Around the globe increasing emphasis is being placed by regulators on greenwashing. This trend reflects the growing strength of consumer responses to environmental protection, and the rising interest of investors in sustainability.
When it comes to cosmetics, it is no longer purely the impact of vertical regulation. As the transition towards a greater sustainable footprint continues to take hold, cosmetic manufacturers must adapt to an increasingly intricate and complex web of regulatory compliance outside cosmetics. However, many of these regulatory adaptations show how some brands today are increasingly formulating with naturals to defossilise, as well as sourcing ethically and sustainably, protecting biodiversity and guaranteeing transparency throughout the chain of custody.
Europe
During the last European political mandate, a wave of proposed initiatives and legislation appeared as a result of the European Green Deal, which is leading change across multiple sectors. For cosmetics, although the proposed targeted revision of the European Cosmetics Regulation has not yet materialised, the impacts from evolving and emerging horizontal legislation up- or downstream within the value chain are set to become applicable during the current political mandate by the mid-2020s. Moreover, it is not only amendments to the framework itself, but any subsequent delegated acts for specific product categories that will present regulatory challenges. Industry-wide collective management and closer pre-competitive collaboration will be essential for seizing opportunities through standardised best-practices and initiatives that lower entry barriers – particularly for SMEs.
The interplay between the zero-pollution ambition and the circular economy are at the heart of the strategies and legislative proposals set to impact cosmetics, and how sustainability will be measured. For some time now, ethical and sustainable sourcing has quickly become a cornerstone for raw material selection, considering both the environmental and social impact of raw materials, or their production using green chemistry, biotechnology, or upcycling of industrial waste stream and by-products.
In the last 12-months, we have already seen three legal Acts published covering rules for raw materials resulting from deforestation (Regulation (EU) 2023/1115), as well as corporate due diligence (Directive (EU) 2024/1760) and reporting (Directive (EU) 2022/2464) enter into force. Whilst the scope of these three examples only affects certain raw materials (e.g., palm oil and its derivatives) or larger companies (e.g., over 1000 employees and a net global turnover of €450k), it is undeniable that these regulations are a turning point for mandating company responsibility for the potential impact of their operations and supply chains on the environment and human rights. Furthermore, these practices promote traceability in the supply chain, which is crucial for consumer transparency.
If we consider circularity as a focal point of a future economy, we must evaluate how to improve product design and environmental impact. These aspects have been addressed holistically in the published eco-design for sustainable product (ESPR – Regulation (EU) 2024/1781) and the provisional agreement for packaging and packaging waste regulation (PPWR). The ESPR guarantees product sustainability throughout the EU single market via uniform requirements across all Member States. It also encourages waste reduction by preventing the destruction of unsold consumer products, accounting for recycled content and reusability, and setting restrictions for substances of concern that impact a product’s sustainability.
On 27 March 2024, Directive (EU) 2024/825 came into force amending the existing Unfair Commercial Practices Directive (UCPD). Whilst the UCPD can already be used to address greenwashing, the targeted amendments in Articles 6 and 7 (misleading actions and omissions respectively), along with additional bans in Annex I (“blacklist”), aim to facilitate enforcement and level the playing field. Articles 6 and 7 cover the main characteristics of a product, including environmental or social aspects, ban unverified environmental claims related to future performance, and establish criteria necessary for product comparisons. For natural and organic cosmetics (NOCs) in particular, the Annex I “blacklist” is perhaps the most interesting since it bans generic environmental claims (e.g., biodegradable, biobased), claims about the entire product only a specific aspect is concerned, and the use of voluntary sustainability labels unless based on third-party certification scheme or established by public. Although neither “natural” (nor “organic”) appears on Annex I, it remains to be seen precisely how Member States may eventually interpret such claims. Member States have two years to integrate this Directive national law, with application from 27 September 2026. Since the Directive’s regulatory scope is horizontal, all sectors are covered although the directionality is business-to-consumer (B2C) only.
The companion to Directive (EU) 2024/825 is the proposed Green Claims Directive (GCD), which sets specific rules for explicit environmental claims and labels, with the same scope and B2C application. To-date, the European Parliament and Council have adopted their negotiating positions, and the process is expected to enter the final institutional negotiation phase with the Commission later this year, following the European Elections. Whilst robust pre-verification of claims and labels remains a focus, the Council position introduces the concept of a simplified procedure to exempt certain types of explicit environmental claims for eligible operators. For NOCs, there is support for existing private label schemes, even if these will need to ensure compliance with the framework of these Directives to ensure continued use after their application.
As environmental claims increasingly play an important role in consumer orientation, a robust and complementary framework will be essential to support informed decision making based on reliable, verifiable and comparable information. Ultimately, with two interconnecting anti-greenwashing Directives, consistency between the final texts is crucial to avoid potential conflicts that could derail their joint objective. Additionally, harmony with other legislative acts is important, and, as with all the Green Deal initiatives, a clear balance needs to be struck between the expectations of the environmental and social sustainability objectives and the reality of the economic sustainability and capacities of the market. To this end, it appears that compliance with regulatory requirements upstream of B2C will support compliance with the GCD without additional regulatory measures. Such a framework is essential for promoting sustainable innovation, fostering consumer empowerment and confidence, and ensuring that natural and organic cosmetics manufacturers can continue to make substantiated environmental claims through long-term trusted label schemes.
UK
Historically, the UK had general consumer protection requirements through the Consumer Protection from Unfair Trade Regulations from 2008. Potential sanctions related to unfair practices had involved court proceedings by the Competition and Markets Authority (CMA) or Trade Standard Services, and could also include action against misleading advertisements by the Advertising Standards Authority (ASA).
In recent years, two significant developments have occurred:
- The CMA has developed and published its Green Claims Code and begun investigating market compliance with the Code. Recently, this has included a high-profile investigation into a multinational cosmetic manufacturer as part of the fastmoving consumer goods focus. Whilst this case is yet unresolved, the CMA’s investigation spotlighted statements and claims related to vague language about the environmental impact of products, exaggerated natural cosmetic product claims (focusing on single aspects of a product to suggest they reflect the product as a whole), and used colours and imagery to create an impression of a positive environmental impact.
- The UK Government passed the Digital Markets, Competition and Consumers (DMCC) Act, where the CMA is set to gain a range of new enforcement powers. Nevertheless, with certain exceptions, the Act’s provisions will not come into force until secondary legislation is passed. The CMA initially expected its new responsibilities to become operational in the Q3 2024, but this timeline may be delayed due to the UK’s election on 4 July. On the same day as the DMCC Act became law, the CMA published for consultation its new Digital Markets Competition Regime Guidance. A key aspect of this Act for greenwashing is that the DMCC replaces the 2008 Regulations and empowers the CMA to impose fines of up to 10% of worldwide group turnover for non-compliance with single market status conduct requirements or “pro-competition orders”.
Given that the UK maintained some EU laws post-Brexit, it is interesting to note that the differences between the UK and EU approaches to green claims. For example, generic claims that are now prohibited under Directive (EU) 2024/825 are permitted in the UK if they are supported by robust substantiation. Similarly, whilst the EU is more in favour of third-party certification to substantiate sustainability (environmental and/or social) claims and labels – including validation of both before placing the product on the market (ex-ante) – the UK still provides flexibility for self-declarations if (again) robust substantiation is provided and does not require any ex-ante verification by an accredited third-party control body. Lastly, in terms of penalties, although the EU GCD remains under discussion the initial proposal referred to 4% of national turnover in the European Member State that raised the non-compliance.
In general, the existing UK approach is more flexible, as it is associated with guidance based on principles, recommendations and examples with less precision and prescriptive requirements. By comparison, the EU approach focuses on binding legislation and prescriptive requirements for verification.
USA and Canada
The most famous aspect of the US regulatory framework to counter greenwashing are the Federal Trade Commission (FTC) Green Guides. These guides, first introduced in 1992 were last reviewed in 2012, and a new review closed for public comments in April 2023.
The Green Guides can inform companies in their supply chain decision-making. The FTC designed the Green Guides to provide guidance to marketers and companies on (1) general principles for all environmental marketing claims; (2) how consumers are likely to interpret particular claims and how marketers can substantiate these claims; and (3) how marketers can qualify their claims to avoid deceiving consumers.
The current 2012 revision covers claims such as degradability and free-from, whilst also highlighting certifications and seals of approval. To-date, the newest update to the Guide has not been made available, but the FTC will likely have to update provisions pertaining to “sustainability,” “recyclability,” “environmentally friendly,” and other ESG-relevant marketing claims given the increasing prevalence of such claims and significant concerns expressed by stakeholders about these types of claims. Whether and how the FTC will tackle environmental marketing claims that it declined to address in 2012, particularly climate change-related marketing claims or organic claims outside of foodstuffs, is less certain.
Although stickly guidance, the FTC Guide’s actions and penalties can still be brought against operators. To this end, a fundamental trigger is whether the practice is deceptive in a way that would involve a material representation, omission, or practice that is likely to mislead an average consumer. As such the FTC requires all marketing claims to be substantiated before they are made, and marketers must have a reasonable basis for the claim, which is often established through competent and reliable scientific evidence. Such scientific evidence to substantiate that each of the marketing claims is true should be based on standards generally accepted in the relevant scientific fields, when considered in light of the entire body of relevant and reliable scientific evidence. If we consider this concept within the context of environmental marketing claims, this “reasonable basis” often requires competent and reliable scientific evidence, which consists of tests, analyses, research, or studies that have been conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results.
In June 2024, Canada has passed Bill C-59, which lays down legislation aimed at curbing ‘greenwashing’ by corporations. The new law will prohibit certain environmental representations that are not based on adequate and proper substantiation in accordance with international methodologies. Companies found in violation of the law may face finds up to the greater of $10 million, or $15 million for subsequent orders, or three times the value of the benefit derived from the deceptive conduct, or 3% of annual revenues. Moreover, from June 2025, the changes could allow private litigants to initiate legal proceedings against businesses over green claims.
India
In early 2024, the Advertising Standards Council of India (ASCI) issued guidelines to take down misleading green claims in advertising. The guidelines have been subject to public consultation since mid-November 2023 and took effect from 15 February 2024. Overall, the guidelines reflect the same themes seen in the EU approach; namely, prohibiting the use of vague terms or generic claims (e.g., green, eco-friendly), ensuring all environmental claims or communications are full disclosed (communication via QR codes, weblinks etc.), and confirming claims are verified, comparative, transparent, and present a clearly defined scope. Moreover, just like in the EU approach, the substantiation of specific claims (e.g., sustainability, degradability, 100% natural) must be verified by independent third-party certification or supported by reliable scientific evidence. However, unlike the EU GCD proposal, the Indian approach does not require the claims to be ex-ante verified by a nationally accredited control body.
Conclusion
Sustainability is a broad topic covering environmental issues (e.g., water usage, waste, biodiversity impact), social concerns (fair compensation, labour rights), as well as economics and governance policies. Nevertheless, whilst the specificity of the approach may vary, many key markets internationally are implementing regulatory models to combat greenwashing, protect consumers, and assist the green transition towards net zero and a circular economy. Given the global marketplace for cosmetics, the need for manufacturers to account for a whole life cycle model when it comes to their products whilst ensuring specificity, justification and verification for the social and environmental claims they make will become increasingly important to ensure compliance and mitigate risk. A key component of these new rules is that every industrial sector will be subject to them, even if some sectors may see more enforcement action than others. The business risks of inaction are real and significant. Impact factors related to penalties, litigation and reputational damage, as well as negative impacts to the environment and increased scrutiny from consumers, NGOs, competitors, and investors alike can only be expected to rise as the crackdown on greenwashing continues. To this end, futureproofing existing products and operations, reviewing standard operating procedures, identifying the methods used for substantiation, and ensuring preparedness will be essential for regulatory compliance and to safeguard commercial and consumer interests.
Article written by Dr Mark Smith, NATRUE”s Director General, and originally published on CACHCA E-Journal (available in English here.)