The European recommendations on greenwashing are part of a broader framework aimed at improving transparency, combating misleading sustainability practices and promoting a transition to a green economy.
Greenwashing refers to the practices of companies or institutions that present an exaggeratedly green or sustainable image of their products or services, without this corresponding to a tangible or verifiable reality. These deceptive practices aim to attract consumers interested in respectful and/or positive-impact qualities, while omitting the banal or even erroneous nature of the claims.
This phenomenon has become a priority for European regulators, with the adoption of several standards designed to tackle the issue from different angles.
Here are the main European measures and recommendations to combat greenwashing:
- CSRD (Corporate Sustainability Reporting Directive)
The CSRD (Directive (EU) 2022/2464) imposes strict requirements on the transparency and verification of ESG information. By strengthening sustainable reporting obligations for companies, this directive aims to reduce greenwashing practices by requiring more detailed and verifiable disclosures on companies’ environmental and social performance. Reports must be certified by external auditors, which is intended to limit unsubstantiated or misleading statements.
- European green taxonomy
The European Green Taxonomy (Regulation (EU) 2020/852) provides a clear framework for what can be considered a sustainable economic activity. By defining strict scientific criteria for determining the environmental impact of economic activities, it aims to limit ambiguity in the use of terms such as “green”, “sustainable” or “eco-responsible”. Companies must now prove that their activities meet the Taxonomy’s objectives, making it more difficult for them to exaggerate their environmental impact.
- SFDR (Sustainable Finance Disclosure Regulation)
The SFDR (Regulation (EU) 2019/2088) requires asset managers and financial institutions to disclose how they integrate sustainability factors into their financial products. Financial products must be classified under Articles 6, 8 or 9 depending on their degree of commitment to sustainability. This regulation is intended to prevent funds from being improperly marketed as “green” or “responsible”, when they do not meet the required criteria. Companies must also report on their sustainability due diligence, adding another layer of transparency and accountability.
- Unfair Commercial Practices Directive (UCPD)
The Unfair Commercial Practices Directive (UCPD) (Directive (EU) 2024/825) governs the way companies market their products and services to consumers, and combats commercial practices that mislead consumers and prevent them from making sustainable consumption choices.
European regulators now consider misleading environmental or social claims, such as greenwashing, to be unfair commercial practices. Companies promoting products as “green” or “eco-friendly” must now provide verifiable evidence to support these claims, or face sanctions.
- Guidelines issued by the European Securities and Markets Authority (ESMA)
TheEuropean Securities and Markets Authority (ESMA ) has published guidelines for financial market players on how to avoid misleading sustainability claims(Final Report on Greenwashing, June 2024). It recommends greater transparency in the communication of ESG risks and opportunities, and requires fund managers to clearly justify their environmental claims. These guidelines align with the SFDR’s insistence that market players have a responsibility to formulate substantiated sustainability claims and communicate sustainability information in a fair, clear and non-misleading manner.
- European Commission inquiry into green claims
A Commission study from 2020(Impact Assessment Report, March 2022) shows that 53.3% of the environmental claims made by the products analyzed were vague, misleading or unfounded, and 40% were unsubstantiated. The EU believes that “greenwashing” results from the absence of common rules on environmental claims, which in turn creates an unlevel playing field on the EU market, to the detriment of truly sustainable businesses.
- Directive on environmental claims
These findings have led the Commission to propose measures to standardize environmental claims and strengthen the criteria of evidence that companies must provide when using environmental labels. In September 2023, the European Parliament announced a provisional agreement with the European Council on new rules on greenwashing aimed at ensuring access to reliable, comparable and verifiable information and protecting consumers from misleading advertising(Proposal for a Directive, Green Claims Directive or Green Claims DirectiveMarch 2023). The agreement, adopted in plenary session on March 12, 2024, targets the general economy by updating the list of prohibited commercial practices to include greenwashing .
Thus, companies will have to prove their environmental marketing claims before they can claim terms like “biodegradable”, or “bio-based”, for example. The information used will have to be based on independent, verifiable scientific evidence, taking into account EU or international standards, such as the climate and biodiversity reporting obligations contained in the European Sustainability Reporting Standards (adopted in application of the CSRD).
Summary of main recommendations:
- Transparency and verification: All sustainability claims must be verifiable, based on clear evidence and audited by independent third parties.
- Clear criteria: Regulators encourage the use of frameworks such as the Taxonomy to define standardized sustainability criteria, in order to avoid vague or ambiguous statements.
- Harmonization of claims: Companies must use clear language and standards for their sustainability communications, to avoid misleading consumers and investors.
- Sanctions and audits: Sanctions for greenwashing practices may be applied, and independent audits will increasingly be required to validate the information provided.
These measures are designed to restore consumer and investor confidence in green claims, and to ensure that companies really are contributing to a green transition, while avoiding the excesses of greenwashing.
Sources:
EU strengthens regulations against greenwashing for more informed purchasing decisions, https://www.forbes.fr/politique/lue-renforce-les-regulations-contre-le-greenwashing-pour-des-decisions-dachat-plus-eclairees/
EIOPA’s Final Report and Opinion on Greenwashing – Advice to the European Commission
Greenwashing: Stricter EU rules on environmental marketing ban misleading and offsetting claims and introduce new information requirements for products, to protect consumers, https://cms-lawnow.com/en/ealerts/2024/01/greenwashing-stricter-eu-rules-on-environmental-marketing-ban-misleading-and-offsetting-claims-and-introduce-new-information-requirements-for-prod
“Greenwashing: MEPs vote to ban misleading green product advertising
Unfair commercial practices, EUR-lex https://eur-lex.europa.eu/FR/legal-content/summary/unfair-commercial-practices.html
Stopping greenwashing: how the EU regulates green claims,
EIOPA’s Progress Report on Greenwashing – Advice to the European Commission
Press release: Parliament seeks to improve consumer protection against misleading claims
Greenwashing: how EU firms can validate their green claims
Circular Economy: Commission proposes new consumer rights and a ban on greenwashing https://ec.europa.eu/commission/presscorner/api/files/document/print/en/ip_22_2098/IP_22_2098_EN.pdf
