What the Empowering Consumers Directive means for your business

With the Empowering Consumers Directive (EmpCo), the European Union has introduced new regulatory requirements for corporate communications. These can be summarised as follows: anyone wishing to advertise on the basis of sustainability in future must provide appropriate evidence to support their claims. Failure to do so may result in substantial fines.

This creates new opportunities for companies that adapt to the new regulations at an early stage and align their sustainability communications accordingly. In doing so, they not only protect themselves against potential sanctions, but can also build trust with customers, banks and business partners through transparency, and use this trust strategically as a resource.

Challenges in sustainability communicationAt its core, EmpCo is designed with consumers in mind. The European Union developed the directive to protect consumers from misleading environmental claims (so-called ‘green claims’). And rightly so! Increasingly, companies are highlighting their own sustainability performance – or that of their products and services – in their communications and marketing without providing adequate evidence to back it up. According to the European Commission, 53 % of all green claims are based on vague or misleading information, and more than half of EU consumers have already been affected by such misleading environmental claims.

At the same time, EmpCo offers protection and guidance to companies that take their sustainable transformation seriously and wish to develop it into a strategic resource. After all, vague wording or deliberate misinformation not only undermines consumers’ trust in sustainable business practices, but also distorts competition.

Furthermore, for many companies, sustainability communication is fraught with uncertainties and complex regulatory requirements. Around a third of all companies deliberately choose not to report on their sustainability performance – often for fear of falling into the ‘greenwashing trap'. If you wish to safeguard yourself in this regard, for example by using a sustainability label, the Commission states that there are around 230 labels with varying transparency standards from which you must choose.

The rationale behind the EmpCo Directive

The EmpCo Directive brings greater clarity to this opaque jungle of sustainability communication. It forms part of the Circular Economy Action Plan under the umbrella of the European Green Deal and specifically addresses B2C sustainability communication by European companies. At a regulatory level, it includes general, misleading and unverifiable environmental claims, as well as non-transparent or untrustworthy sustainability labels, in the list of unfair commercial practices.

Environmental claims are defined as voluntary statements or representations that attribute specific sustainability achievements to a product, a brand or a company. They may be conveyed explicitly or implicitly, and regardless of their form – whether through text, images, symbols or other graphic elements. According to the Commission, this means that even a plant motif in the design of product packaging or colours associated with sustainability in an advert can constitute an environmental claim.

It is important to note that environmental claims or sustainability labels are not automatically problematic – provided they are properly substantiated. To this end, companies can draw on concrete environmental achievements or specific implementation plans. The key factor here is the nature of the environmental claim:

• General environmental claims: Claims that vaguely describe environmental or sustainability performance, for example using terms such as ‘green’, ‘environmentally friendly’, ‘bio-based’ or ‘climate-friendly’. They are permitted if they are specified in terms of a recognised outstanding environmental achievement.

• Forward-looking environmental claims: Claims regarding future environmental or sustainability performance, such as the transition to climate neutrality or a similar target. They are permitted if they are backed by a specific implementation plan.

• Offset-related environmental claims: Claims regarding neutral, reduced or positive environmental impacts in relation to climate-relevant emissions. They are permitted if they relate to the actual impacts across the product’s life cycle.

• Non-representative environmental claim: Claims about the entire product or the entire business activity that in fact relate only to a part of the product or business activity. They are generally not permitted.

The same applies to sustainability labels. They may be used in corporate communications provided they are based on a recognised certification scheme.

Act now to avoid sanctions

Against the backdrop of the new EmpCo requirements, verifiable environmental performance, specific implementation plans and sustainability labels linked to recognised certification schemes are becoming a central component of corporate communications. They ensure the relevance, credibility and transparency of environmental claims through monitoring mechanisms involving competent and independent third parties.

Companies should develop these building blocks as soon as possible. This is the only way they can safeguard their communication measures against penalties that may come into effect when the Directive enters into force in September. In Germany, the Directive was already transposed into national law in February through an amendment to the Unfair Competition Act. Under this legislation, misleading environmental claims constitute an administrative offence which, depending on the size of the company, can be punished with a fine of €50,000 or up to four per cent of annual turnover.

How can they prepare for EmpCo? Firstly, a comprehensive risk analysis of current environmental statements is required, identifying all green claims in product names, advertising campaigns, on packaging and on websites. Environmental claims that pose a risk should be amended in the short term and underpinned in the long term by a strategic communication strategy. This includes, for example, monitoring and reporting processes to ensure consistent sustainability communication, building up internal resources and expertise, and developing documentation systems for environmental performance, implementation plans and sustainability labels.

We would be delighted to support you with our expertise on regulatory requirements and sustainable communication!

Featured image: Annie Spratt via unsplash.com