EU: Council adopts negotiating position on the Green Claims Directive

17 June 2024 marked a significant milestone in the EU’s fight against greenwashing, as the Council adopted its negotiating position (also known as its “General Approach”) on the Green Claims Directive (see Council press release).

What is the Green Claims Directive? 

The EU Commission published its proposal for the Green Claims Directive on 22 March 2023 (see our previous blog post). The Directive aims to combat greenwashing by establishing minimum criteria that companies must meet when making claims to EU consumers about the environmental benefits and performance of their products or services (i.e., substantiation, communication, and verification of environmental claims). It also sets minimum criteria for environmental labelling schemes. 

The Green Claims Directive complements the Directive on Empowering Consumers for the Green Transition which was recently adopted (see our previous blog post) and the Ecodesign for Sustainable Products Regulation (see our previous blog post).

The key elements of the Council’s negotiating position, which is less stringent than the European Parliament’s position (see our previous blog post), particularly regarding carbon neutrality claims, are summarised below.

Climate related claims and carbon credits

One of the key changes introduced by the Council concerns climate related claims and, in particular, a different approach to the requirements for claims based on carbon credits. 

In this context, it is important to note that under the Unfair Commercial Practices Directive (UCPD), which has been amended by the Directive on Empowering Consumers for the Green Transition, any claims that a product has a neutral, reduced, or positive impact on the environment based on the use of carbon credits are prohibited under all circumstances. In contrast, climate-related claims that a trader has a neutral, reduced, or positive impact on the environment, if based on offsetting, are permissible provided that they comply with the requirements set forth in the Green Claims Directive. 

Regarding those requirements, the EU Parliament proposed a stringent approach which only allows  compensation claims based on the use of carbon credits in respect of the “residual emissions” of a trader (see our previous blog post). The Council  places less emphasis on carbon credits specifically and rather focuses on imposing a range of general requirements for the substantiation of climate-related claims. When making explicit environmental claims related to climate, including claims based on the use of carbon credits, the trader’s assessment for substantiation must fulfil further criteria according to the Council, including:

• specifying whether carbon credits used relate to emission reductions or removals,
• explaining whether removals are permanent or temporary, and 
• declaring the scheme under which the credits were verified and certified and by which registry they were issued. 

Moreover, the Council proposes to set up additional requirements for so-called “offset claims” (i.e., explicit environmental claims related to climate regarding balancing out emissions by purchasing carbon credits). These are permissible only where they are substantiated with a demonstration of the trader’s commitment to a “net-zero target” (as defined in the European Sustainability Reporting Standards) and the trader discloses the percentage of emissions balanced by the carbon credits. 

The Council also suggests that the Commission should adopt implementing acts detailing the requirements for the assessment traders must conduct when generating climate-related claims.

Third-party verification and the simplified procedure 

According to the Commission’s proposal, when making explicit environmental claims, companies need to have these claims verified by an independent third party before their publication. 

While the Council’s position maintains the principle of ex-ante verification, the Council introduces a so-called simplified procedure for certain scenarios. In specific situations (including claims based on characteristics exceeding minimum EU requirements, companies certified by an environmental label or companies benefiting from eco-schemes or interventions under the Common Agricultural Policy Strategic Plan), companies shall be able to prove compliance through the completion of technical documentation before the claim is made public. 

Moreover, the Council wants the Commission to adopt implementing acts defining the types of explicit environmental claims that given their nature typically do not require a complete assessment and can thus also be subject to a simplified procedure. However, in this case, environmental claims relating to future performance or achievements, comparative explicit environmental claims and explicit environmental claims related to climate would be excluded from the simplified procedure. Consequently, such claims shall in any case be subject to the verification and certification requirement under the Green Claims Directive. In addition, in accordance with the new Directive on Empowering Consumers for the Green Transition, those claims need to be verified on a case-by-case basis and be supported by clear, objective, publicly available and verifiable commitments. This in practice means that companies shall face a dual verification process for these claims.

The Commission is also supposed to adopt an implementing act within 18 months of the Directive’s entry into force to specify further the format and content of the respective applicable technical documentation.

Environmental labelling schemes 

Under the Council’s position, it will still be possible for the Member States to establish new national or regional environmental labelling schemes as long as these have been approved by the Commission (which will only be the case if they provide “added value”). In addition, certain national and regional public environmental labelling schemes may be exempt from the third-party verification process provided that they are officially recognised in one Member State and that these schemes meet certain EU standards. Recognition by one Member State would be sufficient for the entire EU. 

Compliance and penalties

Finally, the Council has softened the Commission's proposals on compliance and penalties. While the Commission proposed a 30-days period for companies to bring an explicit environmental claim or the environmental labelling scheme into compliance once requested by the authorities, the Council suggests that such corrective action shall only take place “without delay”. Moreover, to facilitate a consistent application, the Council considers common, but only indicative and non-exhaustive criteria for determining the types and levels of penalties necessary. The Council also suggests to not explicitly refer to confiscation of revenues and exclusion from public procurement as possible penalties.

What next?

Both the Council and the Parliament are now ready to enter into negotiations (known as “trilogues”) in order to reach a final agreement on the text. Hungary, which will succeed Belgium to the Presidency of the Council of the EU as of 1 July 2024, aims to achieve the greatest progress in the negotiations of the Green Claims Directive, but given the differences between the positions, negotiations might very well be complicated. A final agreement is expected at the end of 2024 or beginning of 2025 at the earliest. The Council proposes that the Directive be applicable at a national level within 36 months from the date of its entry into force, an extension from the 24-month transition period initially proposed by the Commission.

For more information on the Green Claims Directive, see our blog post: How should companies prepare for the EU’s Green Claims Directive?

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