The European Commission aims to transform communication and marketing practices by cracking down on unsubstantiated green claims. The Green Deal initiative, introduced in March of this year, represents a comprehensive and ambitious package of measures designed to eradicate baseless claims, backed by the threat of sanctions (European Commission 2023).
According to the Commission’s proposal, green claims will need to be independently verifiable in the future. If companies wish to use these claims for commercial purposes and consumer communication, they will be required to provide scientific substantiation. Companies will also be mandated to identify the environmentally relevant impacts of their products as part of their analysis.
A study conducted by the Commission last year revealed that up to 53% of green claims were vague, misleading, or lacking substantiation (European Commission 2022). A similar study carried out by the Ministry of Economic Affairs and the Finnish Environment Institute (SYKE) supports these findings, with up to 56% of claims made by Finnish companies being evaluated as inappropriate and misleading (Heinonen & Nissinen 2022).
These findings undeniably underscore the necessity for regulation to eliminate the unethical and misleading practices that have permeated marketing. This is also a matter of consumer protection. Companies compete for a competitive edge by establishing their brand through sustainability, and consumers must have the ability to distinguish between genuine and dubious claims.
Stakes are high and pressure is mounting
The Commission’s proposal would encompass all business-to-public (B2P) marketing activities, targeting consumers directly. The proposal would govern the usage of terms like “carbon-neutral,” “climate-neutral,” “recyclable,” and “environmentally friendly.” Moreover, the regulation would extend to so-called green product names and company names.
Discussions surrounding this topic are intensifying. The most substantial penalty under consideration is a fine of up to 4% of a company’s turnover. It is hoped that these sanctions will be stringent enough to deter companies from attempting to bypass the directive solely through financial penalties.
Regulation may prompt some companies to discontinue their responsible marketing efforts to evade potential repercussions. Nevertheless, this respite is likely to be short-lived, as the obligation for large companies to report on sustainability in accordance with IFRS standards is anticipated to extend to the SME sector in the near future.
Pressure is already mounting; as of June, large companies are now obligated to incorporate emissions from their supply chains into their sustainability reporting. In practical terms, this requires large companies to monitor the emissions of their subcontractors, thereby accelerating sustainability reporting within the SME sector.
The Age of Sustainability Accountability has arrived
Change is occurring swiftly, and its impact will be substantial. Consequently, now is the ideal moment to scrutinize your company’s marketing practices and determine whether they align with responsible, unethical, or deceptive practices. Are your claims authentic, inappropriate, or even misleading? Is your business model sustainable, and does your company possess the adaptability to confront future challenges?
You can access further information regarding sustainability assessment through initiatives such as Circular Economy Finland, funded by the Ministry of the Environment, or the Academy of Circular Economy, administered by Haaga-Helia University of Applied Sciences.
The European Commission 2022. Commission staff working document. Impact assessment report accompanying the document “Proposal for a directive of the European Parliament and 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”. SWD(2022) 85 final. Given 30.3.2022.
The European Commission 2023. Proposal for a directive of the European parliament and of the council of substantiation and communication of explicit environmental claims (Green Claims Directive). COM(2023) 166 final. Given 22.3.2023.
Heinonen, T. & Nissinen, A. 2022. Ympäristöväittämät Suomen markkinoilla. The Ministry of Economic Affairs and Employment of Finland Publications 2022:48. The Ministry of Economic Affairs and Employment of Finland. Helsinki.