EU Green Claims Directive and its dangers (when everyone cheers, stop and think)
International regulations hold much needed potential for healthy disruption, but they have grown to be a two-edged sword over the last decade – if not before. What are hidden dangers to be aware of around the EU Green Claims Directive?
August 25, 2023
Merlin Eric Bola
Strategy & Content Direction
In beginning of 2023, the town square chat in Ecoville seemed to be all over the EU Green Claims Directive (GCD).
Many saw the directive as an overdue action step towards outlawing greenwashing, which certainly fits its pronounced goal and potential. You'll find the straightforward content of the proposal stage of the directive discussed here. Then again, that might not be the whole story. International regulations influenced by billion-dollar industries can be used to make business harder for everyone else, and the GCD is subject to this threat.
In the spirit of putting regulatory potential under the necessary scrutiny to truly get it right, let’s take a look at what could go wrong.
If you're into critical thinking, this will be fun.
1/ Blind trust
When we talk about fraud, most people might think of out-of-control fringe players, not big everyday brands.
Most people certainly don’t think about international regulators when the topic comes up. You know, they have this aura of officiality and integrity. Well, we have seen enough institutional and large-scale corporate corruption over the last years to ask a different question – not out of paranoia, but experience and critical thinking.
Is there anyone deserving blind trust?
Lobbyism isn’t exactly a new word
While lobbyism is nothing new in our vocabulary, it’s an ever-present intransparent reality while we talk about pandemics, wars and a culminating eco-crisis.
Let’s take the GDPR.
It hit mid-sized businesses the hardest, those that struggled to dedicate the resources for compliance with a new regulation. For most billion-dollar market leaders, it was an itch to be scratched. Shall we discard this as oopsie … well, too bad?
Or should we pay attention to the possibility of a deliberate corporate engineering of international regulations?
Or take the ESG framework.
Not everyone seems to have gotten the memo, but we are seeing mounting distrust in the EGS frameworks made-for-the-people-and-the-planet nature. Founded by the world largest asset managers and with the highest scores going toward tech giants, are we convinced that the rating process is entirely objective and impartial?
Auditors have a life too, and money certainly helps living.
2/ Audits cost money
Will there be an equity distribution of regulatory stress?
Or will the flame again be held against the bums of mid-sized companies – already pummeled by inflation, recession and supply chain chaos – like we saw with the GDPR?
If any and every claim needs to be audited, and audits cost money, then there’s a relationship between money, audits and claims that one can make. Lacking the necessary resources for all the necessary audits might then mean that the truth of your product can’t be confirmed.
Could big companies use their lobbyist leverage to agitate mid-sized companies as a way of burning some bums – and bridges?
Would it surprise you if almost-monopolies would try to leverage their influence on regulations to cement their position?
In the US, it has become tradition to assess someone’s legal power by estimating their vacant financial resources to go to court.
Call that jurisdiction all you want, but that’s business, and crooked business at that. This is not speaking law or pronouncing of what’s right, or however you could translate the latin root of the word. That’s abuse of the highest order, a perversion of what law was originally intended to do.
Would this work outside of the US? I would have a hard time to find certainty in saying no. Since there is the opportunity for third-party complaints in the GCD, this might be abused to put legal stress on competitors.
Those competitors might do everything right on a factual basis, but that wouldn’t stop the regulatory process from draining their time and resources.
Abusing comparative claims
Part of the GCD is the necessity of equal measurements and calcuations for comparative claims, those claims that measure your own product against someone elses.
Since comparative claims would then need more extensive and expensive head-to-head audits, this could be abused by bigger players with deeper pockets. Ill-adjusted regulations could cement a leading position of established brands – not because they’re oh so advanced in their environmental action, but because their chest of gold shines brighter.
We need to pay attention to this, because there will always be attempts to find legal loopholes and game the regulatory framework instead of implementing sincere sustainability.
3/ Assessing claims
Phew, a bit of sweaty palms over here.
Let’s move towards the touchiest notion of them all. Ready?
Alight, claims will be assessed based on widely recognized scientific evidence and international standards – sounds really good and rather unconflicting, doesn’t it?
Well, by now, I am not so sure anymore. With mounting reports of a corrupted peer review process, we are in the middle of something that makes the concept of finding truth ripe for redefinition. You know, one that includes critical thinking instead of oursourcing it to authority.
Riddle me this: If you put blind trust into science, media and authority, do you invite them to abuse that trust?
Let’s take the CO₂-drives-catastrophic-climate-change story as one of the most prominent and striking topics of our age, and as one that will also influence the specifics of the upcoming regulation. The story around carbon is certainly being sold as irrefutable science.
But when something can’t be questioned anymore, are we still operating in the realm of scientific thinking?
Outside of science
When it comes to the CO₂-story, we seem to have missed some pieces.
I haven’t yet seen a public discussion around the fact that we inched a little too close for comfort (190 atmospheric CO₂ ppm) towards too-little-CO₂-for-plants-to-survive (roughly 150 ppm) after the last ice age. Geological records show CO₂-ppm to be shooting up into the multi-thousands in the Ordovician period, shortly after life exploded in the Cambrian period. This wasn’t followed by any rise in temperatures that our models would suggest.
Given all of this, can CO₂ be the problem that we make it out to be?
I am not questioning our environmental impact here – I certainly think that our habit of burning everything we can get our hands on adds up over time. I am questioning the supposedly settled science around the details, and especially around the carbon story. Emissions, yes – carbon … maybe.
Not many people seem to pay attention to the open door to abuse the carbon story, as in 'offsetting business-as-usual', 'investment opportunities' and 'pushes for control' through carbon tracking.
Unless we’re ready to talk about these narrative-breakers openly and openmindedly, it’s brittle ground on which we’re basing our action steps on.
Money and control
If the carbon story is not entirely driven by science and a heartfelt concern for our environment, what might it be driven by?
The likely exponential future ROI of carbon credits with limited retail investor access might be too tempting for corporate players and investors to give it a pass. In turn, the opportunity to introduce a Social Scoring System based on a high-pressure CO₂-narrative might be too tempting for political players to give that one a pass.
I took the time to reiterate on carbon to illustrate a point: I fear that we might long be outside of science, and instead see joint corporate and political interests neatly wrapped in an aura of science. I fear that this trend could be further cemented with the EU Green Claims Directive.
Again, none of this is to say that we have no ecological crisis, we obviously do.
But the details matter – like, a lot.
Realization ≠ Anticipation
Up until a few years ago, for my personal taste, we we’re generally way too surprised about another case of high-level fraud.
They did whaaat? Noone could have suspected!
I am happy to report that the tides seem to be turning as many people are beginning to ask different questions. We’re not so surprised anymore, but I don’t see us anticipating fraud yet. We also seem to have a blind spot in the shape of environmentalism. Whatever sounds like a radical move towards sustainability, especially around the keywords of climate and carbon, quickly gets applauded.
How many people would be surprised if that would turn out to be, as least partially, high-level crooks analyzing political sentiment in order to talk in the tongue of the people?
You get the point.
Time will tell
I have the confidence that there are sufficient amounts of good actors out there.
But when it comes to the highest ranks of governance, I am not so confident anymore. With a history of double-edged international regulations between GDPR and ESG, I can’t say that I am anticipating new international regulations extirely relaxed. The threat is that these rules won’t apply to everyone the same, as it is so often the case.
There are always some animals that are more equal than the others.
How convinced are you that international regulators, with their aura of moral and legal impeccability, will actually live up to that aura? I wonder if we could be less gullible, less blindly trusting in the integrity of authority, and quicker to dismantle high-level corruption.
Our survival and collective welfare might depend on our skill to tell well dressed snakes from sincere voices and dedicated pioneers.
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