The Hungarian Competition Authority (“GVH”) has recently enhanced its role in a key area of consumer protection. The GVH has concluded its market study on green claims (“Green Claims Market Study”), which led to recommendations addressing market players and proposing criteria for a reliable labelling system to the Hungarian legislator, aligned with the forthcoming “EU Green Claims Directive.”

In this article we explore the impact of the GVH’s latest Green Claims Market Study on how companies use green claims in their marketing activities. Our focus is on regulatory changes in Hungary, but we also look at the EU Green Claims Directive and the priorities of other national authorities regarding green claims. 

I.       Strong consumer protection focus has led to looking into green claims 

As we have previously reported, the GVH has shifted its attention towards consumer protection in recent years by severely sanctioning technology giants and telecommunication companies for misleading consumers, launching a new price monitoring tool, and completing several sector inquiries and accelerated sector inquiries into market behaviours affecting Hungarian consumers. This heightened emphasis on protecting consumers has been supported by several new laws (such as the price reduction decree or “shrinkflation” decree), which limit a company’s room for maneuvering in its marketing activities.  

Scrutinising green claims fits right into the GVH’s above initiatives and is set to be a key area of focus in 2024. The GVH previously released a guideline on environmental claims in 2020 which contains detailed rules of thumb for how businesses wishing to market their products and services by using sustainability/green claims can avoid misleading consumers. Nevertheless, with the increasing variety and complexity of marketing and PR messages claiming sustainability and eco-friendliness – known as greenwashing – a more thorough investigation into this area could be expected.

Greenwashing is the practice of making people believe that a company is doing more to protect the environment than it really is. Products and services can either explicitly claim to be ‘green’ or 'eco-friendly' by using direct written statements on labels; or more implicitly through the use of backgrounds, figurative elements depicting symbols or sound effects of nature, which may suggest to the consumer that the product or service is in some way sustainable or eco-friendly. The use of these claims and features is problematic when they are not, or at least not entirely, true.

II.       The Green Claims Market Study brings new requirements for businesses

The Green Claims Market Study, which commenced in 2022, focused on environmental and sustainability claims in the food, clothing, chemical and cosmetics sectors. The main objective of the study was to understand the impact of green claims on consumers’ purchasing decisions. The GVH employed several approaches, including a survey of 2,000 Hungarian consumers, online sweeps, and data collection from relevant market players. 

Consumer perspective on eco-friendly claims

The GVH’s analysis falls in line with the Eurobarometer[1] and Euromonitor[2] surveys of recent years, which revealed that while a striking 83% of Europeans acknowledged that environmental impact of goods significantly influences their buying decisions and are willing to pay more for genuinely eco-friendly products, a lack of information and distrust in manufacturers’ claims hinders their ability to make informed choices. To meet the growing demand, market players have increasingly used labels to communicate positive environmental impacts, however, the rising number of symbols has led to confusion and difficulty in verifying claims and a substantial level of scepticism from consumers.

The GVH’s survey of Hungarian consumers confirms these findings. The study tested three types of claims – recyclable packaging, sustainability, and carbon neutrality – across three product categories: food (mango juice), clothing (jeans) and chemical products (fabric softener). The results revealed that the inclusion of green claims, regardless of format, enhanced the overall environmental product image and had a positive influence on consumers’ purchase intentions. Notably however, a considerable proportion of consumers remained unaware of the specific content of the claims – especially in relation to carbon neutrality – potentially leading to misunderstandings regarding the perceived environmental impact of products.

Takeaways from online sweeps 

The clarity of green claims was also assessed through the online sweep of 59 websites across various industries. The GVH revealed challenges in how companies communicate green claims, including broad messaging, difficulty finding information and inconsistencies in terminology. One of the main issues was the inadequate explanation and justification for the claims, including a lack of in-depth supporting information in the Hungarian language. It was also shown that businesses often go for sustainability claims, but convey them in a broad and unstructured manner. In essence, the results of the sweep exposed the cause of low consumer trust towards green labels, as they frequently encounter vague and unsubstantiated claims.

The GVH proposes key recommendations for businesses

The GVH makes several recommendations based on the market analysis for businesses engaging in sustainability communication:

• Conducting Life-Cycle Analysis (LCA): Businesses should perform life-cycle analyses to understand the environmental impact of their products across all stages. If conducting a full LCA is cost-prohibitive, using generic data already available is suggested.
• Focusing on Significant Impacts: Companies should concentrate their sustainability communication on activities that significantly reduce environmental pollution, emphasizing the most impactful aspects rather than focusing solely on marginal factors, e.g. packaging.
• Verifying Claims: Claims, logos or labels should be verifiable, with information accessible to consumers. Credible and traceable certification bodies and independent organizations can all contribute to verifying environmental claims, which is also part of the upcoming EU Green Claims Directive.
• Avoiding Vague Claims: Businesses are advised to avoid poorly worded, overly general, or vague claims, such as “environmentally responsible” or “eco-friendly”. Specificity in claims is essential to prevent misleading consumers.
• Considering Comparative Claims: Businesses should be cautious with claims showing improvements compared to past performance, ensuring they genuinely represent a better environmental performance compared with industry averages.

These proposals aim to enhance transparency and accuracy in sustainability communication, aligning with guidelines of other European competition authorities. The GVH puts forward recommendations to the legislator calling for action to create a multi-level, state-regulated sustainability labelling system as well as consumer education campaigns.

III.    EU and national outlook on green claims 

EU Green Claims Directive

The EU Green Claims Directive, a legislative proposal unveiled by the European Commission (“Commission”) on 22 March 2023, is a significant step in the ongoing efforts to combat greenwashing at the EU level. Its primary objective is to level the playing field and set clear standards for businesses to ensure that their claims are backed up by verifiable evidence so that consumers can make informed choices. 

The necessity for the EU Green Claims Directive arises from the spread of environmental claims and labels in the EU without uniform definitions. The lack of clear definitions for terms like “green”, “sustainable”, and “eco-friendly” has made it challenging for consumers to assess the true environmental impact of the products they purchase. The Commission revealed that 53% of environmental claims within the EU were characterized as vague, misleading, or unfounded, with an additional 40% lacking substantiation.[3] 

Similar to what the GVH now proposes in its Green Claims Market Study, businesses are advised to provide substantial, widely recognized scientific evidence backing their environmental claims. The EU Green Claims Directive covers the scope of information that should be disclosed to consumers and stresses the importance of fair and equivalent comparison, where businesses must collect data to ensure that product comparisons are unbiased and based on similar information. 

Additionally, the EU Green Claims Directive would require that claims are validated by an independent organisation, obtaining a certificate of compliance recognized across the EU. It would also introduce unified requirements for these environmental labelling schemes and restrict the introduction of any new regional or national schemes after its transposition by Member States. It is also announced that the Commission would publish an official list of recognized environmental labels. 

The next step in the process of the proposal is the commencement of interinstitutional negotiations (‘trilogues’) between the Commission, the European Parliament and the European Council. Negotiations may start as soon as early spring 2024, leaving the approval by the European Parliament and the European Council as final steps. Once the EU Green Claims Directive is finalized, Member States must then adopt and start applying it 24 months later.

National authorities’ approach towards green claims 

As mentioned in the Green Claims Market Study, green claims have become a top priority for many national authorities in recent years, even before or alongside the proposal of the EU Green Claims Directive. Several authorities have thoroughly investigated environmental claims, leading to the creation of policies, and in some cases, specific legislation governing green claims.

Numerous national authorities have issued specific guidelines on sustainability claims, with examples including Australia, the Netherlands and the UK. These countries have also conducted market research and studies into sectors such as fashion, energy, transport, green heating, and fast-moving consumer goods (like household essentials), a practice seen in Finland, the Netherlands and the UK. Furthermore, in Germany, competitors, competition watch dogs and trade associations pursue alleged greenwashing and either demand cease and desist declarations or file civil actions. 

From the above examples, we see that in jurisdictions where misleading environmental claims have recently become a major concern, national authorities have adopted a similar approach to the GVH. They study consumer behaviour and expectations regarding green claims, offer guidance to businesses and work closely with lawmakers. For these countries, the future implementation of the EU Green Claims Directive may not introduce many new changes, as their authorities are already aligning themselves with the standards the directive aims to establish.

IV.    Stringent green claims enforcement to come

Greenwashing enforcement is on track to become more stringent and regulated as demonstrated by the proposed EU Green Claims Directive, the practice of national authorities in Member States and, as a prime example, the results of the Hungarian Green Claims Market Study. The trends we see in this respect are that:

• businesses will have to take more precautions as to the specificity and verification of green claims,
• EU-wide standards may be put in place for green labels, claims and communications,
• more robust legislation and enforcement is expected in the short term to combat vague, misleading, or unverifiable green communications, and 
• national authorities will put more emphasis on and are expected to apply more stringent measures against unlawful green claims.

In its recent workshop, the GVH encouraged organizations on the one hand to submit complaints to further investigate market practices and on the other hand to rely on external advisors to facilitate businesses’ compliance with regulations. We see this as an overarching approach of national authorities, which suggests that businesses may need to take action to ensure that their green communications will withstand the test of the forthcoming stringent scrutiny of enforcement authorities. The first steps in this respect may be the review and self-audit of green marketing activities, and if needed, seeking guidance from external experts on greenwashing compliance.

The Green Claims Market Study can be downloaded from here in English. 

If you need more information or further guidance on green claims, please contact Gábor Kutai, Fruzsina Nagy or Dániel Arányi. 

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The authors acknowledge the contributions of colleagues from several Bird & Bird offices on the aspects of other national authorities’ initiatives on green claims: Patrick Cordwell, Maria Karpathakis, Constantin Eikel, Lisette den Butter, Quinn Liang and Paula Alexe.

[1]https://europa.eu/eurobarometer/surveys/browse/all/series/14868 

[2]https://go.euromonitor.com/ebook-consumer-foodservice-211012-trends-shaping-food-and-nutrition.html 

[3]https://www.europarl.europa.eu/RegData/etudes/BRIE/2023/753958/EPRS_BRI(2023)753958_EN.pdf