Background - What is the problem and what is being done about it?

In March, the EU released a proposal for a directive to provide legislation at European level on what constitutes an acceptable environmental claim. The directive will increase the methodological and substantiation requirements for all companies with over 10 employees or €2 million in annual turnover.

To drive the behavioral change needed to meet the EU's nationally determined contribution to the Paris Agreement, consumers need to understand how their choices can affect the climate. Should you buy the 'climate-smart' or 'eco-friendly' product? The proliferation of essentially meaningless environmental claims has reduced trust in the market and created problems for consumers to make informed decisions. Not only that, the lack of clear regulation has also allowed companies that have not put in the hard work to understand and reduce their emissions to benefit from vague claims.

Research findings on existing environmental statements in the EU (2020)

• 40% of environmental statements were deemed unfounded.
• 53.3% of environmental statements were based on vague, misleading or unfounded information.

To address this problem and create harmonized rules across the EU, a new directive on environmental claims has been proposed. The directive is intended to be preventive rather than punitive, and these rules will significantly raise the bar on what are acceptable marketing practices for environmental claims. The proposal is likely to be implemented by mid-2024 following amendments coming from the current consultation phase.

The main points from this early proposal are summarized below.

Calculation methods - If it cannot be measured, it cannot be claimed, and if it is claimed, it must be measured.

The proposed rules mean that if you want to make a claim about a particular product, you need to have a full understanding of the whole life cycle of the product. If you only want to make a claim about a specific part of the product, such as packaging or energy use, these areas need to be quantified and understood. In fact, it is forbidden to make claims about a product that is not fully understood.

Not only will the calculation method need to be transparent, but links to other environmental issues will also need to be quantified. Product Environmental Footprint Category Rules will be established for different sectors and provide a method to measure how the product will impact water, air, soil, land use and toxicity, among others. If it is decided that the product does not have a negative impact on these factors, this should be explained.

Carbon offsetting - requires emissions, removals and reductions to be specified

When a claim is made related to climate offsetting such as climate neutral, net-zero or climate positive, it must be made clear how much_CO2 is emitted and offset, rather than just making the basic claim that net emissions are zero. The regulation will also require transparent information on whether the project used reduces or removes greenhouse gases, along with an explanation of why the project is of high environmental integrity.

Future goals - It's too late for a goal without a strategy

There will also be requirements to make claims around future targets. Any claims about future environmental impacts will also need to be strongly substantiated to the same level as current claims. This means that if a company wants to communicate, for example, "net zero by 2030", they need to be able to provide a comprehensive strategy for how this will be achieved. If there is no clear plan on how to achieve the target, the target cannot be part of a marketing plan.

Ecolabeling - Certificates of conformity may replace the need for eco-labels

The Directive also addresses eco-labels. As consumers demand that companies do more for the climate, the number of labels available to companies is increasing. However, the integrity of these labels varies considerably, and the financial incentives for organizations to provide eco-labels to sub-optimal companies are clear. Research showed that almost half of the 232 active EU Ecolabels have weak or non-existent verification requirements.

The general objective is to reduce the overall amount of eco-labels on the market and create a greater homogenization of requirements. All labels must comply with this Directive as a minimum and be used in combination with a 'certificate of compliance'. This certificate must be issued by a third-party verifying body to certify that the claim, justification and methodology used are in line with the rules of this Directive. Exactly which companies or organizations will be eligible to provide these certificates of conformity is as yet unspecified.

Conclusion

The introduction of the new directive will create greater harmonization and ensure that products and organizations can make the same claims in all 27 EU countries. In Sweden, the Consumer Ombudsman has been regulating claims linked to eco-labeling in such detail and for such a long time that the changes required by Swedish companies will not be as extensive as the changes required by our European counterparts.

However, the new requirement for an EU Certificate of Conformity and the need to follow a more thorough environmental footprint methodology will create a significant change in the way companies make environmental claims. The consultation phase may lead to changes to the Directive, but it is likely that the main points mentioned above will remain. The increased clarity around what is required to make environmental statements is welcomed by ZeroMission and we are happy to assist you and your company with any issues that arise when trying to comply with this new Environmental Statement Directive.