The New EU Law That’s Looking to Stamp out Greenwashing

April 11, 2023

April 11, 2023


Today's guest blog is authored by Tom Howarth of GreenBiz Group. The original post can be read here.


Consumers today face a barrage of eco-friendly messaging from the corporate world as it hopes to cash in on increasing concern for the environment. At the same time, an absence of common rules for companies making voluntary green claims has left the door open to greenwashing, making it increasingly difficult to gauge the fact from fiction when it comes to sustainable business practice. This is not just a problem for the eco-conscious shopper, who must now sift through reams of "sustainable" products to find one with bona fide green credentials — it is a problem for businesses, too. 


Companies making a genuine effort to reduce their environmental impacts, often at significant cost, are having to compete against others making the same claims but without putting in the work. This effectively negates the economic rewards for caring about the planet, particularly in industries with complex supply chains, where clearly communicating environmental impacts can be tricky. 

Conversely, businesses caught practicing greenwashing, or even those who are perceived to be, can expect drops in customer satisfaction and serious financial repercussions.


At the extreme end, the case of German car manufacturer Volkswagen springs to mind, after it saw profits tumble 20 percent following revelations in 2015 that the company had installed software to cheat U.S. emissions tests. Whilst sympathy for a company purposefully trying to dupe regulators should be limited, the case highlights the toxicity of greenwashing for all parties involved; businesses, consumers and, of course, the planet. 


The Green Claims Directive, proposed by the European Commission in late March, seeks to address this issue by establishing "common criteria against greenwashing and misleading environmental claims." The hope is that by homogenizing the standards for claims made by businesses across the trading bloc, consumers will have "more clarity, stronger reassurance that when something is sold as green, it actually is green, and better quality information to choose environment-friendly products and services." Businesses will also benefit, "as those that make a genuine effort to improve the environmental sustainability of their products will be more easily recognized and rewarded by consumers … rather than face unfair competition."


The need for the legislation is clear. An assessment of environmental claims carried out by the Commission in 2020 across a broad range of industries found that 53.3 percent "provided vague, misleading or unfounded information" about products’ environmental characteristics, while 40 percent had no supporting evidence at all.


What’s more, there are currently 230 sustainability labels and 100 green energy labels in use in EU markets, each with different criteria and levels of transparency. Even if some labeling schemes provide genuine sustainability credentials, it's unlikely the average person on the street would have any idea which ones they are.


Virginijus Sinkevičius, European commissioner for Environment, Oceans and Fisheries, put it well: "We want to help consumers become more confident about their choices and ensure that those companies that make genuine efforts to reduce their impacts on nature, resource use, climate emissions or pollution are rewarded."


How will the new rules work?


The objective of the new proposal is simple — prevent greenwashing by enforcing clear and harmonized rules and labels. Specifically, the measures will target explicit claims, examples of which might include: "T-shirt made of recycled plastic bottles," "CO2 compensated delivery," "packaging made of 30 percent recycled plastic" or "ocean friendly sunscreen."


Under the new rules, companies will need to have any such claims independently verified and proven with scientific evidence. Possible trade-offs will also need to be highlighted, to give a full and accurate picture of a product’s impacts.


Environmental labeling schemes, in the form of trust and quality marks that certify that a product or business meets the requirements set up by the scheme, are another target of the legislation. Such schemes can lack transparency and are not always credible; in response, the new proposal suggests banning the proliferation of new public labeling schemes unless they are developed at EU level, preventing individual Member States from developing their own. Private labeling schemes, on the other hand, can be approved at Member State level, but will need to demonstrate that they provide "added value" in terms of environmental ambition before going through the approval process. Labeling schemes from third countries (those that are not members of the EU, including the U.S.) will also need to be submitted for approval before products brandishing them are admitted into the EU market.


An assessment of environmental claims carried out by the European Commission in 2020 across a broad range of industries found that 53.3% 'provided vague, misleading or unfounded information' about products’ environmental characteristics ...


The penalties for non-compliance will not be cheap, either. Rogue traders caught making unfounded claims can expect fines of at least 4 percent of total annual revenue within any region in which they have been in breach of the rules — the same level as the penalties to be doled out under the EU’s recent law on deforestation-free products, set to be implemented next year.


Does the proposal go far enough?


Despite a warm reception from businesses and trade organizations, including the International Chamber of Commerce, the new proposal has drawn some criticism from environmental groups that claim months of lobbying by companies have left the rules "substantially watered down."


In particular, the new laws will not cover phrases such as "carbon neutrality," a favorite term used by companies looking to give their image a green makeover, according to the watchdog and think tank Carbon Market Watch. Others have argued that because the bill does not outline a single methodology to substantiate green claims, businesses will simply "cherry-pick" the ones that suit them best.


"Sadly, without harmonized methodologies at the EU level, the new Directive will provide little clarity to consumers and business, and will only complicate the job of market surveillance authorities," said Margaux Le Gallou, program manager for environmental information and assessment at the Environmental Coalition on Standards.


How successful the Green Claims Directive will be at stamping out greenwashing in the European Union market remains to be seen. Indeed, the bill is still subject to the approval of the European Parliament and Council before it becomes law, which will take at least a few months. However, if you consider this proposal in its broader context — as part of a package of recent legislation being pushed by the EU — then it’s clear that the world’s third largest economy is becoming an increasingly hostile environment for unsustainable businesses. Where the EU is succeeding is in making rules that must be followed by any company, operating anywhere in the world that wishes to sell to the half a billion or so customers who reside within its borders.


Disclaimer: Guest blogs represent the opinion of the writers and may not reflect the policy or position of the Northeast Recycling Council, Inc.

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Setting standards “would help scale up in efficiency in this system,” she added. Another problem: Textile sorting is largely done by hand, as opposed to other recycled materials that can quickly be sorted by a range of AI-enabled robotic sorting technologies, Goodge said. One reason hand sorting is the norm is because it’s tough to tell exactly what a garment is made of. “We need to know the fiber content to know how to recycle that garment,” she said, but the tag inside might simply say it’s made of 95% rayon and 5% “other.” A particularly itchy tag might get cut out of the garment entirely. “We need to look at a more systematic and technological solution to this,” she said – and technology is catching up. Handheld near-infrared devices can give insight into a garment’s material makeup, and when paired with AI or machine learning models, identifying fiber contents can become faster and more efficient. 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Thrift Stores: Making Landfill Diversion Attractive Thrifting is not a novel idea, but Americans have grown increasingly open to it in recent years due to a mix of rising costs, tariff worries, and economic instability, along with lingering effects of the COVID-19 pandemic, when people had extra time to sort through their closets for items to donate, said Giana Manganaro Cronin, associate director of retail for More Than Words, a nonprofit youth job training program based in the Boston area. More Than Words leverages its thrift stores as a primary means to deliver job training and secure stable employment for participating youth, she explained. The organization previously sold used books, but a surge in interest in secondhand shopping triggered by the pandemic led the nonprofit to adopt a thrift store model instead. This shift was not only vital for the environment and for keeping more items out of landfills, but also beneficial for the business and the young people involved, she said. The nonprofit's thrift stores, known as Boomerangs, achieve a 98% margin compared to the previous 62% margin from its retail bookstore model, and Manganaro Cronin anticipates this trend will persist. Gen Z shoppers are driving this movement, partly because minimizing their environmental impact is a fundamental value for that group, she noted. About 64% of shoppers in that age bracket explore resale options before purchasing new items, she added. Young consumers are expected to keep shaping this trend, said Uli Stosch, chief officer of strategic development for Planet Aid, a thrift store nonprofit that has gathered and reused over 2 billion pounds of clothing since its founding in 1997. Drawing on data from an annual resale report by online thrift company ThredUp, she noted that the U.S. secondhand apparel market expanded by 14% in 2024 and is projected to hit $74 billion by 2029. Labor-Intensive Export and Recycling Markets More Than Words and similar thrift stores strive to sell as many items as possible, but for unsellable goods, the organization frequently collaborates with secondary buyers such as wholesalers who have access to a wide array of additional secondhand markets, Manganaro Cronin said. Stosch noted that thrift stores and other secondhand retailers typically sell between 10% and 50% of their inventory, with a minor portion ending up in the trash, mainly soiled items unsuitable for wearing or use. Another share is categorized as mixed rags and baled for export, where it undergoes further sorting for reuse, resale, or recycling. Many of these bales are sent to Pakistan and Malaysia, where workers are trained to manually sort each piece to separate quality clothing for resale while diverting lower-quality textiles for other uses. Stosch described this process as extremely labor-intensive, requiring long hours of standing and sorting through items, and noted that there is a cap on how much textiles can be handled this way due to the time involved. From there, many clothes intended for resale are shipped to countries in Africa, the Caribbean, and Central America. Over 1.5 billion people globally depend on secondhand clothing, she said, particularly as an alternative to low-quality fast fashion brands. Guatemala has a notably strong secondhand import market, she added. A 2025 study by Full Cycle Resource found that the country imported 290 million pounds of clothing in 2023 and reused more than 91% of it, with women-owned clothing stores accounting for over half of the industry. Complex Streams, Complex Recycling Options When clothing or textiles are too worn or unfit for further wear and have already been downgraded to rags or industrial cloth, recycling becomes one of the next best options. This is where a fresh set of difficulties emerges, said Katarina Goodge, a materials research engineer at NIST. Textiles represent a complex and challenging waste stream to sort, partly because no established standards exist for handling these materials today, she said. Establishing standards would help boost efficiency in this system, she added. Another issue is that textile sorting is predominantly done manually, unlike other recycled materials that can be quickly sorted using various AI-enabled robotic sorting technologies, Goodge noted. One reason manual sorting remains standard is the difficulty in determining a garment's exact composition. Goodge explained that knowing the fiber content is essential to know how to recycle a garment, but the tag inside might only state it is made of 95% rayon and 5% other, or an itchy tag might be completely removed. She emphasized the need for a more systematic and technological approach, and noted that technology is advancing. Handheld near-infrared devices can reveal a garment's material composition, and when combined with AI or machine learning models, identifying fiber contents can become faster and more efficient. A handheld NIR scanner could be used alongside manual sorting to direct garments into appropriate bins, Goodge said, and larger-scale systems might identify textiles while on a conveyor belt, with a robotic arm component to pick out specific items. In the U.S., textile recycling infrastructure is less common than curbside recycling systems, though some companies have invested in such technology in recent years. A Future of Reuse, Repair, and Policy Change Legislation could drive changes in textile recycling efforts in the years ahead, the speakers said. California's extended producer responsibility for textiles law is being implemented, which will encourage more outlets for clothing donation, repair, and recycling, Stosch said. Countries in the EU are also required to implement similar textile EPR programs. Meanwhile, disposal bans in states like Massachusetts have led both thrift stores and lawmakers to consider what to do with textiles that are not suitable for resale but could be recycled into other products, Stosch said. Most thrift stores will accept apparel that is torn or missing buttons, as long as it is clean, she noted, adding that if it is clean, it can be turned into something else. There is also potential for creative ways to reuse or repair clothing before it reaches a recycling center, speakers added. For instance, community repair events are effective for teaching basic sewing skills and inspiring people to create something new from old apparel, Goodge said. She noted that the U.S. once had some infrastructure for repair, but that has largely disappeared because it is difficult to keep economically viable, yet repair efforts have significant potential to keep many garments as garments. P Read on IndexBox.