Background
In the EU, "green claims" are ordinarily governed by the Unfair Commercial Practices Directive (UCPD) regime, which is a general framework prohibiting unfair, and in particular misleading, commercial practices.
The Directive on Empowering Consumers for the Green Transition ("ECGT Directive"), approved in 2024, amends the UCPD to add specific provisions tackling unfair commercial practices relating to greenwashing, harmonizing the EU regulatory framework for green claims. It regulates voluntary environmental claims relating to products and to a "trader's" environmental performance, which include, for example, claims about the trader's impact on the environment as well as climate targets.
The ECGT Directive prohibits generic environmental claims, such as 'climate friendly' or 'sustainable,' unless supported by recognized excellent environmental performance. It also requires that claims related to the future environmental performance of a trader, such as Greenhouse Gas (GHG) emission reduction targets, meet detailed substantiation requirements.
For the purpose of the rules, voluntary sustainability, corporate responsibility, and environmental performance reports and disclosures are, in the broadest sense, advertisements for a trader's products, so any corporate or commercial communications and environmental claims made therein are subject to the ECGT Directive's regime. In a group context, reports published by a parent entity will, in most cases, be caught, even if products are sold by other group entities only.
Timing of compliance and implications for upcoming voluntary reporting cycles
The ECGT Directive must be transposed by Member States into national law by March 2026 and will be applicable from September 2026. As voluntary sustainability reports and disclosures for the financial year 2025 will be published before or around that time, the ECGT Directive's regime will already impact the next annual reporting cycle.
This also means that the regime will apply to voluntary sustainability disclosures containing environmental claims well before the Corporate Sustainability Reporting Directive (CSRD) becomes applicable to "Wave 2 reporters," who must publish their CSRD reports for FY 2027, starting from 2028.
The ECGT Directive will remain relevant to sustainability disclosures after the CSRD obligations come into force. It may apply to claims that exceed the mandatory disclosures required under the CSRD and the European Sustainability Reporting Standards (ESRS), as well as to voluntary commercial communications that may include CSRD-related data, such as voluntary environmental progress reports.
Applicability to B2B traders
While the ECGT Directive and the UCPD regime that it amends focus on a B2C context, the law of several Member States extends this regime to a B2B context in certain instances. Thus, depending on the law of the Member States in which they operate, the new regime for environmental claims could also be relevant for B2B traders.
Enforcement regime and fines
Infringements of the ECGT Directive's regime constitute misleading commercial practices with associated consequences. These are governed by Member State laws but can include (i) legal actions for injunctive relief by competitors and consumer protection organizations, and (ii) administrative penalties.
Notably, there is an existing enforcement regime under which certain widespread infringements may lead to coordinated actions by Member States. In the course of such coordinated actions, significant penalties of up to 4% of the trader's annual turnover in the Member States concerned, or EUR 2 million where turnover information is not available, may be imposed (national laws may provide for even higher penalties). In case of "widespread infringements with a Union dimension," essentially meaning infringements (likely) harming the collective interests of consumers in at least two-thirds of the Member States, accounting, together, for at least two-thirds of the population of the EU, the actions are coordinated by the European Commission.
This enforcement regime is still largely untested in practice, so it remains to be seen whether and how the European Commission will employ it and how it may, in the future, affect companies with an EU-wide footprint.
