Unmasking Business Labelling—How the EU is Tackling Greenwashing

Greenwashing—the practice of marketing a product to look more environmentally friendly than it is—has become a buzzword for policymakers, consumers and businesses in recent years. Consumers are accustomed to seeing a wide range of environmental claims on the goods that they purchase, reassuring them that their decision is the most sustainable and helps the environmental well-being of the planet. While a company’s desire is to demonstrate the environmental merits of its products to entice buyers and outdo competitors, most environmental claims printed on labels are unsubstantiated or untrue. In fact, a study conducted by the European Commission found that over half of products and services assessed which contain explicit environmental claims showed a potentially misleading statement. This led the Commission to conclude that a lack of an EU-wide common standard for the companies making environmental claims can lead to greenwashing and unfair practices, and, in turn, mislead consumers from making educated choices on the sustainability of goods.

To prevent this, the European Commission has embedded consumer protection and awareness into its climate policy over the last four years. Through a range of initiatives under the Commission’s Circular Economy Action Plan, the EU has made combating greenwashing a top priority in its agenda. The Empowering Consumers for the Green Transition Directive will effectively ban generic environmental claims such as “green” or “eco-friendly” on products if no recognised performance can be demonstrated. This legislation goes hand in hand with the Green Claims Directive—still under negotiations with the co-legislators—which will set the rules allowing for voluntary claims in the EU. The new legal framework is expected to change the way companies communicate about their products in the years to come as they will be required to ensure transparency in the way they engage with consumers, providing information on the composition and origin of their goods through plans of digital product passports and environmental claims verified by an independent third-party entity. The EU hopes that this will create a level playing field amongst companies willing to show their efforts towards more sustainable production willing to show their efforts towards a more sustainable production.

The Commission has not stopped at empowering consumers to make responsible commercial choices but has also worked on improving responsible corporate practices: publishing initiatives dealing with early obsolescence, the destruction of unsold goods, and waste management. The EU wants goods to become more durable and repairable, and is requiring enterprises to be more transparent about their supply chains. Companies wishing to operate within the European Single Market must ensure compliance with a wide range of new requirements that can begin with the declaration of what plot of land a raw material originated from and end with extended producer responsibility schemes. Bigger questions remain around the effectiveness of these legislative initiatives. Will consumers really be empowered to make better, more sustainable decisions? Will the voluntary nature of the requirements mean that companies will merely remove claims from their labels instead of substantiating and, in turn, leave customers even more in the dark?

It will be up to the industry to decide whether these initiatives and the administrative burden they impose, will be successful. Companies will have to decide whether the added requirements are worth the cost of transparency and consumer support. Or will consumers decide to champion the companies that embrace the Commission’s demands?

Despite a widespread consensus amongst European institutions in favor of consumer protection and empowerment, the varying degrees of support between political parties leave many questions unanswered regarding the future of the EU’s ambitious green policies.

Ahead of the 2024 EU elections, many are wondering what will become of the EU’s ambitious climate and environmental policies and whether an expected change to the status quo of the European Parliament may lead to radical changes. The most current polls suggest a considerable shift to the right, as conservative groups will consolidate gains in key Member States, with the center-right European People’s Party (EPP) likely to remain the strongest political force, and the Greens expected to face a decline in support. These predictions warrant assumptions that the EU might aim its focus elsewhere, perhaps placing competitiveness and innovation ahead of the environmental performance of goods and services. However, while the green wave might subside, the long period of implementation and the considerable support for consumer rights will mean the EU’s Green Deal policies will continue to be relevant and a central part of the conversation in Brussels.