Increasingly green companies with the new EU measures

2024 is a year of measures on sustainability for the European Union, committed for some time to regulating a number of key factors for the creation of a green economy from the point of view of development practices and models.

Greenwashing, that is, the practice of offering a false impression on the environmental impact of products by misleading consumers, has recently come under the spotlight. There has also been a series of measures imposed on enterprises with over 1000 employees and 450 million euros of turnover, now required to integrate due diligence and governance models to mitigate their impact on sustainability as understood in its environmental and social sense.
The two measures are currently at different stages of the formal process in the European institutions but confirm the clear direction that the European Union has taken now for some years to obtain structural results on sustainability issues starting from the economy and society.

Greenwashing: the directive is effective

Approved on 28 February 2024, Directive (EU) 2024/825 prohibits generic declarations on the environment issued without adequate supporting documentation, declarations of the neutral environmental impact of products also in the event of compensation actions and the use of environmental labels that are not based on certification schemes approved or established by public authorities.

The objective, besides greater protection of consumers, is the promotion of greater product durability through guarantee and repairability aspects linked to the environmental impact of the products. According to a study by the European Commission in March 2022 with the title “Empowering Consumers for the Green Transition” - the document -, 86% of consumers, in fact, desire greater transparency on the durability and, in general, the real impact of the products they buy. Information and the transparency of producers are in fact a means for getting all social and economic parties engaged in the green transition in progress in the European Union.

This concept has been well explained by the Council which, in a press release declares:

“The directive protects consumers against misleading self-declarations, including duplicitous declarations on the compensation of CO₂. It also clarifies the liability of professionals in relation to information (or the lack of information) on early obsolescence, unnecessary updates of software or the unjustified obligation to buy original spare parts. The directive, moreover, improves the information available to consumers in order to help them make circular and ecological decisions.”

New rules for corporate governance

New developments for the due diligence of EU and non-EU enterprises with 1000 employees, a turnover of over 450 million euros, or in franchising with a turnover of over 80 million euros if at least 22.5 million are generated through royalties. The new measures, approved in this first phase by the Legal Affairs Area in agreement with the European Governments, focus, in particular, on the human and environmental impact of activities carried out by companies that are required to prepare an ecological transition plan, in line with the Paris Agreements, that contributes to limiting global warming to 1.5 degrees.

Enterprises are, therefore, called on to mitigate the negative impact of their activities on areas which, besides the environmental one, range from human rights to worker’s rights, from child labour to slavery, from the loss of biodiversity to pollution. The new rules, in fact, push companies to engage with the entire supply stream from top to bottom in their field of activity, involving, therefore, suppliers, raw materials and logistics, with the aim of extending virtuous processes, becoming a vehicle of social and environmental innovation.

There is news also regarding sanctions in the event of failure to comply with requirements related to due diligence. Member States are, in fact, required to designate an authority responsible for supervision and monitoring, equipped with the powers necessary to impose sanctions of up to 5% of total turnover.

The Commission will, finally, set up a European Network of supervisory authorities to promote cooperation between supervisory bodies of single Member States.