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The Business Implications of the Green Claims Directive



Greenwashing, a phenomenon where companies or organizations spend more of their resources on marketing themselves as being sustainable than actually being sustainable. It is a deceitful marketing tactic used to gain favor with their consumers, as more become aware of their impact on the environment and make changes to be more sustainable. Whereas in the past it was easier for organizations to get away with it, consumers today have increased access to information. As their interconnectedness and consumption awareness increases, this leads to the severity of global issues to become more transparent. Now, many acknowledge that sustainability is not an issue that can be tackled only at a superficial level. This phenomenon has been occurring for a long time, and presents itself as a significant problem. In a 2020 study, 53% of green claims on products and services were found to be vague, misleading, or unfounded, while 40% were unsubstantiated.


GREEN CLAIMS DIRECTIVE

The Green Claims Directive is one of the the latest measures proposed to crack down on greenwashing. It was published by the European Commission, seeking to help establish an EU-wide policy in order to regulate environmental claims in the market. The majority of the Members of the European Parliament voted to pass the directive in mid-January. Therefore, it is anticipated that the policy will be in affect starting early 2026. With that being the case, firms could face penalties of at least 4% of their annual revenue for greenwashing. This directive hopes to ensure consumers receive accurate information regarding an organization’s products and services. Before companies can make green claims, they must be verified by an external agency and provide scientific evidence for said claims. This is an attempt to not only verify businesses are making a genuine effort, but to eventually put an end to greenwashing.


BUSINESS OBLIGATIONS

Businesses of all sizes and in every sector are impacted by this law. It compels organizations to take transparent actions that genuinely address environmental concerns, rather than merely following the trends or engaging in green marketing to boost sales. Compliance with environmental standards is no longer optional; it’s imperative for firms to consider the environmental impact of all their business activities or risk becoming irrelevant in the market. Ultimately, equipping consumers with reliable information is key in empowering them to make genuine sustainable choices.


Tackling misleading green claims and the greenwashing phenomenon as a whole is no longer an option but an absolute necessity. At BRANDi, we believe that sustainable and Future-ready organizations are those that incorporated the Triple Bottom Line (Profit, People, and Planet) into its cores. They will not only remain relevant but also strive in any disruptions that may arise including a legislation like this. While this directive is a well-intentioned proposal, the question remains as to whether such measures will remain sufficient, or will businesses and governments be expected to take bolder steps given that the world is already “on the way to climate hell.” What are you going to do about this?


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