Approximately 53% of the green claims made within the European Union (EU) are imprecise, deceitful, or unsupported, while 40% lack any corroborating evidence. The EU’s new green label criteria highlighted that a responsible company must ensure its brand is reliable, comparable, and verifiable.
The EU is currently counting 230 sustainability and 100 green energy labels, respectively. Each label is dedicated to serving different sectors, making it difficult to become transparent. As a company falsely claims its green label, buyers are easily tricked into being a victim of greenwashing.
The European Union (EU) has pledged to cut greenhouse gas emissions by at least 55% by 2030 with each nation announcing its national targets—some even higher. However, the year 2030 is not that far and many countries cannot afford to deal with greenwashing if they want to meet their climate target. Both the New Circular Economy Action Plan and the New Consumer Agenda have made avoiding greenwashing a top priority.
End of 2020, the European Commission showed the intention of asking for proof of green labels based on green marketing of a business. With a proposed new law, the EU is taking action to address greenwashing and protect consumers and the environment.
What is the current problem with the EU labels?
The Commission carried out inventories of green products as the businesses claimed in 2014 and 2020 by looking at 150 businesses for a wide range of products. The 2020 study found that 53.3% of them provided vague, misleading, or unfounded information about products’ environmental characteristics across the EU, and 40% were unsubstantiated.
For instance, the authorities encountered challenges in distinguishing whether the claim covered the entire product or only specific components, the whole business or a specific department, and which phase of the product’s life cycle it covered.
This highlights two major problems: (i) Lack of transparency and credibility, (ii) Environmentally conscious customers are faced with unclear or not well-substantiated brands.
A company can benefit from being transparent
Eco-friendliness is a significant factor when it comes to making purchases, regardless of industry or location, although price and quality remain the dominant considerations. Around the world, 60% of consumers consider sustainability as an important factor when making purchases.
One major study, done a few weeks before the COP26, included more than 10,000 people across 17 countries. The result shown in Figure 1 demonstrates the top 5 countries and their consumers, who are considering sustainability in their purchasing decisions.
Customer attitudes towards eco-friendly brands or companies differ not only between generations, but also between countries. Austria is at the forefront and has either significantly changed their purchasing behavior or adopted a more sustainable lifestyle, with 42% reporting such changes, followed by Italy at 41%, Spain at 35%, and Germany at 34%.
In the United States, 22% of consumers indicate major changes to their purchasing behavior, but this figure increases to 55% when including those who report making at least some modest changes.
In the last five years, a vast majority of people, about 85%, have reported adopting more sustainable purchasing practices globally. Nearly a third of the Millennial generation research sustainable alternatives whenever possible.
Last year, online research was conducted to gain an overview of European consumers on their buying expectations and attitude. As shown in Figure 2, 69% of European adults wish the companies were transparent about their sustainable practices.
How the EU aims to eliminate greenwashing?
The EU’s new directive would mandate companies to comply with minimum requirements for substantiating and communicating voluntary green label claims.
Scientific evidence: To ensure that environmental labels are credible, businesses will be subject to independent verification processes before product placement in the market. The information regarding the environmental footprint of a product must be easily accessible to consumers through QR codes or website links.
Clear and Transparent: To maintain clarity and transparency, companies must comply with minimum standards for substantiation and communication, with verification performed by a third party and regular reviews conducted to ensure ongoing compliance.
Avoid Vague Claims: Unless set by EU rules, the use of aggregate scoring of the product’s overall environmental impact on biodiversity, climate, water consumption, and soil shall not be permitted. This should take into account all significant aspects, the use of hazardous chemicals, whether the claim is accurate for the whole product or only for parts of it.
Greenhouse gas offset: Businesses that are marketing their carbon offset should be presented transparently, including accurate primary or secondary information.
Development of New Schemes: Unless developed at the EU level, new schemes will not be allowed, and new private schemes are only allowed if they can show higher climate ambition than existing ones. The scheme must prove the significance of impacts and performance from a life-cycle perspective, and make sure that the product is environmentally friendly.
To prevent greenwashing and abide by the Green Claims Directive, EU corporations may face severe repercussions, including fines of up to 4% of their annual revenue, confiscation of trader revenues, and exclusion from public procurement and EU funds for a period of up to 12 months.
By avoiding false claims, a business or organization not only avoid the greenwashing practice, but also enhance the green advertising and competitiveness of firms that are working to boost consumer demand for their products and services.
Summary
In March 2022 the European Commission proposed to update EU consumer law to ensure that consumers are protected against misleading environmental claims
The new criteria require companies to provide evidence for the eco-friendly or green-label claims of their products using robust, scientific-based, and verifiable methods
Customers in the EU could get adequate information on products’ durability and repairability before purchasing from the businesses
Not complying with the new criteria can result in penalties for the organization, such as fines of up to 4% of yearly turnover
