The Directive on Empowering Consumers for the Green Transition Through Better Protection Against Unfair Practices and Information (Directive) has been passed by the European Parliament.

It will enter into force once it is formally adopted by the Council and published in the Official Journal of the European Union. Member states will have 24 months to transpose it into national law, with such national law required to come into effect within a further six months.

The purpose of the Directive is to empower eco-conscious consumers to make informed purchasing decisions by prohibiting traders from adopting unfair commercial practices that could mislead consumers as to the environmental impact of a purchase. A European Commission study conducted in 2020 found that just over 50% of the EU products included in the study were promoted using vague, misleading or unfounded claims about their environmental impact.

Strengthening of existing consumer protection legislation

The Directive aims to protect consumers from such claims by amending both the Unfair Commercial Practices Directive (UCPD) and the Consumer Rights Directive. In particular, the Directive broadens the scope of misleading commercial practices under the UCPD to specifically include “greenwashing” claims. The Directive also adds to the blacklist of commercial practices which are, in all circumstances, treated as unfair, and introduces new obligations on traders to make information on product repairability and durability available to consumers at the point of sale.

Prohibited practices

The changes introduced by the Directive will be particularly relevant to traders who promote the sustainability of their products or services. Such traders should be aware that any environmental claims made in respect of products or services will now come under far greater scrutiny. Specifically, the Directive will prohibit the following commercial practices:

• Any commercial practice which misleads the consumer as to the environmental or social impact, durability or repairability of the product or the results to be expected from its use;
• The making of claims about future environmental performance (such as carbon-neutrality) of the product where such claims are not supported by clear, objective, verifiable and publicly available commitments and targets and without an independent monitoring system;
• Advertising benefits for consumers that are considered a common practice in the relevant market (e.g. if it is common practice in an industry to omit a certain chemical from a product, then the omission of that chemical should not be advertised as a benefit to the environment);
• Comparing products without providing information to consumers on the methodology behind how the comparison is carried out i.e. by naming the comparator products and suppliers as well as identifying the measures in place to keep the information up to date;
• Displaying a sustainability label that is not based on a certification scheme or established by public authorities;
• Making environmental claims about a whole product when the claim is only true of a certain aspect of the product;
• Making claims based on greenhouse gas emissions offsetting, that a good or service has a neutral, reduced or positive impact on the environment, unless the claim is based on the actual lifecycle impacts of the good/service and not based on offsetting outside the product’s value chain; and
• Making generic environmental claims (e.g. that a product is “biodegradable”) where no recognised excellent environmental performance can be demonstrated. Specific claims (e.g. that a product is “biodegradable through home composting within one month”) will not be caught by this prohibition.

Traders will also have positive obligations to provide accurate information to consumers regarding the durability and reparability of products, including how software updates affect products with a digital element.

One part of the puzzle – EU Green Deal and New Consumer Agenda

The Directive forms part of a larger package of initiatives set out in the EU’s New Consumer Agenda and Circular Economy Action Plan and follows the European Green Deal. It is intended to be complemented by two further initiatives:

• the Proposed Directive on Substantiation and Communication of Explicit Environmental Claims (Proposed Green Claims Directive), which aims to create a harmonised methodology for substantiating environmental claims; and
• the Sustainable Products initiative which builds on the current Eco-design Directive to introduce sustainability requirements for products sold in the EU.

These initiatives form part of a wider package of proposals to implement the European Green Deal and set the EU on the path to climate neutrality by 2050.

Enforcement

While national transposing legislation to implement the Directive will follow, the current penalties for unfair or misleading commercial practices in Ireland range from a €3,000 fine and/or six-month imprisonment for a first-time offender on summary conviction, to a €60,000 fine and/or 18-month imprisonment for a first-time offender convicted on indictment. These penalties increase for subsequent offences. Furthermore, if the offence has an EU-cross-border element, which will be relevant to many traders on the EU market, it can attract much larger fines of up to 4% of the trader’s annual turnover in the EU member states concerned, or where that information is not available, up to €2 million. Powers to enforce compliance rest with ComReg and the Competition and Consumer Protection Commission.

Impact for Traders

While businesses will likely have until mid-2026 to prepare for the incoming obligations, changes to the packaging and labelling of products can take time. Traders who make environmental claims about their products must start thinking now about whether any information displayed needs to be updated or further substantiated to ensure the continuity of product lines once the legislation becomes effective.

One of the benefits of the Directive and associated initiatives is that traders who make genuine and concerted efforts to be sustainable will be easily identifiable to consumers, standing out from those who fail to meet the standards required to substantiate their environmental claims. Although traders will need to apply concentrated efforts in ensuring claims are substantiated, consumers will be able to choose products that are genuinely better for the environment, thereby encouraging competition towards more environmentally sustainable products.

For further information on how the Directive and associated initiatives will affect your business and how you promote your products or services, please contact David Kirton, Annah Kenna or your usual William Fry contact.

Contributed by Louisa Muldowney