The EU Commission introduces proposals to ban "greenwashing" and empower consumers for the green transition

6 January 2023

The EU Commission (EC) has published a proposal to tackle "greenwashing" and better inform consumers about the sustainability of their purchases by amending two key pieces of consumer legislation: the Unfair Commercial Practices Directive and the Consumer Rights Directive.

Climate change and environmental issues continue to be key concerns for individuals, businesses and policy makers worldwide. As a result, "greenwashing" has become rife as businesses rush to declare that their products and services are "eco-friendly" and "sustainable" in a bid to appeal to consumers. However, overuse of such terms by businesses has watered down the meaning of the terms and left many consumers questioning their meaning.

Indeed, the EC considers these terms to be too vague and is now taking steps to tackle greenwashing in the EU as part of its Green Deal and goal to become the first climate neutral continent by 2050. On 30 March 2022, the EC published a proposal designed to empower consumers for the green transition and better protect them against unfair commercial practices. The EC have proposed amending two key pieces of EU legislation - the Unfair Commercial Practices Directive and the Consumer Rights Directive. The primary objectives of the directives are to protect consumers and support the single market and the environmental benefits under the EC's proposal are considered to be complementary to those objectives.

The EC's proposal has two key aims:

to better inform consumers about the durability of the products they are purchasing; and
to strengthen consumer protection against false environmental claims and greenwashing.

Durability and repairability of products

Under existing EU law, businesses operating in the EU are required to inform consumers about the main characteristics of a product and any legal warranties or commercial guarantees that accompany their purchase. However, there are currently no requirements for consumers to be informed about the general sustainability of products, including their durability and repairability.

Under the EC's proposal, environmental and social impact, durability and reparability would be included in a products' main characteristics. If the information provided in relation to these aspects is found to be false, this could be considered a misleading commercial practice, which could potentially lead to further action and sanctions by the relevant regulatory authorities. Such sanctions will vary between Member States but may include injunctions, compensation for consumers and fines based on annual turnover.

In relation to durability, businesses would be required to inform consumers when the commercial guarantee of durability is longer than the two-year legal guarantee. For energy-using products specifically, the manufacturer would also be obliged to inform consumers where it has not provided information on the existence of such commercial guarantee. This category is subject to more stringent requirements as it has been identified as the category that consumers are most interested in receiving information about. However, such proposal would not include products where the energy-using component is secondary to the main function of the good (e.g. an electric light for a bicycle or decorative lighting on footwear).

In addition, the practice of planned obsolescence, where products are designed to fail after a particular period of time (which leads to material waste), will be banned under the EC's proposal on the basis that it would be misleading if a business omits to inform the consumer about a feature of the product that may limit its durability.

In relation to repairability, consumers would be provided with a repairability score, as well as information relating to spare parts and their availability. However, this score need only be provided if it is already established by other EU laws. If a repairability score is not provided then consumers would have a right to information about spare parts, how they can be obtained and the availability of a repair manual. It's worth noting that this relates to spare parts manufactured by third parties too. If the product is incompatible with such third-party products then the consumer should be informed. For example, a printer company would have to disclose the fact that its printers' functionality may be impacted if used with third-party products, such as third-party ink cartridges.

The EC's proposals not only cover physical and tangible products, but digital products, content and services too. Businesses would therefore need to provide consumers with information concerning how long software updates will be provided for if these updates are offered for a period longer than the commercial guarantee of two years (but only if they have been given this information by the manufacturer). Under the EC's proposal, it would also be considered misleading to omit to inform consumers that a software update could negatively impact the use of the product (e.g. if updating the operating system would negatively impact any functions of a smartphone).

Ban on greenwashing

The EC has also proposed stricter regulations to clamp down on misleading and vague claims about the sustainability of products and services, commonly referred to as "greenwashing". To tackle this, the EC proposes adding a further ten items to the list of commercial practices which are considered to be "unfair" (Annex I to the Unfair Commercial Practices Directive). This list currently contains thirty-one items, and although these general rules can be applied to greenwashing, none of the items relate directly to sustainability. The addition of these ten items, which relate specifically to sustainability, is therefore a significant proposal that will have an impact on all businesses and their supply chains.

One such item is a proposed ban on generic claims such as "environmentally friendly", "eco-friendly", "eco", "green", "biodegradable", "carbon neutral" unless the product or service has been official recognised as part of an eco-labelling scheme. Currently, these terms are used extensively and the increased restrictions and evidential requirements to use such generic terms may force businesses to consider whether they wish to risk using them at all.

Further, it is commonplace for businesses to advertise the fact that they are committed to "net-zero" emissions within the next few decades. However, under the EC's proposal, such claims will only be acceptable if there are clear, objective and verifiable commitments and targets, which are being independently monitored.

The EC's proposal specifically targets certain practices, which demonstrates how seriously it is considering the adoption and implementation of its green agenda. For instance, another proposal includes a prohibition on advertising an element that is commonplace in the market as a particular benefit of that product or service. This would catch, for example, businesses that highlight the fact that their product does not contain a certain substance, when such a substance is typically absent from that product anyway.

What will the impact of these proposals be?

For consumers

In proposing these changes, the EC aims to ensure that consumers are fully informed when making purchasing decisions. Not only will consumers have more information available to them in terms of durability and repairability, but the reliability of that information should improve considerably due to the expanded list of misleading practices. Knowing that one product might last significantly longer than another may cause consumers to opt for different products, which may lead to long-term cost savings for consumers too.

For businesses

For businesses, there will likely be additional costs associated with providing the additional information required in relation to durability, updates and repairs. The EC's proposal estimates a total cost of EUR €9.1 – 10.4 billion for businesses to adjust and prepare for the proposed measures. However, the EC argues that since consumers generally wish to purchase products that last longer, demand should not be an issue for those businesses that are providing products that score well on durability and repairability. Indeed, the EC's related online consumer survey results showed that over half of respondents were willing to pay extra for a product that would last longer. For businesses that don't provide this information, these new requirements and the ban on planned obsolescence may force them to reconsider how their products are manufactured. Regardless, businesses will need to review their internal policies and processes to ensure that they have visibility of their entire supply chain in order to mitigate the risk of their marketing practices breaching the EC's proposed amendments.

The crack down on greenwashing will also bring additional costs to businesses who engage in the practice of using ecological/sustainable wording in their marketing campaigns. However, the EC argues that the amendments should benefit those businesses that make credible statements about the sustainability of their products/services with supporting evidence. Those that don't have the evidence to back up their claims may consider it safer to avoid making statements in relation to sustainability at all, which in turn could have a knock-on effect on consumer demand for their products.

Next steps

The EC's proposal must be considered by both the Council and European Parliament. It was discussed by the Council in October 2022 but is yet to be discussed by the European Parliament. If adopted, Member States will then need to implement these changes into local law within 18 months, with an additional 6 months to commence application.

Although this proposal is unlikely to come into effect for some time, businesses should continue to monitor the guidance being released in this space as regulatory authorities across the world turn their attention to sustainability and the fight against climate change. In particular, this proposal is complementary to and consistent with the EU's Green Claims initiative and Sustainable Products initiative, which should be monitored closely.