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News | 2024-02-29
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New law to stop greenwashing

The European Parliament has adopted a new directive banning greenwashing and misleading product information. It will now be unlawful to claim that a product is "climate neutral" or "climate positive" as a result of carbon offsetting.

IVL researcher Kenneth Möllersten and KTH doctoral student Malin Pehrs, who are both affiliated with the Sustainable Finance Lab consortium, welcome the EU's efforts to combat greenwashing, but underline the importance of companies continuing to invest in good climate projects.

"Good climate action requires that businesses reduce their own emissions very ambitiously, and contribute to reducing emissions outside their own value chain in order to take responsibility for their remaining emissions”, says Kenneth Möllersten.

The new legislation must be implemented in EU member states by 2026. It applies to what is known as 'business-to-consumer' situations, i.e. when companies sell to consumers. Once the legislation is in place, businesses will no longer be able to use simplistic claims such as "climate neutral" or "carbon offset" to describe their products.

"The European Parliament wants to prevent consumers from being misled into thinking that products have no climate impact, when in reality there are emissions during production”, says Malin Pehrs.

One challenge that businesses will face is how to communicate their contribution through investment in climate projects now that offset claims are banned. Support for climate projects will need to be communicated completely separately from the reporting of businesses' own emissions.

"If a company buys greenhouse gas credits that contribute to a country's target fulfilment, this can be communicated as a contribution claim, as the company contributes to a country's target fulfilment. But then you haven't really done anything to raise the ambition above what is already included in the climate promises the countries have made", says Kenneth Möllersten.

"Businesses that want to make a real difference to the climate can buy high-quality greenhouse gas credits that are included in the emissions accounts of the country where the climate project is implemented. This way, the reduced emissions are not counted towards that country's target, so only the investing company can claim the reduced emissions generated by the project”, says Malin Pehrs.

When products are not being marketed to consumers, it is still possible for companies to use carbon offsets. Here it is a matter of the environmental reporting of companies at the organizational level. But even in this area, EU legislation is being prepared that should have far-reaching consequences.

It is likely that companies that want to be able to communicate that they have net zero emissions will only be able to do so if two conditions are met, says Kenneth Möllersten.

"First, they must have reduced their emissions by 90-95 per cent compared to current levels, and second, the remaining emissions, the 'residual' emissions, must be compensated with permanent negative emissions. If companies want to use credits for this, they must be certified through a new certification system – the Carbon Removal Certification Framework (CRCF) – that the EU is developing”, says Kenneth Möllersten.

As part of the project Nordic Dialogue on Voluntary Compensation, the researchers have produced a guide on how companies can work with climate compensation. Read more at nordicdialogue.com External link, opens in new window.

In case of questions, contact:
Kenneth Möllersten, kenneth.mollersten@ivl.se, tel. +46(0)10-788 68 79
Malin Pehrs, msavelin@kth.se, tel. +46(0)70-296 01 76

The researchers' three tips for businesses in the wake of the new law:

  1. Focus on reducing your own emissions and those in the supply chain, i.e. scope 1-3, as far as possible.
  2. Understand the difference between investing either in the new 'adjusted' climate projects where only the company is credited with the emission reduction or negative emission and not the country where the project is implemented, or in climate projects aimed at contributing to another country's ability to meet its Paris Agreement climate targets.
  3. Improve your ability to communicate in a clear and transparent way how what you do contributes, including what your purchase of greenhouse gas credits means for the climate.

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