juillet 12 2023
Mayer Brown partner Christoph Crützen warns companies about EU directive against greenwashing
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Düsseldorf, July 12, 2023 - The planned EU guideline against misleading green claims in corporate communications presents considerable financial risks for the business sector, according to Christoph J. Crützen, partner for Intellectual Property at Mayer Brown in Düsseldorf. "The impact is comparable in dimension to that of the diesel scandal," Crützen warns companies in Handelsblatt (July 11, 2023 issue). "In the future, any misleading advertising statement could be subject to a sensitively high penalty," Crützen continued to tell the business newspaper.
Two factors are particularly dangerous for companies: First, the directive planned for 2025 will apply retroactively in many areas. Secondly, the new EU directive will reverse the burden of proof: companies advertising ecology-related claims will have to provide detailed scientific evidence of their own accord. Otherwise, Crützen said, there is a risk of substantial fines.
The EU wants to impose stricter sanctions on misleading environmental and ESG-related claims made by companies and at the same time increase the requirements for such statements. Above all, companies will have to scientifically prove statements about the effects of their products and services on the environment. Statements such as "is made from recycled materials" can be warned in future if they do not stand up to scientific scrutiny.
EU politicians justify the initiative by pointing out that a large number of products and business activities are currently being subjected to a greenwashing process. According to the observation, products are often labeled as "green" when they are not really green.
The new regulation is to apply to all companies that are listed on the stock exchange and have to submit sustainability or ESG reports. Highly regulated industries such as finance and healthcare are also likely to be affected. The legislative process was recently initiated at EU level.
For companies, the future legislation means a conflict of goals, says Crützen: "On the one hand, it won't be definitively clear until 2025 what kind of statements and evidence will be accepted in the future. On the other hand, customers already expect reliable information about how much or how little environmental damage what they buy will cause. The financial markets and investors also insist on clear statements. This is becoming much more difficult," sums up Christoph Crützen.
Two factors are particularly dangerous for companies: First, the directive planned for 2025 will apply retroactively in many areas. Secondly, the new EU directive will reverse the burden of proof: companies advertising ecology-related claims will have to provide detailed scientific evidence of their own accord. Otherwise, Crützen said, there is a risk of substantial fines.
The EU wants to impose stricter sanctions on misleading environmental and ESG-related claims made by companies and at the same time increase the requirements for such statements. Above all, companies will have to scientifically prove statements about the effects of their products and services on the environment. Statements such as "is made from recycled materials" can be warned in future if they do not stand up to scientific scrutiny.
EU politicians justify the initiative by pointing out that a large number of products and business activities are currently being subjected to a greenwashing process. According to the observation, products are often labeled as "green" when they are not really green.
The new regulation is to apply to all companies that are listed on the stock exchange and have to submit sustainability or ESG reports. Highly regulated industries such as finance and healthcare are also likely to be affected. The legislative process was recently initiated at EU level.
For companies, the future legislation means a conflict of goals, says Crützen: "On the one hand, it won't be definitively clear until 2025 what kind of statements and evidence will be accepted in the future. On the other hand, customers already expect reliable information about how much or how little environmental damage what they buy will cause. The financial markets and investors also insist on clear statements. This is becoming much more difficult," sums up Christoph Crützen.
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