The European Union is proposing new rules to crack down on “greenwashing” by protecting consumers from false environmental claims.

The EU has proposed the Green Claims Directive to ensure products and services meet minimum criteria and provide consumers with reliable information about their impact on the environment.

It builds on the European Commission’s commitment to ensure consumers are empowered to make better informed choices and play an active role in the ecological transition.

The move is a warning to companies making green claims to ensure they avoid potential legal problems by complying with the proposals. It comes at a time when greenwashing and climate-washing litigation is increasing.

In 2020, the European Commission carried out an inventory of environmental claims, looking at their clarity, accuracy, and the extent to which they are substantiated with evidence that can be verified. The analysis found that 40% of claims were unsubstantiated.

The Directive aims to tackle unclear or poorly substantiated green claims - greenwashing -and environmental labelling schemes which are not transparent or credible.

It proposes a minimum set of criteria before a company can make green claims to consumers, and a prohibition on sustainability labels which do not meet a minimum transparency and credibility requirement.

The move is designed to ensure claims that fail the minimum criteria have to be removed and adjustments made to product packages, flyers, etc. Businesses will have to bear the cost of substantiation of claims.

The Directive would apply to companies - including those from the UK - placing products and services for sale on the EU single market. However, companies with fewer than 10 employees and an annual turnover not exceeding EUR 2 million are exempted. The proposal does not apply to financial services.

Any green claims must be verified by an independent, third-party accredited verifier and businesses must clearly show how they are going to deliver 'carbon neutral' or 'net zero' claims.

The Directive also sets minimum requirements for environmental labelling schemes to ensure transparency and claims are backed by scientific experts. Penalties for non-compliance may include fines of up to 4% of the trader’s total annual turnover in the Member State(s) concerned, as well as confiscation of the relevant product or any revenues deriving from that product.

Members States would be required to adopt penalties for infringement while businesses could face private enforcement action by consumer representative groups or environmental NGOs under the Representative Actions Directive.

W Denis Europe offer high limits of indemnity to protect businesses against various types of class actions and some commercial policies could respond to defend greenwashing claims. Policies are available for General Public and Product Liability, Product Recall, Professional Indemnity, Directors & Officers Liability and Management Liability and Environmental Liability Insurance etc. For any enquiries, please contact Vida Jarasiunaite Vida.jarasiunaite@wdenis.eu or Mark Dutton mark.dutton@wdenis.com