What is the link between ESG and consumer protection?
In 2020, the European Parliament published the results of an analysis of the contribution of the then current EU consumer protection framework to sustainable consumption and a longer lifetime of consumer products. The study focused on various stages of the lifecycle of consumer products:
- Design and production stage (e.g., need for more ecodesign requirements and standard for durability);
- Market and pre-contractual stage (e.g., need for blacklisting of “greenwashing” claims, regulation of “green” claims for consumer products, the inclusion of mandatory pre-contractual information on durability and repairability of products and for the supply of spare parts);
- Contractual stage (e.g., need to link product warranty periods to the expected lifetime of products, more access to repair and maintenance information, making e-commerce “greener” by limiting free returns of consumer products); and
- Waste stage (e.g., measures to promote a more circular economy).
Several of these considerations and recommendations have been further developed in the past couple of years, and changes were made to consumer protection laws throughout the EU. The focus of the present article will be on Belgian law.
Promoting sustainability through enhanced product warranty requirements
The Belgian Act of 20 March 2022 (implementing EU Directives 2019/2161, 2019/770,and 2019/771) introduced some important changes in the legislative framework governing the legal warranty of conformity in B2C sales.
First, the trader’s statutory product warranty no longer applies only to physical goods sold to consumers but also to the digital elements incorporated in such goods and to digital content and digital services supplied to consumers on a stand-alone basis. This legal warranty covers any lack of conformity that existed at the time of supply or delivery, and that becomes apparent within 2 years as from that moment. If the contract provides for a continuous supply of digital elements / content / services for longer than 2 years, then the liability period is the same as the supply period provided in the contract.
What’s also new is that the presumption of a hidden defect already being present at the moment of delivery is now extended to the entire term of the 2-year warranty period. For physical consumer goods, this means that the burden of proof in case of a hidden defect lies with the trader (and not with the consumer) for the entire warranty period. This measure is meant to encourage traders to develop and manufacture more sustainable products. A specific warranty regime applies for the supply of digital elements / content / services.
Finally, for goods with digital elements, digital content, or digital services, B2C traders must now also ensure that consumers are informed of and supplied with all updates, including security updates, that are necessary for those goods, content, or services to keep performing “in conformity with the contract” during the entire period during which the consumer may reasonably expect this.
In case of non-conformity, the consumer shall have the right to request a repair or replacement or – in a subsidiary order – a price deduction or complete reimbursement of the purchase price. From a sustainability perspective, a clear legislative choice for repair over replacement is being recommended by stakeholders but is not (yet) reflected in the law.
Enhancing consumer awareness through pre-contractual information obligations
The Belgian Act of 8 May 2022 (also enacted within the context of implementing EU Directives 2019/2161, 2019/770, and 2019/771) introduced additional changes in the Belgian consumer law legislative framework.
Traders must now provide consumers with specific information (i) on the functionality of goods with digital elements, digital content, and digital services (including applicable technical protection measures), (ii) on any relevant compatibility and interoperability issues of which the trader is aware, or can reasonably be expected to have been aware, and (iii) of the existence of the statutory warranty period (see above).
Stakeholders are also recommending that the list of pre-contractual information obligations be updated with information on, for example, the repairability of products and sustainability warranties.
In this respect, a proposal for a new EU Directive is currently being discussed with amendments to consumer protection laws specifically aimed at empowering consumers for the green transition through better protection against unfair practices and through additional pre-contractual information to be provided by traders of consumer products. This proposal was one of the initiatives set out in the EU’s New Consumer Agenda and Circular Economy Action Plan and follows up on the European Green Deal.
More precisely, the EU’s proposal aims at:
- Providing information on the existence and length of a producer’s commercial guarantee of durability for all types of goods, or the absence of such guarantee in case of energy-using goods;
- Providing information on the availability of free software updates for all goods with digital elements, digital content and digital services; and
- Providing information on the reparability of products, through a reparability score or other relevant repair information, where available, for all types of goods.
Greenwashing as “unfair commercial practice” in B2C relationships
The (proposed) new EU Directive mentioned above also proposes certain amendments to the list of B2C unfair commercial practices, targeting practices capable of misleading consumers away from sustainable consumption choices. Such practices include:
- Greenwashing practices (i.e., misleading environmental claims);
- Early obsolescence practices (i.e., premature failures of goods); and
- The use of unreliable and non-transparent sustainability labels and information tools.
More precisely, the EU’s proposal aims at:
- Ensuring that traders do not mislead consumers about environmental and social impacts, durability and, reparability of products;
- Ensuring that a trader can make an environmental claim related to future environmental performance only when this involves clear commitments;
- Ensuring that a trader cannot advertise benefits for consumers that are considered a common practice in the relevant market;
- Ensuring that a trader can only compare products, including through a sustainability information tool if they provide information about the method of the comparison, the products and suppliers covered, and the measures to keep the information up to date;
- A ban on displaying a sustainability label that is not based on a certification scheme or not established by public authorities;
- A ban of generic environmental claims used in marketing towards consumers, where the excellent environmental performance of the product or trader cannot be demonstrated in accordance with EU Regulation 66/2010 (EU Ecolabel), officially recognised eco-labelling schemes in the Member States, or other applicable Union laws, as relevant to the claim;
- A ban on making an environmental claim about the entire product, when it actually concerns only a certain aspect of the product;
- A ban on presenting requirements imposed by law on all products within the relevant product category on the EU market as a distinctive feature of the trader’s offer; and
- A ban on certain practices related to the early obsolescence of goods.
Reducing waste by putting an end to free product returns?
In the era of online shopping, an important challenge for the promotion of ESG is the generalized “right of withdrawal” that applies throughout the EU for consumer products sold online (or via other distance selling methods). In the EU, consumers have a statutory period of 14 days during which they can decide to return a product to the online trader without having to justify the return and very often without any charge. This right aims to compensate for the information asymmetry created by the fact that the consumer cannot see the goods before concluding the contract.
The current legislation provides no incentive for consumers to limit returns or to limit the environmental impact of their purchases. Legislators are therefore looking for more sustainable options. The European Parliament has also flagged this issue in its 2020 study.
In Belgium specifically, some initiatives have already been taken to make e-commerce more environmentally friendly. The Conseil Central de l’Economie has formulated several recommendations to make e-commerce, and especially the “last mile ”, more sustainable. These recommendations include the use of price differentiation between sustainable (e.g., pick-up point) and less sustainable last mile delivery options and additional information to increase transparency on the environmental impact of home delivery. In practice, many online shops are implementing these recommendations by actively pointing out to consumers the environmental impact of several different delivery options, but requesting a small financial contribution to compensate for the CO2 impact of their chosen delivery option, etc.
As noted above, sustainability, repairability, environmental claims, etc. are currently at the heart of several proposed changes to consumer protection laws, both at European level and at national level.
Reach out to one of our specialists if you wish to learn more about this topic.
Other articles in this series
- ESG litigation – the criminal angle of greenwashing? | Loyens & Loeff (loyensloeff.com)
- ESG considerations to restructure your business | Loyens & Loeff (loyensloeff.com)
- Sustainability considerations in B2C relationships | Loyens & Loeff (loyensloeff.com)
- Belgian temporary insolvency law measures protecting energy-intensive companies | Loyens & Loeff (loyensloeff.com)
- Trends in climate litigation | Loyens & Loeff (loyensloeff.com)
- Enforcing ESG obligations in supply contracts | Loyens & Loeff (loyensloeff.com)