European producers given greater obligations to decarbonise with extended producer responsibility and greenwashing regulation

Producers have an increasingly vital role to play in the decarbonisation of the supply chain. Jurisdictions across Europe are therefore gradually increasing the level of obligations attached to the manufacture and use of products. Increased awareness of green issues among the consumer base has also led to a surge in the green claims being made by businesses, resulting in a new wave of regulation and intervention to protect consumers against "greenwashing". 
 
In the third webinar of our Decarbonisation Week series, our expert panel examined the changing regulatory environment in three jurisdictions: the UK, France, and Poland, with a particular focus on Extended Producer Responsibility and the risks of greenwashing.

Extended Producer Responsibility 

Extended Producer Responsibility (EPR) involves expanding the liability of producers to cover wastage over the full life cycle of their products. Regulation in this space is designed to reflect the "polluter pays" principle – that the entity responsible for placing a product on the market should bear responsibility for any and all environmental impacts resulting from that product's life cycle.

While different jurisdictions have different EPR schemes, these will broadly require a qualifying producer to:

• Register with an EPR compliance scheme and pay the required fees. 
• Collect data surrounding the waste at all points of the product's life cycle.
• Report this data to the scheme administrator.

The position in the UK

To date, the UK's EPR focus has been on packaging waste and there has been an EPR scheme for packaging in place since 1997. 

The Environment Act 2021 enabled the government to implement regulations which set legally binding environmental targets for waste and to establish an EPR scheme which obliges manufacturers to contribute to the costs of waste disposal. The government has recently confirmed that a replacement scheme will be introduced that will require qualifying producers to pay for the full life cycle of the product being placed onto the market. The types of producers caught under the legislation will also be expanded to include brand owners who put products into packaging for sale, and online marketplaces. 

This will significantly increase the financial burden of packaging waste processing, shifting this responsibility away from the taxpayer, and is expected to result in a total annual cost to producers of £1.7bn. The government hopes that the new scheme will incentivise manufacturers to carefully consider their materials and process to ensure the greenest possible solutions are utilised.

The new scheme was originally intended to begin in 2023, but this has now been pushed back to 1 April 2024, which is the first reporting date. Manufacturers will have to begin collecting data in 2023 to meet this deadline. From then on, reports must be made biannually.
 
UK businesses should be beginning to consider whether they will be required to comply with this scheme, and how they will do so. Even if they do not meet the current threshold test for payments into the scheme (£2m turnover and 50 tonnes worth of packaging produced), there is a lower threshold (£1m turnover and 25 tonnes) at which qualifying businesses still need to report their data.

The position in France

In France, the polluter pays principle has a strong focus. There are currently 18 different EPR schemes in France, varying from household packaging to construction products and materials for the building sectors.

Similar to the UK scheme, these schemes require producers to either pay into an established eco-organisation or create their own individual waste treatment system, approved by the relevant local authority. They must also design products with a the aim of an efficient life cycle, and at the point of purchase must make buyers aware of the availability of spare parts. "Producers" are also defined broadly under French law, and includes any person who produces, imports or sells products that generate waste, and also includes online merchants.
 
There is also an emphasis on strengthening the information available to consumers at the point of purchase. There are numerous consumer information requirements, such as the obligatory reporting of the environmental characteristics of products along with their environmental impact.

The position in Poland

Currently the Polish waste management system does not meet the minimum EPR criteria set out by the EU in the Waste Directive 2018 and requires major amendments. The Single Use Plastics Directive 2019 was not adopted under Polish law, but it is anticipated that it will be implemented by the end of this year after a strong response from the European Commission.

It is also expected that a deposit return system will soon be implemented, which will oblige vendors to charge a maximum deposit fee of approximately €0.50 on plastic bottles up to three litres, plastic beverage packaging up to three litres, reusable glass beverage packaging up to 1.5 litres and aluminium cans up to one litre. Consumers will be able to return these products without a receipt; the system will be mandatory for stores larger than 200 square metres, however owners of smaller shops already declare that they will participate.

Greenwashing

As consumers place emphasis on a companies' environmental impact in their purchasing decisions, there has been a marked increase in claims of green credentials from corporates. It is important to ensure these are credible and trustworthy so that consumers can make an informed choice about the environmental impact of the products they purchase.
 
Greenwashing is where an environmental claim is misleading, and would cause or be likely to cause the average consumer to make a transactional decision they would not have made otherwise. As increasing importance is placed on the green claims made by businesses, many countries have seen increased regulation and/or intervention in this space in order to ensure that consumers are adequately protected.

The position in the UK

The rules which apply to green claims in the UK have been in place for some time and operate to generally protect consumers from false or misleading claims. The risk profile for businesses has, however, increased in light of the focus that regulators are putting on green claims.

The Competition and Markets Authority (CMA) has begun to consider instances where environmental advertising or labelling becomes an issue of breaching consumer protection. The regulator launched its Green Claims Code in September 2021 which lists a set of principles designed to help businesses adhere to the existing consumer protection regulations when it comes to green claims. The code requires that, among other things, green claims must be:

• Truthful and accurate.
• Clear and unambiguous.
• Not missing or hiding important information.
• Fully substantiated with up-to-date robust evidence.

 
The Advertising Standards Authority (ASA) has also been active in monitoring the green claims made by UK businesses. Recent ASA adjudications on this topic have been interesting, including a claim from Lipton that their bottle was 100% recycled, which was deemed misleading despite a small asterisk and disclaimer clarifying that the cap and label were excluded.
 
The risk for UK companies of falling foul of greenwashing claims continues to grow, as both the ASA and the CMA increase their focus on this area of consumer protection. The ASA is actively seeking out instances of greenwashing, including using online bots to search for green claims. The CMA is currently undertaking a sector investigation into environmental claims, and it is recommending that the government consider updated regulation and statutory claims (that carry criminal liability) in this space.

The position in France 

There have been numerous recent developments in the French approach to greenwashing. This includes a new law which confirmed that misrepresentations as to environmental criteria qualifies as misleading advertising as prohibited by the consumer code. There has also been a recent (1 May 2022) prohibition on the use of the terms "biodegradable" and "environmentally friendly" on a product or packaging. Similarly, since January 2022 plastic products and packaging may not be labelled "compostable" if their compostability can only be achieved industrially. From the same date, any mention of a product being comprised of recycled elements must be accompanied by the actual percentage of incorporated recycled materials. 

At present, the sanction framework for greenwashing claims is ambiguous due to some inconsistent wording, but it is possible that the Minister of Environment has the power to issue a €7.5k fine per tonne of product concerned. The government has also introduced the possibility that an organisation could be fined up to 80% of the cost of the false promotion campaign – a measure that is a world first in terms of being directly targeted at greenwashing.

The position in Poland

Poland currently has no specific regulation on greenwashing, but misleading environmental claims that occurs on the market may result in violation and penalties according to of competition and consumer protection regulations. Consequently, a penalty of up to 10% turnover achieved in the prior fiscal year if a violation of collective interests of consumers may be imposed. Despite initial proceedings, no such penalty has yet been imposed, though some proceedings have already been commenced relating to greenwashing practices. 

Additional regulation to strengthen the position of consumers in the ecological transition is expected in the coming year via amendments to existing EU directives.

Osborne Clarke comment

Though different jurisdictions have approached the issue of EPR in different ways, there is a clear trajectory towards increasing the responsibility of producers for the products that they place on the market. 

The shift towards holding producers accountable for the entire lifecycle of their products is likely to result in a significant increase in costs for producers – whether in the form of contributions to the costs of disposal, or in redesigning products and packaging to improve their reusability and recyclability. 

As regards greenwashing, recent high-profile examples of corporates being reprimanded for misleading green claims demonstrates the need for a cautious and fully considered approach to making any statements around a company's green credentials. 

While regulation varies across different jurisdictions, it is always important to consider what a consumer would interpret a green claim to mean. Absolute claims that cannot be substantiated should be avoided, and disclaimers used carefully. While the full consequences of non-compliance will depend on jurisdictional considerations, the reputational damage that can flow from a greenwashing claim can be considerable.

This Insight was prepared with the assistance of Luke Webb, Trainee Solicitor.