Why Supply Chains are Facing EU Confusion over Green Claims

The European Commission’s decision to withdraw the Green Claims Directive sends confusion rippling through European supply chains.

Designed to tackle greenwashing, the use of vague or misleading environmental claims, the directive now hangs in the balance, leaving both multinationals and micro-enterprises unsure where they stand.

What the Green Claims Directive aims to do

Originally part of the wider “Empowering Consumers for the Green Transition” push adopted in 2024, the Green Claims Directive set out rules to ensure that environmental claims made by businesses are “clear and easy to understand.”

The intention is to ban generic green labels that lack evidence and hold companies to account when promoting sustainability credentials.

The European Commission claims that over half of green claims made by companies contain either vague, misleading or unfounded information. The directive aimed to standardise how companies present environmental claims to consumers across the EU’s single market.

It was meant to work alongside broader frameworks like the Corporate Sustainability Reporting Directive (CSRD), which expands corporate environmental disclosure, and the Corporate Sustainability Due Diligence Directive (CSDDD), which requires companies to monitor and address environmental and human rights impacts in their supply chains.

In June the Commission made an unexpected move. It announced plans to withdraw the Green Claims Directive, citing complications due to an amendment that would bring 30 million micro-enterprises under its scope. This sparked speculation over whether the withdrawal was accidental, political or procedural.

Ulrike Sapiro, Chief Sustainability Officer at Henkel, raised concerns on LinkedIn: “The ‘anti-green’ movement seems to successfully topple a European law that would forbid the rampant ‘greening-claiming’ of products. Or maybe it was just an institutional accident?”

She added: “As with the tale of the CSRD-CSDDD-Taxonomy omnibus, we need better regulation not no regulation. One thing is sure: a permanent legislation yo-yo is burning more resources than it tries to save.”

Supply chains caught in the policy crossfire

The Green Claims Directive’s withdrawal links closely to the Commission’s broader attempt to reduce regulatory burden via the Omnibus Simplification Package. Published in February, the Omnibus package seeks to streamline complex EU sustainability laws such as the CSRD and CSDDD.

The European People’s Party, a centre-right political group, is reported to have formally requested the Green Claims Directive be scrapped. The withdrawal follows this letter and reflects wider political tensions over how far the EU should go in regulating corporate sustainability.

Andreas Rasche, Professor and Associate Dean at Copenhagen Business School, commented: “Such a withdrawal is very unusual, but the Commission has the right of initiative and hence can use it also to withdraw proposals for legislation.”

He warns: “Fighting greenwashing will become more difficult with this withdrawal.”

Major global companies are now calling for regulatory consistency. In an open letter, Unilever, Nestlé, Mars, Primark, DP World and Signify urged the European Commission to “support companies with resources and guidance to ensure compliance while maintaining competitiveness.”

Nicholas Mazzei, Vice President for Sustainability at DP World, writes: “What we in the business world want is clear implementation guidance from the commission, and not the reopening of adopted legal texts for renegotiation.”

His concern echoes through global supply chains, especially among firms working to align operations with the due diligence demands of the CSDDD and the reporting obligations under the CSRD.

What’s behind the legislative back-and-forth?

To understand the policy shift, many point to the Draghi Report published in 2024. Compiled by Mario Draghi, former President of the European Central Bank, the report explores why European companies often struggle to scale.

It reads: “Innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations. As a result, many European entrepreneurs prefer to seek financing from US venture capitalists and scale up in the US market.”

The EU Competitiveness Compass and the Omnibus Simplification Package both aim to address these concerns by reducing overlapping rules. But this approach has opened new tensions between maintaining regulatory effectiveness and reducing bureaucracy.

Ursula von der Leyen, President of the European Commission, said: “The content of the laws is good, we want to maintain it and we will maintain it.”

“But the way we get there, the questions we’re asking, the data points we’re collecting is too much, often redundant and often overlapping.”

In December 2024, more than 90 organisations from business, finance and civil society signed a joint statement urging the EU to ensure that the CSRD remains robust while improving its implementation.

So while the direction of travel is still towards greener supply chains and stricter environmental disclosures, the path is now more uncertain. Firms are asking for less legal turbulence and more practical clarity.