EU Parliament adopts stricter requirements for environmental and sustainability-related advertising

On 17 January 2024, the EU Parliament adopted the “Directive of the European Parliament and of the Council amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and better information” (the text of the directive can be found here). The directive is often – and also in this article – abbreviated as the "EmpCo Directive".

The EmpCo Directive is based on a proposal made by the EU Commission in spring 2022 and is a component of the European Green Deal. In September 2023, representatives of the Council of the European Union and the European Parliament had already reached a provisional agreement on the text of the EmpCo Directive in the so-called "trilogue procedure" with the mediation of representatives of the European Commission. As part of this process, the Council had already announced that it would also formally adopt the text then passed by the EU Parliament. 

Some changes to the UCPD relevant to competition law

The EmpCo Directive aims to amend two existing directives, firstly the Unfair Commercial Practices Directive (2005/29/EC, or "UCPD" for short) and secondly the Consumer Rights Directive (2011/83/EU). This article focuses on the amendments to the first directive – which introduces new requirements for advertising in connection with "green claims" as well as so-called "social claims". The key aspects are outlined below:

Introduction of new definitions for green claims by the EmpCo Directive 

Definitions are introduced for "environmental claims", "generic environmental claims", "sustainability labels" and "certification schemes", which are included in the definition catalogue of the UCPD for the first time.  

• The EmpCo Directive is primarily concerned with generic environmental claims. These are environmental claims made in written form, orally or through audiovisual media (e.g. on television or in streaming services) that are not contained in a so-called sustainability label (see below) and where the "specification of the claim" is not provided in clear and prominent terms on the same medium (e.g. in the respective commercial, on product packaging or online sales interface).
  
  The recitals to the EmpCo Directive use the terms "environmentally friendly", "green", "ecological", "climate friendly", "energy efficient", "biodegradable" or "biobased" as examples. In concrete terms, this means that if on a garbage bag’s packaging, it is simply stated "biodegradable", for example, this is a generic environmental claim that will be subject to particularly strict regulations in the future. In contrast, a claim such as "the packaging is biodegradable within one month in the case of home composting" would be specific and therefore subject to different regulations.
   
• The "sustainability labels" also focussed on by the EmpCo Directive not only cover environmental aspects but also social characteristics. A sustainability label is therefore a voluntary trust mark, quality mark or equivalent, either public or private, that aims to set apart and promote a product, a process or a business with reference to its environmental or social aspects or both. (However, mandatory labeling required by Union or national law is not covered). 

Significant additions to misleading business practices 

The commercial practices provided for in the UCPD, which are considered misleading because, for example, a company deceives consumers about the main characteristics of a product through its advertising, are supplemented with regard to environmental and sustainability advertising or "social claims" as follows (non-exhaustive list):  

Art. 6 Abs. 1 (b) UGP: 

The main characteristics of a product that must not be misleading now explicitly include environmental or social characteristics or circularity aspects, such as durability, reparability and recyclability. 

According to the recitals of the EmpCo Directive, social characteristics in connection with the advertising of a product should be understood to relate to, for example, the quality and fairness of working conditions (such as adequate wages, social protection, work environment safety) or the respect of human rights, gender equality, inclusion and diversity or animal welfare. The EU legislator therefore not only wants to prevent greenwashing, but also so-called "social washing". The latter refers to a strategy by which companies present themselves as more socially responsible than they actually are. 

Art. 6 Abs. 2 (d) UGP: 

Misleading business practices now also include making an environmental claim about future environmental performance without the company having made "clear, objective, publicly available and verifiable commitments". These must also be set out in a "detailed and realistic implementation plan", which must include "measurable and time-bound targets" and be regularly reviewed by independent experts. The company must also publish the results. In this way, the EU legislator wants to ensure that future-related claims such as "climate-neutral by 2050" are verifiable.

Art. 7 Abs. 7 UGP: 

In the situation where a trader offers a service that compares products and provides consumers with information on environmental or social characteristics or on circularity aspects, such as durability, reparability and recyclability, of the products or the suppliers of these products, information on the method of comparison, the products concerned and the suppliers of these products, as well as the measures in place to keep the information up to date, are now considered material information (within the meaning of Art. 7 (1) of the UCPD). It is thus now prohibited to mislead about any of these aspects.

Important: New "blacklisted" business practices

The newly included business practices in the so-called "blacklist" (Annex I to the UCPD) are particularly significant. In future, the commercial practices listed there will be deemed unfair under all circumstances, meaning that the court will not need to examine the specialities of each individual case:

• It is not permitted to display a sustainability label that is not based on a certification scheme or has not been established by public authorities. 
  
  The EU legislator defines such a "certification scheme" as a third-party verification scheme that certifies that a product, process or business complies with certain requirements and allows the use of the respective sustainability label. The certification scheme itself must also fulfil various requirements listed in the EmpCo Directive. One of the most important of these is probably the requirement that the monitoring of the company's compliance with the respective requirements must be carried out by a third party that is independent of both the company and the owner of the certification scheme. 
  
  For the future, this means that "environmental labels" or labels developed by the company itself that refer to social aspects are inadmissible from the outset. Furthermore, this also applies to sustainability labels that do not fulfil the other strict requirements for certification schemes, in particular those that are not third-party verified. 
   
• It is now also prohibited to make a generic environmental claim where the company cannot provide evidence of the recognised excellent environmental performance to which the claim relates. 
  
  The EU legislator understands "recognised excellent environmental performance" to mean, for example, compliance with the requirements of the EU Ecolabel or top environmental performance for a specific environmental characteristic in accordance with other applicable Union law. In this respect, it is interesting to note that even if generic claims such as "sustainable" or "responsible" are based on recognised excellent environmental performance, these are inadmissible if other social aspects are not also covered at the same time because such claims relate to other aspects in addition to the environmental aspects.
   
• It now also covers the phenomenon frequently observed to date of making an environmental claim about the entire product or the entire company when it actually only relates to a specific aspect of the product or a specific activity of the company. This business practice will also be considered unfair per se in future.
   
• At a later stage of the legislation process, a requirement was added that is likely to represent a significant tightening of the previous case law of the courts in some Member States. In future, claims that a product has a neutral, reduced or positive environmental impact in terms of greenhouse gas emissions will be regarded as unfair per se – if the claim is based on greenhouse gas emissions offsetting. The EU legislator cites claims such as "climate neutral", "CO2 neutral certified" and "limited CO2 footprint" as examples. In future, these will only be permitted if they refer to actual effects on the product life cycle and not to greenhouse gas emissions offsetting outside the respective product’s value chain. 

Roadmap – rules expected to be applicable from mid-2026 

The Member States have 24 months to implement the EmpCo Directive after it entered into force. For example, in Germany, this will probably be done by amending the Act against Unfair Competition again. Once this implementation period has expired, companies will have a further six months to adapt to the new regulations. The new requirements are therefore expected to be applicable from the third quarter of 2026.

Interaction with the Green Claims Directive? 

Now that the EmpCo Directive has been adopted, the draft of the "Directive on the substantiation and communication of environmental claims" (2023/0085 (COD), in short: "Green Claims Directive", see our article from 28 March 2023 here) is coming to the fore. The proposal is currently still being negotiated in the relevant committees of the EU Parliament and preparatory bodies of the Council. It would be welcome if the EU Commission's current proposal were to be aligned even more closely with the recently adopted provisions of the EmpCo Directive.

Change in German case law

With the implementation of the EmpCo Directive into the German Act against Unfair Competition, German courts will be given more precise guidelines for assessing whether a case of unfair environmental advertising exists. At the same time, the focus is also shifting to "sustainability advertising" based on social criteria or advertising with "social claims". The inclusion of certain "greenwashing" practices in the blacklist – i.e. the catalogue of business practices that are always deemed unfair – is also likely to ensure that German courts will now assume unfair advertising in previous cases of doubt.

The Regional Court of Karlsruhe (judgement of 26 July 2023, Ref.: 13 O 46/22 KfH) and the Regional Court of Berlin (judgement of 19 September 2023, Ref.: 102 O 15/23) have already ruled that financially supporting certain forest protection projects is not a suitable compensation measure that allows advertising with claims such as "climate neutral" or with the compensation of CO2 emissions. In future, this legal understanding will be expressly supported by the EmpCo Directive. The strict line previously taken by the German courts is thus confirmed at EU level.