
  • Labeling products as "carbon-neutral" will be prohibited if neutrality is only reached by purchasing carbon offsetting credits
  • Sustainability labels will have to be supported by independent third-party verification scheme or public authorities

What did the European Parliament vote on?

On 17 January 2024 the European Parliament approved with a staggering majority of 593 votes in favor (and only 21 against) the new Directive on Empowering Consumers for the Green Transition (DECGT) banning greenwashing and other misleading product information. The DECGT which was first proposed in March 2022 is part of the overall "European Green Deal" action plan, a package of policy initiatives aiming to set the path to a green transition, with the ultimate goal of reaching climate neutrality by 2050.

Prohibiting greenwashing

One of the key aspects of the DECGT is to prohibit greenwashing tactics, i.e. when products (or entire companies) are being presented as more environmentally friendly than they actually are.

But the DECGT does not stop at prohibiting incorrect statements. Under the directive, all "green claims" will have to be substantiated and will only be permitted if there is a true and relevant contribution to positive environmental impacts. Generic claims such as "eco-friendly", "green" or "energy efficient" will be prohibited if no excellent environmental performance can be demonstrated. Additionally, companies will be banned from addressing such claims towards the entire product when in fact only minor parts of the product or only the packaging are concerned, for example, are made of recycled material.

The DECGT goes even further regarding generic claims like "conscious" or "sustainable". They will be prohibited if the environmental performance is exclusively based on other aspects such as social ones (e.g. the quality and fairness of working conditions).

Furthermore, the DECGT prohibits claiming that a product has a climate neutral, reduced or carbon positive impact on the environment in terms of greenhouse gas emissions if such a claim is purely based on the purchase of carbon offsetting credits. At least in the EU, this has become a common practice which will no longer be permitted once the DECGT is in effect and transposed into national law.

Limiting the use of sustainability labels

Strict requirements will also apply to sustainability labels. In the future they will have to be backed up by a third-party certification scheme or established by public authorities to ensure their transparency and credibility. Thus, advertising with individually created sustainability labels will likely come to an end.

Next steps

The directive still needs to be approved by the European Council which is expected to happen soon. Member States will then have 24 months to implement it into national law. Therefore, the new rules will likely take effect in mid 2026.

For the complementary directive proposed by the Commission – the Green Claims Directive - a vote in the committee is supposed to take place in mid-February 2024 after which it would go to the plenary. If all goes to plan the Green Claims Directive could become law before the EU parliament elections (taking place in June 2024). The Green Claims Directive will safeguard the DECGT and also provide measures for breaches of the DECGT, i.e. through fines.

What does it mean for business?

For companies, the new rules will likely separate the wheat from the chaff – companies that are serious about protecting the environment and that really want to continue using their engagement in advertisement will do what is necessary to satisfy the envisaged rules. Others may need to consider cutting down on "green" advertising claims. However, anyone who still wants to refer to its company or products as environmentally friendly must be prepared to increase investments. Higher costs will not only result from adjusting product packaging, flyers and media related statements but will also arise from providing comprehensive data to substantiate the claims. Depending on the nature and complexity of the environmental claim, the related substantiation costs can vary significantly (e.g. if conducting a study becomes necessary).

But it's not all bad news: Once the new rules enter into force, companies with substantiated "green claims" will be able to distinguish themselves from competitors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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