TL;DR:
New EU legislation, the ‘Green Claims Directive,’ will impose stricter conditions on corporate communication about environmental impact.
In addition, companies are required to more accurately report their sustainability efforts. Regreener’s vision on carbon credits is clear: We should all prioritize the reduction of our own carbon emissions (scope 1-2-3). However, for the remaining emissions, CO2 compensation (through carbon credits) can be a valuable contribution to a sustainable future.
Introduction to the Green Claims Directive
Green claims: once you pay attention, you see them everywhere. A green claim (environmental claim) is any form of (marketing) communication in which a company makes a statement about its impact on the environment. There’s nothing inherently wrong with a green claim. On the contrary, sustainable initiatives are crucial in the fight against climate change, and communicating about them can be inspiring.
However, the problem is that in recent years, companies have (consciously or unconsciously) greatly exaggerated their positive impact. For example, research by the European Commission in 2020 showed that about 50% of the assessed environmental claims in the EU provided vague, misleading, or unfounded information about product characteristics.
This misleading communication, also known as ‘greenwashing,’ has led to confusion and distrust among consumers regarding sustainable initiatives. Genuine sustainable efforts suffer from this. Misleading environmental claims can distract attention from authentic initiatives, slowing down the transition to sustainable business practices.
Moreover, greenwashing hinders the growth and competitiveness of sustainable companies, as it makes it harder to differentiate between truly sustainable products and those that only claim to be sustainable. As a result, greenwashing significantly impedes achieving the climate goals of the Paris Agreement (maximum temperature increase of 1.5 degrees).
For tips on how to avoid ‘greenwashing’ and ensure clear communication, click here.
If you want to learn how to become a sustainable business, read our blog on sustainable entrepreneurship.
Lost in all the information? Click here for our explainer, where we provide an overview of the key sustainability frameworks & certifications.
What is the Green Claims Directive?
With the Green Claims Directive, the European Commission's (EC) is taking steps to tackle greenwashing. Last spring, the new EU directive, the ‘Green Claims Directive,’ was approved by the European Parliament. As a result, the Green Claims Directive is expected to be legally implemented in all EU member states by 2026. The Green Claims Directive requires companies to communicate transparently about the actual efforts made to address the climate issue. Violation can result in public ‘naming & shaming’ and fines of up to 4% of annual revenue.
The Green Claims Directive has three main focus points:
It prohibits misleading claims about the environmental effects of a product or service.
It combats the spread of unsubstantiated public and private environmental labels.
It requires companies to be transparent about which part of their sustainability efforts relates to their own operations (such as CO2 reduction in their own value chain) and which part depends on CO2 compensation through the purchase of carbon credits.
In this blog, we will update you on the requirements that will be set for the use of carbon credits and the communication around them.
The Green Claims Directive sets conditions for the use of Carbon Credits
The EU acknowledges that carbon offsetting is a legitimate way to combat greenhouse gas emissions. Nevertheless, stricter requirements are set for communication regarding CO2 compensation. We have listed some key points from the Green Claims Directive:
• Prioritize your own CO2 reduction: Reducing your own emissions must take priority over using CO2 compensation as a mitigation strategy.
• Substantiate CO2 claims: CO2 claims must be based on recognized scientific evidence without exaggerating the impact of CO2 compensation. It will no longer be possible to claim a product is ‘carbon-neutral’ based solely on CO2 compensation. The consumption and production of products almost always have an environmental impact, but carbon credits can reduce this impact.
• Be Transparent: Companies making CO2 compensation claims must provide consumers with transparent information about the projects they support (such as the type of project, location, the amount of CO2 offset, and its impact).
• Use trusted quality standards: Scientific standards and methods must be used to assess and quantify the benefits of CO2 compensation projects to ensure credibility and integrity.
• Selection and control: Careful selection, monitoring, and verification in considering CO2 compensation projects are strongly emphasized to ensure that the supported projects contribute effectively to emission reductions and sustainable development.
Our view on the Green Claims Directive and the role of Carbon Credits
The Green Claims Directive is a positive development in the fight against climate change. The stricter requirements will help businesses and consumers distinguish between green initiatives and greenwashing. This distinction is also important when it comes to CO2 compensation. We see reliable carbon credits as part of a broader sustainability strategy. When used correctly and in combination with CO2-reduction, carbon credits are an essential part of the solution to combat climate change (see explanation at the bottom of this blog).
Moreover, the CO2 compensation projects from which you purchase carbon credits also hold significant societal value. Our projects support both sustainability and the economic development of local communities that are most affected by the impacts of climate change globally. Check out our projects for examples of such social initiatives.
*Want to learn more about the risks of climate change? The IPCC report, published by global climate change experts, compiles the latest scientific insights. *
Or read this explainer from the BBC.
Want to know how your business can reduce its emissions? We have identified the quick wins to help reduce your company’s carbon footprint.
Our Carbon Credit Principles
When misused, carbon credits can do more harm than good. Therefore, we recommend adhering to our CO2 compensation principles:
• Take responsibility for your residual emissions: Take responsibility for all remaining emissions by investing in climate projects, even outside your own value chain. Recent research by Trove Research shows that companies that set an internal price for all their (remaining) CO2 emissions reduce emissions twice as fast as companies that do not.
• Choose CO2 certificates from quality projects: Use CO2 certificates from projects that restore ecosystems and promote sustainable development in local communities.
• Report accurately: Calculate and report compensated emissions accurately to ensure the path to ‘net zero’ emissions can be consistently measured and reported.
• Be transparent in your communication: Commit to transparent communication and focus on broader climate goals. Compensation is not a replacement for reducing CO2 emissions but supports global efforts to reduce CO2 emissions.
Interested in sustainable entrepreneurship? Discover how to involve your employees in your sustainability strategy and why that’s a good idea.
Conclusion
In recent years, the lack of regulations and guidelines has allowed companies to make unfounded sustainability claims. This form of greenwashing has not helped the transition to a sustainable economy.
With the recently adopted Green Claims Directive, the EU aims to change this by setting clear conditions for corporate communication about environmental impact. Transparency is key here. Companies will also be required to report their sustainability efforts more accurately, as well as the distinction between CO2 compensation and CO2 reduction.
Regreener’s vision on carbon credits is clear.
We advise companies to use carbon credits as part of a broader sustainability strategy, in which the reduction of your own CO2 emissions (scope 1-2-3) is the core priority.
On the journey to sustainable business practices, it’s essential to be transparent about the start & end points of your journey, as well as every step in between. Regreener is your partner from A to Net Zero.
Extra info: The use of carbon credits in the fight against climate change explained
To meet the Paris Agreement and keep global warming within a safe boundary, the temperature increase must be limited to 1.5°C. Above this threshold, the risk of irreversible and disruptive consequences of climate change increases significantly, seriously threatening the stability of our ecosystem and the habitability of Earth.
For some sectors and business processes, it is impossible to completely eliminate emissions. There will always be some environmental impact linked to economic activity. Think of the impact of travel, material use, and food consumption. By making more conscious and smarter choices, it is possible to significantly reduce this impact in many cases.
Unfortunately, because we started the transition to a sustainable economy too late, the Earth will almost definitely warm up with more than 1.5˚C. On the current trajectory, the Earth is expected to warm up to about 3˚C. The CO2 ceiling, within which we can keep warming below 1.5˚C, will soon be breached.
It is still possible to bring warming back within the 1.5˚C limit, but reducing our emissions alone will not be enough. We will need to develop an ecosystem in which the Earth absorbs more emissions than our economy produces, allowing the planet to cool down. This means we must actively remove additional emissions from the atmosphere.
Thus, we believe carbon credits are valuable in several ways. They offer your company the opportunity to take responsibility for the emissions you cannot avoid and provide a way to compensate for historical emissions. In doing so, you contribute to achieving the goals of the Paris Agreement and help protect the Earth's stability for future generations.
