Curbing Greenwashing in Europe

Have you ever bought a product that claimed to be eco-friendly, only to find out later that it was not as green as it was claimed to be? If so, you have been a victim of greenwashing, the practice of making false or misleading claims about the environmental benefits of a product, or company. Businesses often make claims about their products or services being “green” or “sustainable” without any attempt to provide any supporting evidence. As consumers become more aware of the importance of their daily choices and purchases, many businesses have become creative in the way they lure customers. A common tactic is to rebrand or redesign packaging to appear green-friendly using logos, buzzwords, and natural images. Some companies are unaware that they are engaging in greenwashing.

Why is it a problem?

Many organizations have put up a facade of sustainability relating to activities like recycling water and claiming that packaging is compostable, while they continue to emit more greenhouse gases and fail to reduce waste. This is not only a problem for the consumer and the environment, but also bad for business. Greenwashing is deceitful. It takes up space in the fight against truly environmental issues like reducing carbon emissions, deforestation and plastic ocean pollution.

A classic example of greenwashing is when Volkswagen admitted to cheating on emissions tests. It fitted various vehicles with a “defeat” device – software that could detect when it was undergoing a test – and altered the performance to reduce the emissions level.

This was active while Volkswagen was promoting the low-emissions and eco-friendly features of its vehicles.

Well-known brands’ supposedly eco-friendly and sustainable collections have been accused of greenwashing because of confusing labels for customers, lack of third-party verifications, misleading claims of circularity, promotion of fabrics in blends which is unrecyclable, and lack of public information about chain of production. You can find more detailed information in the Greenpeace report here.

EU legislation to curb greenwashing

On January 17, 2024, the European Parliament approved new legislation aimed at curbing greenwashing by businesses named The Directive on Empowering Consumers for the Green Transition (ECGT). The legislation is designed to promote transparency in product marketing, discourage a disposable mentality, and address the issue of products being designed to become obsolete prematurely.

This is a response to the increasing number of companies making misleading claims about the environmental benefits of their products or services. Some common tactics include using vague or irrelevant wording and terms, exaggerating or fabricating achievements, and hiding or omitting negative impacts. This Directive on greenwashing aims to protect consumers and the environment by ensuring that claims and labels are clear, accurate, and verifiable. EU countries will have 24 months to implement the new rules, after which “proportionate” penalties for companies that make false or unsubstantiated green claims may be applied.

How the ECGT will regulate environmental claims

The main objectives of this Directive are to:

• Outlaw generic environmental claims and other misleading product information
• Allow only sustainability labels based on approved certification schemes or those established by public authorities
• Provide better visibility of information about guarantees

The Directive will ban claims that a product has a neutral, reduced, or positive impact on the environment because of their use of emissions offsetting schemes.

Product Labeling

Companies operating in the EU are mandated to enhance the clarity and reliability of product labels by refraining from using broad environmental claims like “environmentally friendly”, “natural”, “biodegradable”, “climate neutral” or “eco” without proof.

Product Durability

Another important objective of ECGT is to make producers and consumers focus more on the durability of goods. In the future, information about guarantees must be more prominently visible and a new, standardized label will be introduced to highlight products with extended warranty periods. The new rules will ban baseless claims about durability and discourage premature replacement of  appliances and consumables (often the case with printer ink, for example), and falsely advertising products as repairable when they are not.

The EU directive on greenwashing and the rest of the world

ECGT is stricter than the UK’s Green Claims Code. The UK’s proposed new rules only require businesses to be more transparent about their environmental claims. These laws will serve as a model for other countries and regions, creating a trickle-down effect. Global companies will need to take note and adjust their behavior in line with the expanding legislation.

The implications for businesses 

1. Backup environmental claims with data: All environmental claims must be backed by data. Any claims made must align with the truth. Data will have to be collected on energy use, waste production, and greenhouse gas emissions if you wish to calculate and report on your carbon footprint. If you have reduced your carbon footprint by 20%, it must be verifiable. The same applies to claims of products being made of “100% sustainable materials”. Can you prove it? You can only manage what you can measure.
2. Audit trail for accuracy: An audit trail ensures the accuracy of the information reported. This may require the involvement of an independent and qualified third party to review data collection methods, check calculations, and verify the truth of claims.
3. Penalties for unsubstantiated claims: Penalties may be applied for misleading or unsubstantiated claims. This can lead to financial losses and/or reputational damage.

How to avoid accusations of greenwashing 

The Directive is about addressing the root causes and drivers of greenwashing. It aims to foster a culture of sustainability among businesses and consumers in the EU. Businesses need to establish a transparent system for accurate reporting. Greenwashing can be identified by its lack of any numerical evidence. Tracking and reporting on even small achievements avoid being accused of greenwashing.

How supply chain technology can help

Understanding the Directive and how it impacts your business can be confusing. A supply chain platform solution using easy-to-use software can help navigate in 7 ways:

1. Compliance with EU Laws: The technology platform can ensure that your business complies with the new Directive and any amendments that are made. Being open about your compliance can boost the competitiveness of your business.
2. Supplier Collaboration and Management:  A supply chain platform can facilitate seamless online communication and collaboration with suppliers. It eliminates side channels for communications and achieves transparency in the procurement process.
3. Optimal sourcing: You can match your suppliers with facilities and sources of supply that have the necessary capabilities and approvals such as GPP (Green Public Procurement) certification on one platform. The platform can help businesses identify these factories and approach them for the right product needs. This ensures that you are sourcing your products from factories that align with your sustainability goals and product requirements.
4. Efficient Data Collection: A platform should excel in data collection, ensuring all pertinent information is systematically gathered and organized. This not only streamlines the process but also enhances the verification process, ensuring businesses maintain alignment with their sustainability objectives.
5. Certificate Management:Various players in the supply chain such as suppliers or laboratories can upload certificates on the platform, where these documents get neatly organized, stored and can easily be retrieved. Furthermore the platform can automatically trigger an alert when certificates are about to expire and have to be renewed. This efficient management of data and certificates underscores the platform’s commitment to facilitating sustainable practices in a user-friendly manner. It ensures that all certificates are systematically organized, thereby streamlining the process of keeping track of them and enhancing the verification process.
6. Better transparency and accountability: Clear labeling helps consumers and regulators access and verify the evidence and sources behind your environmental claims. A technology platform can connect and integrate data from various sources and systems to provide the necessary proof.
7. Insights through analytics: Using the supply chain platform you can process and present large amounts of data and information visually and generate insights and alerts. This information helps environmental activists and experts monitor your environmental performance and impact enhancing your reputation.