industry
All
Location
European Union
Status
Proposed
Overview
The Directive on Substantiation and Communication of Explicit Environmental Claims—known as the Green Claims Directive (GCD)—is a legislative proposal that aims to protect consumers from greenwashing. The GCD would establish minimum requirements for the communication, substantiation, and verification of environmental and climate claims or labels. The GCD would also apply to voluntary environmental and climate claims on the impact, aspect, or performance of a product or its producer.
The European (EU) Council’s position distinguishes two types of carbon credit claims: contribution claims (carbon credits to contribute to climate action) and offset claims (carbon credits to balance out an emissions share).
The EU Parliament’s position is more restrictive, limiting companies to making compensation claims (equivalent to the Council’s offset claims) based on the use of carbon credits only in respect of their residual emissions. Additionally, the Parliament promotes the like-for-like principle, which requires companies to compensate for fossil emissions with permanent removals only.
Across all EU proposals, companies can only make claims using credits issued under the EU Carbon Removals and Carbon Farming (CRCF) regulation, or certification schemes deemed to have equivalent requirements.
The EU Commission proposed legislation in 2023, with the Council and Parliament publishing their own proposed versions in 2024. Representatives from Parliament, the Council, and the EU Commission will hold a trilogue—an informal negotiation to reach an agreement on a legislative proposal—to reconcile their differing positions on the GCD. The trilogue negotiations to finalize this policy will occur in 2025.
Requirements
Both the Council and Parliament are opposed to the use of carbon credits to make product-level claims, aligning with the Empowering Consumers Directive, which effectively banned greenwashing when the Commission approved it in February 2024. Notably, their positions differ on the claims corporations can make about offsets counted towards residual emissions and the qualifying criteria for the types of offsets used. Overall, the Parliament’s position prioritizes consumer protection and strict verification processes, while the Council favors flexibility and lower compliance costs for businesses. Table 1 distinguishes the key differences in the positions of the EU Parliament and Council in regards to environmental claims.
Table 1. Comparison of key differing positions of the EU Parliament and Council on the substantiation, verification, and communication of green claims.
Aspect | Parliament’s Position | Council’s Position |
Verification | Stricter, pre-approval, limited exemptions | More exemptions, simplified procedure for some claims |
Scope | Broader (includes packaging, future claims) | Narrower, more exclusions, delayed implementation |
Carbon offsetting | Tighter restrictions, public reporting | More flexibility, less stringent requirements |
Micro-enterprises | Exempted | Initially included |
Enforcement | Stricter deadlines and compliance | More flexibility, gradual compliance |
Affected Companies
Revenue thresholds
Not defined
Company size
The Council’s position applies to all companies, including micro-, small-, and medium-sized enterprises, that must comply with GCD definitions when making Green Claims. However, this position would require the Commission to provide supportive measures in place—such as publicly available life cycle assessment (LCA) calculation tools—to ensure the GCD does not disproportionately impact these enterprises.
This policy does not apply to:
The Parliament’s position exempts microenterprises, defined as having fewer than 10 employees and an annual turnover that does not exceed EU€2 million. This exemption differed from both the Council and the Commission’s position.
Company Type
Not defined
Geography
Not defined
industry
All
Status:
timeline for compliance
Member States will conduct regular checks of the explicit environmental and climate claims and labels. If a company’s claim or label does not comply with the GCD requirements, the company must either adjust the claim or label within 30 days to comply, or cease using or referencing the non-compliant claim or label.
GCD would mandate companies update claims and labels every five years to ensure compliance with the Directive.
Under negotiations
Parliament adopted the GCD in March 2024 and the Council approved it in June 2024. Trilogue negotiations are taking place throughout 2025 to reach agreement on the text. The GCD’s text indicates the policy will likely go into effect in 2027, however the Commission's request for revisions in late June 2025 will likely delay this.
Trilogue Sessions Schedule
The first trilogue negotiation took place on January 28, 2025. During this meeting, the Council and Parliament presented their positions and set the groundwork for the following negotiations.
The second trilogue negotiation took place on April 24, 2025. Among the outcomes of this negotiation, Parliament accepted a provision that will require companies to verify environmental claims, such as "biodegradable" or "less polluting", before publicizing these claims.
The third trilogue negotiation was set to take place in June 2025, however the President of the European Commission cancelled this session. Support for this has decreased and the Commission has expressed intent to withdraw the GCD if microenterprises are not exempt from the final proposal.
Penalties
Following the EU Commission’s approval of the Directive, Member States will be responsible for enforcing compliance with the GCD and establishing effective, proportionate penalties for non-compliance.
Implications
The EU Council and Parliament differ in their position regarding the use of offset claims, the scope of emissions eligible for offsetting, and the types of credits eligible for offsetting claims. In many aspects, the discourse of leading authorities in the voluntary carbon market (e.g., SBTi and VCMI) reflect these opposing positions. The private and public sectors must align on whether and how offset claims can be made to prevent double-counting and non-additional mitigation claims. The EU Commission’s final decision could either encourage the use of verified carbon credits or pose major limitations on the use of offsets towards corporate claims, potentially invalidating the emissions accounting methods companies are already using.
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