Your Carbon-Neutral Label Becomes Illegal This September: What the EU ECGT Directive Bans and How to Prepare

In August 2025, Italy's competition authority (AGCM) fined Giorgio Armani €3.5 million for misleading ethical and social responsibility claims that did not match the working conditions found at its suppliers. The same week, AGCM fined Shein €1 million for environmental claims the regulator called "vague, generic, and in some instances misleading or omissive," including emissions reduction targets that were contradicted by the company's own rising emissions data in 2023 and 2024. Neither enforcement action required the EU's new anti-greenwashing directive to be in force. Both were brought under existing consumer protection law. When the Empowering Consumers for the Green Transition Directive (ECGT) becomes enforceable on September 27, 2026, the legal basis for these actions gets broader, the prohibited practices become explicitly codified, and the political cover for aggressive enforcement increases across all 27 member states.

This matters because many compliance teams treated the European Commission's June 2025 withdrawal of the separate Green Claims Directive as a reprieve. It was not. The Green Claims Directive would have required pre-market verification of environmental claims before publication. Its collapse removed that procedural layer but left the ECGT, adopted in February 2024, fully intact. The ECGT amends the Unfair Commercial Practices Directive to add specific greenwashing prohibitions that operate on a "blacklist" basis: certain practices are banned in all circumstances, with no need for regulators to prove consumer harm on a case-by-case basis. A 2020 European Commission study found that 53.3% of environmental claims on the EU market were vague, misleading, or unfounded, and 40% were completely unsubstantiated. The ECGT is the regulatory response that survived.

What the ECGT actually bans

The ECGT's most operationally consequential provisions fall into three categories, each requiring a different internal response.

First, generic environmental claims are prohibited unless the trader can demonstrate "recognised excellent environmental performance" relevant to the claim. Terms like "eco-friendly," "green," "sustainable," "climate-friendly," and "nature's friend" cannot appear in consumer-facing marketing without meeting that threshold. The European Commission's November 2025 Q&A guidance confirms that "recognised excellent environmental performance" means performance verified under schemes like the EU Ecolabel or equivalent publicly recognized certification. Most companies currently using these terms will need to either remove them or replace them with specific, substantiated claims. The Commission's Q&A also warns that visual elements like green leaves or water drops, when combined with text or logos, can be interpreted as implicit environmental claims subject to the same rules.

Second, offset-based product neutrality claims are blacklisted. Making a claim that a product has "a neutral, reduced, or positive impact on the environment in terms of greenhouse gas emissions" based on carbon offsetting is prohibited in all circumstances. This is not a substantiation question; it is a categorical ban. Companies currently marketing products as "carbon neutral" or "climate neutral" through offset purchases must remove those claims before September 2026, regardless of the quality of the offsets. Germany's Federal Court of Justice (BGH) reached a similar conclusion in its June 2024 Katjes ruling, finding that "climate neutral" advertising based on offsetting was misleading. But the ECGT goes further: the German court allowed that climate-neutral claims could still be made with adequate disclosure, while the ECGT prohibits them outright when based on offsets.

Third, self-certified sustainability labels are banned. Any sustainability label displayed on products or in consumer-facing communications must be based on a certification scheme that is open to all traders under transparent and non-discriminatory terms, and verified by an independent third party that is legally separate from both the scheme owner and the trader.

The Commission's Q&A clarified that companies can own and operate a certification scheme and also use the resulting label, provided the scheme meets these structural requirements. But the verification body must be a separate legal entity, and the scheme must be genuinely open to competitors. The Netherlands Authority for Consumers and Markets (ACM) had already forced H&M to remove its "Conscious" label and Decathlon to pull its "Ecodesign" label in 2022 for failing to substantiate these proprietary sustainability designations. The ECGT codifies that enforcement posture EU-wide.

The scope is broader than most companies assume

The ECGT's formal scope is limited to business-to-consumer (B2C) commercial practices, which the Commission's Q&A defines as "any act, omission, or communication directly connected with the promotion, sale or supply of a product to consumers." Corporate sustainability reports prepared under the CSRD are generally outside scope because they are mandatory and addressed to investors.

The boundary line, however, is thinner than it looks. The Commission's guidance states explicitly that when a company repurposes any information from a sustainability report in voluntary consumer-facing advertising or marketing, that communication falls fully within the ECGT regime. A corporate website that discusses sustainability performance is, according to the Q&A, "more likely than not" to address consumers and therefore likely in scope, particularly if a consumer-facing site links back to it. Brand names and trademarks containing environmental implications (such as "Green" or "Eco" in a product name) also fall within scope and must comply with the directive's substantiation requirements. Member states may choose to extend the ECGT requirements to B2B practices, and several are expected to do so.

This creates a coordination problem that most organizations have not solved. The sustainability team drafts the CSRD report. The marketing team pulls language from it for product campaigns, website copy, and social media content. Under the ECGT, the marketing team's use of that language is subject to a completely different legal standard than the report itself. Without a review process sitting between the two functions, the gap becomes an enforcement vector.

The brand name issue compounds this. The Commission's Q&A confirms that any trademark containing or consisting of environmental claims (such as "Green" in a brand name) must also comply with the ECGT. For companies that built their consumer identity around sustainability language, this could require trademark review and, in some cases, product renaming. The timeline for rebranding a product line is measured in quarters, not weeks, which means companies with this exposure should already have legal counsel reviewing their trademark portfolios.

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Forward-looking claims require verifiable implementation plans

The ECGT's treatment of future environmental performance claims introduces a requirement that many companies' net-zero commitments do not currently meet. Stating "we will be carbon neutral by 2040" or "net zero by 2050" in consumer-facing communications is now only permissible if the claim is supported by a detailed and realistic implementation plan that includes measurable and time-bound targets, allocated resources, and regular independent third-party verification. The commitments and targets must be clear, objective, publicly accessible, and verifiable.

This hits operations directly. A company's net-zero target, if communicated to consumers (on packaging, a consumer website, in advertising), must be backed by something far more granular than a corporate ambition statement or a press release citing SBTi validation. It requires a publicly accessible roadmap with milestones, resource commitments, and a third-party verification arrangement. Germany's draft transposition law limits this requirement to consumer-facing communications, explicitly excluding B2B contexts, but companies marketing across both channels will find it difficult to maintain two separate communication standards for the same target.

The KLM ruling from the Amsterdam District Court in March 2024 previewed this dynamic. The court found that 15 of 19 KLM advertising claims were misleading, including the airline's statement that it was committed to the Paris Agreement climate goals. The court concluded that KLM had painted an overly optimistic picture of its measures, which only marginally reduced environmental impact. Under the ECGT, claims of this nature face even stricter scrutiny because the directive converts the court's case-specific reasoning into a codified, EU-wide prohibition.

How to audit your claims portfolio before enforcement begins

The six-month window before the September 2026 enforcement date requires a structured approach. Compliance teams that treat this as a marketing cleanup will miss the structural changes the ECGT demands.

The starting point is a complete claims inventory across every consumer touchpoint: product packaging, websites, social media, advertising, retail displays, brand names, and any communication that could reach EU consumers. Each claim should be classified by type (generic environmental claim, specific environmental claim, forward-looking claim, sustainability label) because the ECGT applies different rules to each category.

For generic claims, the test is whether the company can demonstrate recognized excellent environmental performance. "Decision-grade" evidence here means performance verified under a recognized certification scheme like the EU Ecolabel, or equivalent third-party-certified performance that is demonstrably superior to market norms in the relevant product category. If a claim cannot meet this bar, it must be replaced with a specific, substantiated claim or removed entirely.

For offset-based neutrality claims, the answer is straightforward: remove them. This applies to "carbon neutral," "climate neutral," "CO2 compensated," and any variation that relies on offset purchases to substantiate a product-level environmental impact claim. Companies can still communicate their offset purchases separately, but they cannot use those purchases to claim that a product has neutral or reduced emissions.

For proprietary sustainability labels, the analysis requires evaluating whether the label's underlying certification scheme meets the ECGT's structural requirements: open access to competitors, transparent terms, independent third-party verification by a legally separate entity. If the label is an internal badge that lacks these features, it must be withdrawn. The European Commission's guidance confirms there is no grandfathering clause for products already on the market. From September 27, 2026, all products must comply regardless of when they entered distribution.

For forward-looking claims, the question is whether the company has a publicly accessible implementation plan with measurable targets, resource allocations, and third-party verification. An SBTi commitment alone is insufficient if the implementation plan is not accessible and independently verified on an ongoing basis.

The enforcement architecture rewards early action by competitors

Member states can impose fines of up to 4% of annual turnover in the relevant member states, or €2 million, whichever is greater. But the more significant enforcement mechanism may be private litigation. Germany's transposition will integrate the ECGT prohibitions into its Act against Unfair Competition (UWG), which allows competitors and consumer protection organizations to obtain ex parte preliminary injunctions within days, enforceable immediately even if appealed. The Deutsche Umwelthilfe (German Environmental Aid) is already pursuing more than 30 companies for greenwashing under existing law. The ECGT gives organizations like this a more precise legal basis.

This competitive enforcement dynamic means that the companies most exposed are not those with the worst environmental practices, but those with the widest gap between their marketing language and their substantiation. A company that quietly sells products with no environmental claims faces zero ECGT risk. A company that aggressively markets "sustainable" product lines without certified, third-party-verified evidence faces maximum exposure, and its competitors have a financial incentive to point that out.

The cross-border dimension adds complexity. Because the ECGT applies to any trader selling to EU consumers regardless of headquarters location, a U.S. or Asian company that ships products to Europe must comply with 27 different national transposition laws, each enforced by a different consumer protection authority.

While the ECGT mandates full harmonization (meaning member states have limited discretion in how they transpose the core B2C prohibitions), enforcement intensity and procedural norms will vary. Italy's AGCM has already demonstrated a willingness to impose seven-figure fines on non-EU companies, as the Shein case shows. Companies with significant EU consumer exposure should identify which member states present the highest enforcement risk based on their product distribution and marketing footprint.

The ECGT's prohibitions are specific enough that compliance gaps can be identified with a structured audit, but broad enough that most multinationals selling into the EU will find at least some exposure. The companies that act before September will have six months to redesign packaging, rebuild label certification structures, and establish the internal review processes needed to keep marketing and sustainability functions aligned under the new legal standard. The companies that wait will be doing the same work under enforcement pressure, and their competitors will already have the legal tools to make that pressure very expensive.

We help companies close the gap between their sustainability communications and the evidence behind them. Our ECGT compliance diagnostic starts with a full claims audit across your consumer touchpoints, maps each claim to the ECGT's substantiation requirements, and identifies certification gaps in proprietary labels. The first step is a two-week scoping engagement that produces a classified claims inventory and a priority risk matrix. Schedule a consultation →

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Written by: Gasilov Group Editorial Team Reviewed by: Seyfi Gasilov, Partner, Corporate Strategy & Regulatory Governance Brings more than twenty years guiding organizations through strategic growth, governance challenges, and cross-border compliance with a combined legal and operational lens.

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Frequently Asked Questions (FAQ):

Can a non-EU company be fined under the ECGT for claims made on its website?

Yes. The ECGT applies to any trader engaging in commercial practices directed at EU consumers, regardless of where the company is headquartered. A U.S.-based brand whose website ships to the EU and makes environmental claims about its products is fully in scope. Enforcement would be initiated by the national consumer protection authority of the member state where the consumers are located, and remedies could include fines, injunctions, and product removal orders. Non-EU companies should also consider that EU retailers they supply may pass compliance obligations upstream through contractual indemnification clauses.

Does the ECGT ban all use of carbon offsets in corporate communications?

No. The prohibition is specific to product-level claims that a product has "neutral, reduced, or positive" environmental impact based on offset purchases. Companies can still communicate their participation in offset or carbon credit programs at the corporate level, provided those communications do not imply that the offsets make specific products environmentally neutral. The distinction between corporate-level disclosure and product-level marketing will require careful legal review, particularly for companies that currently feature offset programs prominently on consumer-facing websites. The EU's forthcoming Carbon Removal Certification Framework may eventually provide a recognized basis for certain offset-related claims, but it is not yet applicable for this purpose.

Will the ECGT apply to B2B marketing and communications?

The directive's formal scope covers B2C practices. However, member states have discretion to extend the new prohibitions to B2B contexts, and B2B environmental claims are already subject to the general prohibition on misleading commercial practices under existing national competition laws. Germany's draft transposition explicitly limits the ECGT's forward-looking claims requirements to consumer-facing communications, but the generic claims restrictions could have indirect B2B effects through supply chain pressure, as EU retailers subject to the ECGT will demand substantiation from their upstream suppliers. Companies that primarily operate in B2B markets should not assume they are exempt.

How does the ECGT interact with CSRD sustainability reporting?

CSRD disclosures are generally outside the ECGT's scope because they are mandatory and directed at investors. But the moment a company extracts language from its CSRD report and uses it in voluntary consumer-facing marketing, that communication is subject to the ECGT's full requirements. This applies to website copy, advertising, social media, and any other consumer-directed channel. Companies should establish internal protocols governing how sustainability report language can be adapted for consumer communications, including a legal review step before any CSRD-sourced content appears in marketing materials.

What should companies do about existing product packaging that contains banned claims?

The European Commission's November 2025 Q&A confirms there is no grandfathering clause. Products in the distribution chain after September 27, 2026 must comply with the ECGT, regardless of when they were manufactured or placed on the market. European business associations have lobbied for a transition provision, but the Commission has not indicated any willingness to grant one. Companies with long distribution cycles should begin packaging redesigns now to avoid having non-compliant inventory on shelves past the enforcement date. Sticker overlays or packaging inserts are practical interim solutions for inventory already produced but not yet distributed.