By Athina Evagorou

As sustainability becomes a strategic imperative for modern businesses, so too does the risk of overstating green credentials. The rise of ‘greenwashing’ has eroded consumer trust, distorted fair competition and diluted the integrity of genuine environmental commitments.

This article introduces the topic of ‘greenwashing’, unpacks the key provisions of Directive (EU) 2024/825 (the ‘Green Claims Directive’) and examines its implications for key stakeholders.

Greenwashing refers to the practice of misleading consumers about the environmental practices of a company or the environmental benefits of products and services. This includes claims related to product circularity such as durability and recyclability. Often, greenwashing involves exaggerated, vague, or false declarations intended at appealing to eco-conscious individuals, without any corresponding sustainability measures in place. It often manifests through visual cues such as green hues and depictions of flowers, leaves, trees, and water. Nonetheless, greenwashing is not always straightforward.  As consumer demand for sustainable products rises, so too does the prevalence of greenwashing, undermining trust and distorting fair market competition. 

In response, the European Union has taken a decisive stance against deceptive environmental marketing. A key development is the Green Claims Directive, which amends existing consumer protection legislation to address greenwashing and enhance product transparency. Now in force, the directive mandates that member states adopt implementing legislation by March 2026 and begin enforcement by September 2026. This transitional period should be strategically used through industry engagement in order to develop a national framework that is both business-friendly and protective of consumer rights. Cyprus, at the time of writing, has yet to update its Consumer Protection Law or introduce broader implementing measures.

The Green Claims Directive expressly prohibits unsubstantiated environmental claims, whether made in writing, orally or via audiovisual media. The following practices are banned: –

  • Environmental claims based on carbon offsetting (i.e. ‘climate neutral’ or ‘reduced climate impact’). While companies may disclose environmental initiatives such as carbon credits, claims about the product’s impact must reflect its actual lifecycle, not future offset efforts.
  • Statements implying that products or businesses, as a whole, have a specific environmental feature or quality when that benefit applies only to part of it. (e.g. the expression ‘made with recycled material’ when only the packaging material is).
  • Generic environmental claims such as ‘eco-friendly’, ‘climate friendly’, ‘green’, ‘sustainable’, ‘energy efficient’ unless supported by specific and verifiable evidence to substantiate them.

To ensure transparency, businesses must substantiate their environmental claims through accessible, scientific proof. The directive restricts the use of sustainability labels unless they are certified by public authorities or by verified, independent schemes. This move seeks to minimise customer confusion by replacing fragmented eco-labels with standardised, credible alternatives. As certification can be costly, member states are encouraged to facilitate the access of small and medium enterprises in approved sustainability labels. 

A further focus of the Green Claims Directive is product durability and early obsolescence, i.e. the practice of designing goods with intentionally short lifespans. Overproduction exacerbates environmental harm through increased waste and resource consumption, making durability a key regulatory concern related to greenwashing. Notably, the scope of the directive extends beyond physical goods to include digital products and e-services. For example, it addresses how software updates might reduce a product’s performance, encouraging premature replacement. This broader applicability reflects the extensive impact of greenwashing across sectors.

Why it’s a problem

Greenwashing creates legal and commercial risks for consumers, businesses and the internal market. It deceives consumers and exposes companies to reputational damage, especially when products or practices are falsely portrayed as environmentally responsible. When such claims flood the market, consumers may unknowingly support products that offer little to no environmental benefit thus hindering real progress toward the EU’s binding climate goals. Eliminating greenwashing is essential to fostering genuine demand for and supply of sustainable goods.

Additionally, greenwashing often includes claims about corporate ethics or ESG (Environmental, Social and Governance) indicators by labeling businesses as “responsible” or “conscious” without merit. Businesses that are committed to a strong ESG profile and operational model are likely to attract new funding and investment opportunities. In a growing ESG investment landscape, overstating sustainability can skew investor decisions and disrupt sustainable finance. Financial institutions must distinguish genuinely sustainable companies and business models in order to allocate their capital accordingly. Robust regulation helps ensure that capital flows to businesses making measurable environmental commitments and taking actionable steps towards the green transition.

Against this backdrop, the evolving legal framework and broader European policy offers clear opportunities. Companies face a critical crossroads: embrace transparency or face regulatory consequence. The shift toward verified environmental marketing incentivises transparency and stimulates growth in sustainability services. The cornerstone of the Green Claims Directive is the validity of statements and claims. Therefore, it is an opportunity for independent third-party experts with experience in environmental issues to work towards the verification of claims.

Likewise, it is an opportunity for legal and business advisors to strategise and guide the transition, for compliance and monitoring practitioners to streamline the reporting process, and for industry to invest in research, development and sustainable supply chains.

Whilst greenwashing must be addressed, regulation must strike a careful balance. Regulation can be seen as an opportunity; it should not be so restrictive as to be an obstacle to real progress in the pursuit of green transition. An overly restrictive approach could deter companies from making ambitious environmental commitments, fearing regulatory repercussions or penalties. In practice, many businesses are actively investing in sustainable practices across their supply chains. Regulation should therefore enable the green transition by promoting transparency, accountability and innovation. Financial implications are apparent both at the stage of developing operations and at the stage of enforcing the law.

The domestic legal framework of member states must encourage substantiated climate claims while fostering corporate ambition. National legislation should be clear, enforceable and aligned with broader sustainability goals. National consumer protection authorities, for their part, should be equipped with environmental expertise to offer guidance and apply sanctions where necessary. Industry, in turn, must be supported with practical tools to ensure compliance and drive meaningful change.

The Green Claims Directive represents a landmark step in the EU’s effort to curb greenwashing and promote sustainable production and consumption. By tightening rules on environmental claims, product durability, and transparency, the directive empowers consumers and encourages companies to adopt genuinely sustainable practices. As member states move towards implementation, businesses must revisit their marketing, design and communications strategies to lead responsibly in an increasingly climate-conscious and skeptical marketplace.

Athina Evagorou is an associate of Elias Neocleous & Co LLC