Webinar Q&A: The EU Green Claims Directive – key takeaways

The Compensate webinar, The EU Green Claims Directive – key takeaways, was arranged in April 2023. In this Q&A, we answer the questions we received during the webinar. If you missed the webinar you can download the webinar recording . 

Do you know of any studies on the impact of green washing on brand value (and near + long term financial impact of this)?

This empirical research “explores the relationship among greenwashing, green brand equity, brand credibility, green brand associations and purchase intention”.  

Do you think the new ISO standard for Carbon Neutrality (due to be published by the end of this year) will help tackle the greenwashing issues? And do you think the standard will fit with the Green Claims Directive?

The draft of the ISO standard for Carbon Neutrality, which was open for public consultation until the end of March, was ambitious enough to effectively tackle most greenwashing issues. The standard goes much beyond the requirements in the Green Claims directive proposal. In fact, the ISO Standard is setting a good example for achieving integrity when offsetting. Hopefully, some aspects will be adopted in the final draft of the Green Claims Directive.

Does the Directive affect all the industries/economic sectors including the financial sector?

The Directive will cover all environmental and green claims regardless of the industry sector.

Do you think EU countries will apply stricter legislation than the directive? Which country's legislation is a good benchmark for today?

Under the proposal, Member States will have to designate competent authorities and give them all necessary powers of investigation and enforcement, to ensure compliance with the Directive and establish a regulatory and sanctioning regime. At the moment, we cannot tell whether the national legislation in member states will take a more strict stand or not.

(During the webinar, one of the webinar participants referred to the guidelines of the Danish ombudsman.)

Do you think the SBTi must become a legal standard? (recognized as this)

Setting net-zero targets under the SBTi is not a guarantee for science-based emission reductions. A recent research by Carbon Market Watch and NewClimate Institute investigates the transparency and integrity of the emission reduction and net-zero targets of 24 major global companies accounting for 4% of global emissions. Findings revealed concerning facts about companies' carbon neutrality and net-zero targets, which amount to greenwashing. 

For instance, 12 companies commit to no emission reduction target for their net-zero target year, 17 commit to less than 40% emission reduction, and only 5 out of the 24 companies studied commit to deep decarbonization with their net-zero pledges. Thus, being compliant with the SBTi is not a guarantee for integrity and many companies take advantage of the loopholes to continue greenwashing. So, there is no need/benefit of the SBTi to become a legal standard.

You can read the full report here . 

Any information you can provide on likely timelines for implementation?

It is a proposal which will be adopted by the European Parliament and Council through the ordinary legislative procedure. After that, the Directive must be implemented in national legislation in the EU Member States. We estimate that it will take at least 2-3 years before the actual implementation.

Could we think about a product standard like CE with marking the gCO2 included in the product, the origin country/company of energy used and separately certified offset in gCO2?

According to the proposal, environmental labels will need to meet strict requirements (see Directive’s Articles 7 and 8). Generally speaking, a marking similar to CE could help consumers, if the information behind the marking is verified, transparent and truly accessible. The product or its package should contain the substantiating information. If it is impossible to include the information in the product or package itself, an easy-access web link or QR code should be provided.  

You mentioned that no alignment with the Paris Agreement is required. Does that also mean that there are no requirements for Corresponding Adjustments for offsetting claims?

Offsets relied upon should be of high integrity, which implies avoiding double claiming by securing a corresponding adjustment, thus going beyond what countries have already committed to achieve under their NDC targets.

Will it be possible to communicate offset-claims in short marketing claims (e.g. for hang tags on textiles which offer very little space) and refer to more information then on the website (e.g. with QR Code)?

See directive proposal, Article 5 : Information on the product or the trader that is the subject of the explicit environmental claim and on the substantiation shall be made available together with the claim in a physical form or in the form of a weblink, QR code or equivalent.

You say we should do offset as the latest step but we cannot wait and do this later, when we have reduced our emissions. We have to start offset now too to be able to purchase offset later, otherwise the market will have no chance to develop and grow! Or what is your opinion on this?

We definitely agree that we need to offset our current unavoidable emissions. You can do these simultaneously: work with emission reductions and at the same time, offset those emissions you cannot currently avoid. The mitigation hierarchy highlights that carbon offsets should not replace emission reductions.

Are the claim flaws presented here also concerning insetting claims?

The proposal covers all environmental or green claims, so insetting is also included.

How will future monitoring of mitigation hierarchy be addressed through scientific evidence? Through 3rd parties?

The proposal doesn't include legally binding requirements for setting an emission reduction pathway and interim targets that are compatible with the goals of the Paris Agreement.

Is there evidence that there will be a review of the existing labels and potentially a ban to use some of them in the future?

The existing labels will be subject to verification, too. Only claims and environmental labels fulfilling the requirements would be allowed. 

Also, penalties can be assigned, as outlined in Article 17: Member States shall provide that penalties and measures for infringements of this Directive shall include: (a) fines which effectively deprive those responsible of the economic benefits derived from their infringements, and increasing the level of such fines for repeated infringements; (b) confiscation of revenues gained by the trader from a transaction with the relevant products concerned; (c) temporary exclusion for a maximum period of 12 months from public procurement processes and from access to public funding, including tendering procedures, grants and concessions.

What will be the exact role of CEN in this regulation?

The directive proposal document does not include reference to CEN, the European Committee for Standardization.

For the verification, does it have to be limited assurance? Or is advisory accepted?

The proposal introduces minimum requirements on substantiation and communication of environmental claims which are subject to third party verification to be delivered prior to the claim being used in commercial communications. See especially proposal Articles 10 and 11 .

Will the verification only concern labels or all marketing claims in general? Thanks!

The verification concerns both labels and claims. The proposal introduces minimum requirements on substantiation and communication of environmental claims which are subject to third party verification to be delivered prior to the claim being used in commercial communications.

What is considered scientific evidence? How scientific? What are the rules exactly? Is it just the ISO one or also others? How will they be comparable? What about recyclability?

Requirements on substantiation of environmental claims is explained in Article 3 of the proposal .

One of the main issues my customers mention when I talk about offsetting strategies is double counting. I have not seen anything regarding this topic in this new legislation. Do you think it will be addressed in the final legislation, or maybe there is some way already to avoid the double counting and I am not aware of it?

The climate-related claims that include the use of offsets have to be substantiated by methodologies that ensure the integrity and correct accounting of these offsets, but detailed requirements regarding double counting are absent. However, companies can already demand high-integrity credits, which avoid double counting.

Will there be a limit on how big companies will have to comply with this legislation? By personnel size or yearly revenue?

To avoid a disproportionate impact of the requirements on smaller enterprises compared to larger ones, microenterprises (fewer than 10 employees and less than €2 million turnover) are exempt from the obligations of this proposal unless they wish to use the rules.

Can we have your views on how final is this EU directive draft? Do you expect it to change a lot until its finalization?

It is a proposal which will be adopted by the European Parliament and Council through the ordinary legislative procedure. This may include introduction of amendments. After that, the Directive must be implemented in national legislation in EU Member States.

Interested in learning more? Download the webinar recording.