Are businesses prepared for the EU’s ban on non-certified Sustainability Labels?
Henrietta Worthington
As part of its green taxonomy, the EU is clamping down on the use of sustainability labels by setting strict requirements for consumer facing labels. From 27 September 2026, it will be prohibited to display a sustainability label in the EU that is not based on a “certification scheme”. The new rules were adopted in February 2024 and must be transposed into national law by 27 March 2026. However, many businesses, and scheme owners themselves, have not yet started updating their processes. Firms that continue to display uncertified labels after the implementation date could be committing an unfair commercial practice, leading to possible fines, injunctions, and reputational damage.
Legal background
EU Directive 2024/825, commonly known as the Empowering Consumers Directive (the ECD), was introduced to empower consumers to make more sustainable consumption choices by providing them with clearer information about the environmental and social impacts of their purchases. It is estimated that there are currently more than 200 different environmental and sustainability labels circulating in the EU market, leading to consumer confusion. Many of these labels lack transparency, scientific basis, or oversight, meaning that consumers struggle to identify credible sustainability labels, thus undermining consumer trust.
The ECD bolsters two pieces of existing consumer legislation: the Consumer Rights Directive and the Unfair Commercial Practices Directive; and expands upon a list of prohibited commercial practices which were established by the existing directives. In addition to imposing strict requirements for sustainability labels, the ECD further enhances consumer protections through various measures including prohibiting the use of vague or ambiguous environmental terms; limiting future environmental performance claims; and requiring transparency for claims relating to offsetting.
Requirements for Sustainability Labels
Specifically, the ECD prescribes that a sustainability label may only be used if it is based on an independent certification scheme or established by a public authority. It then proceeds to define a “certification scheme” as a third-party verification scheme that certifies that a product, process or business complies with certain requirements, and allows for the use of a corresponding sustainability label. Certification schemes must also be publicly available, and meet specific criteria detailed in the ECD, requiring such schemes to be transparent, fair, and nondiscriminatory to all traders willing and able to comply, as well as developed in consultation with relevant experts, monitored for non-compliance and independently audited based on international standards and procedures. Given the increased scrutiny of certification schemes, in order to ensure compliance with the ECD when displaying sustainability labels, scheme owners should take steps to ensure that their certification schemes meet the prescribed ECD criteria.
The requirements for a “certification scheme” under the ECD are intentionally non-prescriptive to allow for them to be satisfied in a variety of ways. The provisions are non-sector specific, meaning that they are sufficiently broad to function across sectors and industries. However, this also creates increased scope for misinterpretation, and it is likely that litigation will be required to clarify the interpretation of the more opaque provisions. It is anticipated that the EU will release FAQs in advance of the implementation date to help companies prepare for the new rules.
Certain experts have queried whether the legislation goes far enough in clamping down on the use of sustainability labels which fail to push users towards meaningful improvements in sustainability. The requirements relate more to the processes of the certification scheme rather than the rigour of the standards themselves, meaning that it may remain hard for consumers to differentiate between products and services that are doing “enough” and those that are “best in class”.
Next steps
The impact of the ECD is far-reaching. Firms exporting to or marketing in the EU must comply. Additionally, non-EU companies may also be affected if they target EU consumers. Companies must therefore act quickly to ensure that their policies and processes are up-to-date. Immediate steps for a company may include auditing existing claims and labels for their compliance with the ECD, and subsequently updating or removing non-compliant claims or labels. Similarly, engaging third-party verifiers to review claims may be a key step, and in any case maintaining records of audits, testing and verification of claims is crucial in case of inspection by regulators. Providing internal training, particularly to marketing and design teams may also be something companies consider in their compliance efforts.
Conclusion
It is likely that court decisions will be required to define the scope of the new rules to ensure sustainability claims are factually and legally accurate, and to guarantee consumer trust. The result will undoubtedly be fewer but more credible labels in the EU market, but whether this goes far enough is still unclear. What is clear is that there is a huge lag in businesses taking action to audit their current labels and verify that they are only using compliant labels. Affected companies must act now to ensure that they are correctly communicating environmental claims and only using certified sustainability labels.
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