Political agreement on promoting sustainable products within the EU

In their trilogue meeting on 19 September, the EU institutions reached a provisional political agreement on a Proposal for a Directive as regards empowering consumers for the green transition which contains measures to improve consumer information on product durability as well as on a ban on greenwashing and other unfair commercial practices. 

For companies, the new regulations may provide some more legal certainty in a field that is factually difficult and legally largely unregulated. However, based on the currently available information, the new rules will entail new obligations and potentially give rise to new liability risks that companies must be aware of.

The new provisions are part of the first Circular Economy Package (read more here and here) and amend the Unfair Commercial Practices Directive and the Consumer Rights Directive. Based on the overarching goal of the new provisions to empower consumers for the green transition, they strive for better protection against unfair practices and better information. The compromise text is not yet available, but the press releases by the Council and the Parliament indicate that the following compromises have been reached.

Obliging traders to provide more reliable information about sustainability aspects

The amendments to the Consumer Rights Directive relate to commercial guarantees of durability and the legal guarantee of conformity in order to make information on such guarantees more visible. For instance, as requested by the Parliament, the amendments eventually introduce a label with information on the commercial guarantee of durability that producers offer. The Commission will be responsible for designing this label. With regard to the legal guarantee of conformity, information must be provided via a notice to be displayed prominently in shops and websites.

Avoiding unfair commercial practices with regard to sustainability

The amended Unfair Commercial Practices Directive provides for stricter regulations for traders:

• Traders may only use sustainability labels under tight conditions. The amendments define the key elements of the certification scheme they have to be based on (unless established by public authorities), with a view to improving the credibility of the label.
• Traders must avoid greenwashing, i.e., misleading and vague claims on the sustainability of products, including when it comes to the future environmental performance. The amendments are set to increase the transparency requirements for and the monitoring of such claims. In particular, generic environmental claims such as “environmentally friendly”, “biodegradable” or “climate neutral” are forbidden if recognised excellent environmental performance relevant to the claim cannot be proven.
• At the Parliament’s request, environmental claims that a product has a neutral, reduced, or improved environmental impact are prohibited if they are based on “unverified” greenhouse gas emissions offsetting schemes.
• Further banned practices include measures relating to the early obsolescence and repairability of products, incorrect durability claims in terms of usage time or intensity, a lack of information on unnecessary software updates, or the unjustified obligation to buy spare parts from the original producer. However, at the request of the Council, traders are only liable “if there is information available on the design features leading to those situations”.

Next steps

There are still several procedural steps that need to take place before the final provisions are published in the Official Journal, including endorsement by the Parliament and the Council, translation into all the official EU languages, and the formal adoption by the Parliament and the Council. The Directive will enter into force 20 days after its publication in the Official Journal and the EU Member States will need to transpose it into their national rules within the following 24 months.

Practical implications

It remains to be seen whether the new legislation provides certainty in areas that are characterised by considerable legal ambiguity and uncertainty, leaving companies exposed to unpredictable liability and reputational risks. For example, German case law on greenwashing in product marketing has so far been very inconsistent (read more in our blog post). With a new unified standard that applies throughout the EU, companies will hopefully be able to rely on an EU-wide level playing field.

In any case, based on the currently available information, the new provisions come with (in some cases far-reaching) changes and liability risks that companies should prepare for. This should include, for example, reviewing their existing green claims (e.g., with regard to forward-looking statements, and claims based on offsetting), and making sure they have appropriate backup as well as the right processes in place to avoid greenwashing risks.

The ban on greenwashing will be further tightened with the Green Claims Directive currently under discussion (read more in our blog post). Companies should therefore keep a close eye on the further progress of national and EU legislation as well as the corresponding case law and align their conduct accordingly.