Other Authors Kismet Johnson, Legal Consultant
A centerpiece of the European Green Deal was officially unveiled last week. The Proposal for a Regulation establishing ecodesign requirements for sustainable products ('ESPR' or ‘Regulation’) is an ambitious document, part of a series of European Commission proposals seeking to redefine business in line with the European Union's vision for a more sustainable future as part of the European Sustainability Initiative.
The ESPR extends the scope of the Ecodesign Directive1 from energy-related products to all products – save food, feed and medicines. If adopted, the Regulation will provide a general framework imposing ecodesign requirements on products intended for the EU market, on the basis of which the Commission will adopt a series of delegated acts setting more specific requirements for different product groups.
The Commission has stated it would start legislating for high-impact industries with gaps in sustainability rules, such as textiles, furniture, mattresses, tyres, detergents, paints, and lubricants, as well as iron, steel, and aluminium.2
We have analysed below some of the important ecodesign requirements that will apply to companies placing products on the market in the EU.
The overall context
Published on 30th March 2022, the ESPR is part of the European Sustainability Initiative (or "SPI"), a package that also comprises a communication on products sustainability,3 another on sustainable textiles,4 a proposal for a directive on consumer empowerment,5 and a proposal for the revision of the Regulation on construction products.
More proposals are expected in the course of the year, including a proposal on the substantiation of green claims used in product advertising, which we expect will draw from the Products Environmental Footprint (PEF) and Organizations Environmental Footprint (OEF) methodologies, and the revision of the consumer rights directive that may extend consumers’ right to have goods repaired. Indeed, whereas before this right was limited to defective products, it could in future also apply to goods that have merely suffered ordinary wear and tear.
The ESPR should be read in conjunction with these other measures as they overlap. One example concerns information requirements pertaining to the sustainability of a product for advertising and labelling: although the proposal for a directive on consumer empowerment provides a specific framework, the ESPR also applies. It will be interesting to see how this interplay pans out in practice.
The ESPR: A three-pronged approach
First of all, the proposal aims to impose ecodesign requirements on products intended for the EU market. The intention is to have the design of products reviewed to answer the environmental and sustainability concerns they currently raise. Two types of requirements are foreseen: performance requirements and information requirements. Performance requirements involve complying with rules on durability, repairability, reusability, recyclability, environmental footprinting, carbon footprinting, microplastic release, presence of substances of concern, and waste generation, among others. In practice, this might entail, for example, a duty to comply with rules on minimum recycling content or lead to shifting to a product-as-service business model.6
Information requirements entail that details pertaining to a product's performance, as defined above, must be supplied with the product. The proposal foresees that the information may be provided on the product, packaging, label, website, or manual or in a product passport.
Prong number two is indeed the digital product passport. It is no secret that the Commission views digitalisation as a prerequisite to a green, sustainable Europe. Digitalisation facilitates traceability, simplifying market surveillance and encouraging compliance. The product passport will play an important role in this regard. Every product placed on the EU market will have to be equipped with a machine-readable passport, accessible by scanning a data carrier and linked to a unique product identifier. To ease enforcement of ecodesign requirements, the Commission will set up a product passport registry to store all the data pertaining to the products placed on the EU market.
Thirdly, the proposal introduces transparency requirements pertaining to the destruction of unsold goods. This entails being upfront about the quantity of products disposed of and the reason for doing so. The duty applies at every stage of the value chain: from manufacturers to online marketplaces. Subsequently to the entry into force of this proposal, the Commission may choose to adopt delegated acts banning the destruction of unsold goods. The Commission hereby aims to reduce waste generation, disincentivise overproduction, and provide a harmonised set of rules to replace those which some Member States have adopted in this area. Some leeway is foreseen for SMEs, as well as an exemption on health and safety grounds.
There is scope for the Industry to ask the Commission to validate their own set of ecodesign measures as an alternative to compliance with the future delegated acts that will be adopted under this proposal. Self-regulation here operates in much the same way as under the Ecodesign Directive's voluntary agreements. Here again, companies must demonstrate that their measures achieve the same objectives as those set out by the proposed Regulation, in a faster and more affordable way. The Commission may reject measures or request that amendments be made. After approval, companies must report to the Commission on a regular basis detailing progress made. Provision must also be made for the monitoring of measures by independent experts.
Here, two points need to be considered. First of all, as ESPR is a regulation, industries should expect a more rigid approach to self-regulation than pursuant to the Ecodesign directive, including longer wait times for approval. Secondly, self-regulation is only an option if the measures in question have been adopted by companies representing at least 80% of all units placed on the market for the products concerned. This will require level of cooperation between companies which are generally viewed as problematic under competition rules. The Commission seems to have paved the way earlier this month, however, with a draft revised version of its Horizontal Guidelines. These foresee what it terms a “soft safe harbour” for sustainability standardisation agreements. The new guidelines provide that sustainability standards should not lead to significant price increases, meaning that the cost of complying with ESPR requirements should not be passed on to consumers.
Conformity of products
When assessing products for compliance with ecodesign requirements, Industry should use test, measurement and calculation methods that are generally recognised as being state-of-the-art. For some product groups, the Commission may require the use of online tools which will be made available, hopefully easing the burden of compliance.
Test, measurement and calculation methods, as well as products that are considered in conformity with harmonised standards published in the EU Official Journal, will be presumed to be in conformity with the ESPR. The same applies to products that have been awarded the EU Ecolabel, provided relevant ESPR requirements are covered by EU Ecolabel criteria.
Manufacturers should be aware that, post entry into force of ESPR, a CE marking will indicate that the products complies with ESPR performance criteria. The Commission is likely to adopt further legislation on conformity markings.
Bearing in mind the massive scope of this proposed Regulation, there will inevitably be numerous (indeed unquantifiable) areas of overlap with other EU legislation. On this matter, the Commission provides that lex specialis lex generalis derogat: where there are several sets of rules applicable to the same issue, the more specific rule applies. For example, regarding chemicals and ESPR's overlap with REACH,7 the Commission provides that REACH rules will apply to health and environmental concerns, whereas ESPR will intervene to address sustainability. In the same way, specific eco-design requirements adopted for the identified product groups will prevail.
As the transparency requirement applies across the whole value chain, consumers may expect the price of regulated products to rise as all actors from manufacturers to suppliers put in place structures to comply with these new rules. Although consumer savings do, on occasion, seem to underlie the Commission's green-deal reasoning,8 this proposal is unlikely to lead there in the short term.
It remains to be seen how the initiative will go down with industries generally. It is also worth keeping an eye on how third countries react. Indeed, trading with the EU is looking to become a lot more cumbersome. We already know that the Commission intends to impose workplace requirements on textiles' manufacturers9 with implications for the survival of the national industries of third countries.
Finally, considering the considerable investments and upskilling which compliance with these new rules will involve, particularly for third countries, we would not exclude the EU having to defend these rules before the WTO on the grounds they constitute technical barriers to trade.
How Mayer Brown can help
The Mayer Brown regulatory team has in-depth experience in products legislation and safety and sustainability requirements, as well as in preparing companies for legislative changes.
We represent a broad range of companies, industries and trade associations, ensuring that they keep up-to-date with the regulatory developments and are able to meet the sustainability challenges in an ever-shifting regulatory environment. Our team stands ready to advise on the potential implications of the ESPR and other regulations that are part of the EU SPI for your companies’ specific operations and products.
1 Directive 2009/125/EC of the European Parliament and of the Council of 21 October 2009 establishing a framework for the setting of ecodesign requirements for energy-related products (recast)
4 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – EU Strategy for Sustainable and Circular Textiles
5 Proposal for a Directive of the European Parliament and of the Council amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and better information