Update on the proposal for the EU Directive empowering consumers for the green transition

On 17 January 2024, the European Parliament gave its final green light to the Proposal for a Directive on empowering consumers for the green transition through better protection against unfair practices and better information (the "Directive"). The Directive aims to ban greenwashing and misleading product information, in line with EU’s objective regarding circular, green, and clean economy, by enabling consumers to take informed purchasing decisions and therefore contribute to more sustainable consumption.

Key measures

The Directive – which will apply to business-to-consumer commercial practices – provides for amendments to the Unfair Commercial Practices Directive (the "UCPD") and the Consumer Rights Directive (the "CRD"), in order to seek better consumer information, improved product labelling and more visible guarantee information.

Amendments to UCPD

The Directive updates the list of product characteristics which can be the subject of misleading actions, including "environmental or social characteristics" and "circularity aspects, such as durability, reparability or recyclability".

Further, the Directive adds two commercial actions to the list of practices which are to be considered misleading if they cause or are likely to cause the average consumer to take a transactional decision that he/she would not have otherwise taken:

• making an environmental claim related to the future environmental performance without clear, objective and publicly available and verifiable commitments set out in a detailed and realistic implementation plan, that includes measurable and time-bound targets and other relevant elements necessary to support its implementation (e.g. allocation of resources) and that is regularly verified by an independent third-party expert, whose findings are made available to consumers;
• advertising benefits to consumers that are irrelevant and do not result from any feature of the product or service.

It also updates the list of information to be regarded as material in the case of specific commercial practices: where a trader provides a service which compares products and provides the consumer with information on environmental or social characteristics or on circularity aspects of the products or suppliers of those products, information about the method of comparison, the products which are the subject of comparison and the suppliers of those products, as well as the measures in place to keep that information up to date, must be regarded as material information.

Additionally, the Directive extends the list of commercial practices which must be considered unfair in all circumstances to include practices associated with the early obsolescence of products and greenwashing, e.g:

• displaying a sustainability label which is not based on a certification scheme or not established by public authorities;
• making a generic environmental claim for which the trader is not able to demonstrate recognised excellent environmental performance relevant to the claim;
• making an environmental claim about the entire product or the trader’s entire business when it concerns only a certain aspect of the product or a specific activity of the trader’s business;
• claiming, based on the offsetting of greenhouse gas emissions, that a product has a neutral, reduced or positive impact on the environment in terms of greenhouse gas emissions.

Amendments to the CRD

The Directive further details pre-contractual information to be provided to consumers when concluding contracts other than distance or off-premises contracts, i.e. information on the existence and length of a producer’s commercial guarantee of durability for all types of goods; the existence and length of the period during which the producer commits to providing software updates for goods with digital components, digital content and digital services; the reparability score of the good; other repair information, should no reparability score be available at EU level – such as information on the availability of spare parts and a repair manual.

The same pre-contractual information must be provided to consumers when concluding distance and off-premises contracts as well as the arrangements for payment, delivery, including environmentally-friendly delivery options where available.

Finally, the Directive provides that, to ensure that consumers are well informed and can easily understand their rights throughout the EU, a harmonised notice must be used to provide information on the legal guarantee of conformity for goods and a harmonised label must be used to provide information on a commercial guarantee of durability at no additional cost, covering the entire good and with a duration of more than two years.

What’s next?

In a next mere formal step, the Directive needs to be approved by the Council. After that, the Directive will enter into force on the 20th day following its publication in the Official Journal of the EU, Member States will then have 24 months to implement the new rules into their national law.

The Directive is also meant to work together with the proposal for a Directive on substantiation and communication of explicit environmental claims (the "Green Claims Directive"), currently being discussed at committee stage in Parliament which focus is to ensure that consumers (and genuinely sustainable companies) are protected against false environmental claims. The Green Claims Directive will provide for more details by setting minimum requirements on the substantiation and communication of voluntary environmental claims and environmental labelling in business-to-consumer commercial practices. The vote in the joint committee of the European Parliament is planned for mid-February and the confirmation in plenary for March 2024.

For further background and information you may want to read our further content here:

• Green Claims update – Green Claims Directive Proposal
• Green Claims Directive Proposal – The EU’s new approach to combat greenwashing

Current status and litigation risks for green claims in France, Germany, Spain, Italy and the Netherlands

Meanwhile, current national legislation is already leading to regulatory investigations, or civil and even criminal proceedings, depending on the circumstances and the jurisdiction. Many of the existing rules stem from unfair competition laws, which differ from one jurisdiction to another despite partial harmonization through European Directives. Indeed, some EU Member States such as France, Germany and the Netherlands have already developed national frameworks to prevent greenwashing.

France

For example, under French Law, greenwashing statements are already measured against the grounds of unfair misleading commercial practices, since Law no. 2021-1104 of 22 August 2021 ("Climate and Resilience Law") added an environmental dimension to the definition of misleading commercial practices. According to these provisions, a commercial practice is misleading when it is based on false or misleading claims, indications or representations concerning the essential characteristics of the goods or services, in particular the expected results of its use, notably its impact on the environment, or the scope of the advertiser's commitments, notably in environmental matters.

Besides, recent French Decrees nos. 2022-538 and 2022-539 of 13 April 2022, which entered into force on 1^st January 2023, prohibit to state in an advertisement that a product or service is carbon neutral or to use any wording of equivalent meaning or scope. This legislative framework gave rise to disputes and environmental claims were considered misleading (such as the use of the terms "greener" and "more ecological" when promoting a vehicle). Advertising campaign, notably in the aviation industry, were prevented because of improper use of environmental claims.

Germany

The legal landscape in Germany is also evolving primarily under the unfair competition law rules and case law in the context of misleading advertising. In this regard, a increasingly tighter understanding and application of the rules in more recent case law can be observed: whilst claims on climate neutrality are not forbidden in general and can in fact be positive, any such advertising must also explain or make reference to the facts supporting such a claim.

In particular, in 2023 several German higher regional courts had to decide on the advertising of products as "climate-neutral". The courts found that this term is not necessarily understood to mean an emission-free manufacturing process. Rather, the average consumer would understand the term "climate-neutral" to mean a break-even balance of the company's carbon dioxide emissions, knowing that neutrality can be achieved through both avoidance and compensation measures (e.g. certificate trading). However, even if this is the case, it should be made clear on the product and related information to what extent the company's own avoidance measures have been applied and to what extent offsetting measures have been applied.

Spain

The scenario in Spain is different, as there is no specific legislation on greenwashing yet. For this reason, general consumer protection and unfair competition regulations must be followed. Regarding consumer protection, for example, the General Law for the Defense of Consumer and Users recognizes, among the basic rights of consumers and users, the protection of their legitimate economic and social interests against unfair commercial practices, including illegal advertising. This being said, there is no rule that prohibits misleading or diffuse messages of environmental attributes. There are some cases in which Spanish courts have issued rulings against deceptive practices stemming from environmental claims.

Further, a Royal Decree (no. 1055/2022) on packaging and packaging waste prohibits packaging to be marked "environmental friendly" or equivalent to avoid littering.

Finally, companies in Spain have relied on existing self-regulation codes, which can provide guidance on how environmental issues should treated.

Italy

Unlike Germany and France and similarly to Spain, green claims in Italy are not covered by any organic legislative framework. Indeed, the only provisions expressly addressing them can be found within the self-regulation code of the IAP (the Italian advertising self-regulatory body).

Outside the purview of the IAP, practices related to greenwashing are primarily dealt with in the Italian Consumer Code (Legislative Decree no. 206 of 6 September 2005), particularly with its provisions on unfair commercial practices, and Article 2598 of the Italian Civil Code on unfair competition.

Despite the absence of harmonised legislation under Italian law, relevant cases and precedents highlight specific criteria for green claims. These claims must be clear, specific, and unambiguous, grounded in scientifically verifiable evidence, and both true and pertinent. Concurrently, they must facilitate a clear understanding of which aspect of the product, service, or activity the claimed environmental benefits pertain to, avoiding any exaggeration. Finally, such claims should not center on impacts irrelevant to the advertised product and should abstain from asserting the overall sustainability of i) a product when it pertains only to a component or phase of its life cycle, and ii) a brand when the green benefits relate only to a part of the company's products and activities.

Netherlands

In the Netherlands, greenwashing and sustainability claims are receiving increasing attention. The Authority for Consumers & Market (Autoriteit Consument & Markt, "ACM") is the responsible supervising authority in the Netherlands and can, for example, impose fines or orders subject to a penalty in case of violations with rules of misleading advertising and unfair commercial practices. In June 2023 the ACM updated its specific Guideline regarding Sustainability claims setting out five rules of thumb and practical examples to help companies phrase their sustainability claims. The ACM takes an active approach at the moment and sustainability claims are certainly one of its focus areas.

Apart from the (active) supervising role of the ACM, the Netherlands Advertisement Code Committee (Reclamecodecommissie, "RCC") plays an important role with the self-regulation system of advertising in The Netherlands. The RCC published advertising rules that can be found in the Dutch Advertising Code. Also, on 1 February 2023, the RCC even published – as part of the Dutch Advertising Code – a new Code for Sustainability Advertising (Code voor Duurzaamheidsreclame, “CDR”). It should be noted that the Code and the decisions made by the RCC are not binding.

Therefore civil law proceedings can and will also be initiated in the Netherlands in case of misleading advertisement and unfair practices. Dutch case law is evolving in the area of greenwashing and sustainability claims.

In conclusion

All in all, a lot is happening in the EU and on a national EU Member State Level.

Please get in touch with a member of Hogan Lovells’ ESG group or your usual Hogan Lovells contact if you wish to discuss this development. We stand ready to assist companies from all industry sectors to adjust their processes and operations as well as assess the associated litigation risks in this context.

Authored by Christelle Coslin, Christiane Alpers, Christian Di Mauro, Jon Aurrekoetxea, Manon Cordewener, Margaux Renard, Nicole Saurin, Karen Jelsma, and Roberto Isibor.

Hogan Lovells (Luxembourg) LLP is registered with the Luxembourg bar.