Greenwashing: key insights from the new EU Directive

What is greenwashing, and why should companies care?

Greenwashing has been one of the most debated topics in the communications sector in recent years. The growing public awareness of sustainability means that consumers are paying more attention to the environmental impact of the products they are considering buying. Companies must respond to new demands from their customers, not only from the characteristics and price of products but also from the need to minimize their environmental impact. In such a context, being able to communicate that a product is sustainable can give a company a significant competitive advantage. And it is in the wake of these principles that we find greenwashing, which the European Commission defines as a form of misappropriation of environmental virtues aimed at creating a green corporate image.

How does greenwashing affect the market?

The objective of preventing the dissemination of false or confusing environmental messages meets two main needs. On the one hand, it aims to prevent consumers' economic behavior from being distorted to such an extent that it leads them to make commercial choices that they would otherwise have made. Given products with similar characteristics and prices, the average consumer's rationality may lead him to choose the product with the lowest environmental impact. However, if sustainability information is presented misleadingly , the customer risks making the wrong choice. In addition, such a situation damages other companies - competitors of greenwashers - that behave legitimately and risk losing market share due to customers' misplaced trust in products advertised as having a low environmental impact.

How is the EU tackling greenwashing with new regulations?

The European Commission deemed it necessary to intervene with a legislative proposal after a general analysis of environmental claims made on hundreds of company websites found that in 42% of cases, there was reason to believe that the claims were exaggerated or false, in 37% of cases the claims were vague or general, and in 59% of cases no easily accessible evidence was provided to support the claims. The regulatory strategy was based on two pillars:

1. the identification of the main illegal practices in the field of environmental sustainability reporting;

2. the provision of new obligations and responsibilities for companies wishing to disseminate environmental claims, resulting in the adoption of the so-called "Greenwashing Directive" and the ongoing discussion on the so-called "Green Claims Directive".

What are the key points of the EU Greenwashing Directive?

EU Directive 2024/825 concerns the "empowerment of consumers for the green transition," reflecting the principle emphasized by European institutions: environmental sustainability also depends on increased consumer awareness. Therefore, it is essential that consumers are not misled about the characteristics of products and services. The Directive addresses the information consumers must have in order to make informed choices, defining as misleading any commercial practice that could mislead them about product characteristics, such as composition, social attributes, circularity, and recyclability. In the same spirit, it is illegal to make environmental claims about future performance that are not supported by clear, objective, publicly available, and verifiable commitments. In short, general environmental claims are prohibited.

Which greenwashing practices are now illegal?

The Directive contains a list of particularly serious commercial practices that are always considered unfair. Among the most important is the use of unreliable sustainability labels, the use of generic claims, making claims about a product as a whole when in fact they only relate to one aspect, and presenting legally imposed requirements as if they were a distinguishing feature of the trader's offer, making false claims about the durability of a product, misrepresenting a product as being repairable, inducing the consumer to replace consumables earlier than necessary, and falsely stating that the use of non-original spare parts may affect the functionality of a product. Interestingly, the legal text focuses on the whole life cycle of the product and not just the disposal phase, which is often - wrongly - the only phase considered.

What risks do companies face under the Greenwashing Directive?

A Directive aims to approximate the laws of the Member States by making them binding as to the result to be achieved, while leaving discretion to each country in its actual implementation. Therefore, each Member State must adopt national legislation to give effect to the content of the Directive. In the case of the Greenwashing Directive, Member States must take action by 27 March 2026, with the rules taking full effect on 27 September 2026. However, this does not mean that businesses will not face risks during the next two years. The general rules already in place on consumer protection, commercial communications, misleading advertising, and unfair competition are sufficiently flexible to cover cases of unlawful environmental claims. Even today, the dissemination of ambiguous or misleading environmental claims can expose companies to the risk of litigation and potential penalties.

Interested in learning more about sustainability performance measurement systems? On 22 October at 12 pm, the Oasis of CSR, the network for sustainability professionals, will host a new episode of the webinar 'How to measure sustainability performance' on LinkedIn. The webinar will be held in Italian.

Together with the Professor Lucrezia Songini from the University of Eastern Piedmont, we will analyze the main indicators and metrics that companies can use to assess their sustainability performance, as well as strategies for verifying and validating data and the most effective ways to communicate results to stakeholders.

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The webinar will be available for later viewing on YouTube with automatically generated English subtitles.