Abstract

In recent years, corporations around the world have increasingly embraced the language of sustainability and social responsibility, presenting themselves as champions of environmental and social welfare. Yet, behind this carefully crafted image often lies the issue of greenwashing—the practice of making exaggerated or misleading claims about a company’s environmental or social impact. Such practices not only mislead investors and consumers but also erode trust in genuine ESG initiatives and weaken the overall credibility of corporate governance. This paper examines how India’s corporate governance and legal frameworks can be strengthened to ensure greater authenticity and accountability in sustainability practices. The research explores the effectiveness of India’s current ESG disclosure mechanisms, particularly SEBI’s Business Responsibility and Sustainability Report, to assess whether these rules are sufficient to identify and prevent corporate greenwashing. It also examines the question of liability: how far can companies and their directors be held legally or fiduciarily responsible for false or misleading sustainability claims? Finally, the study looks at the role of corporate governance structures—including board oversight, ESG committees, and independent directors—in promoting transparency and ethical reporting practices.

By comparing India’s approach with international frameworks such as the EU Corporate Sustainability Reporting Directive and the UK anti-greenwashing guidelines, the paper highlights best practices that could inform policy reforms in India. It argues that stricter disclosure standards, independent ESG assurance, and robust governance mechanisms are essential to building trust and curbing deceptive environmental claims. Ultimately, this research emphasizes that sustainability is meaningful only when backed by verifiable action and transparent governance. Addressing greenwashing is not just a matter of compliance—it reflects a company’s integrity and its ability to balance profit with genuine environmental and social responsibility.

Keywords: Corporate Governance, ESG, Greenwashing, Accountability, Sustainability

CHAPTER 1: INTRODUCTION

In recent years, companies around the world have increasingly used the language of sustainability. Many now release ESG reports, set net-zero targets, and promote themselves as eco- friendly. This trend reflects growing awareness among investors, consumers, and regulators about the importance of responsible business practices.[1] However, behind these claims often lies greenwashing when companies exaggerate or falsely present their environmental efforts. Greenwashing damages trust in markets and governance by misleading investors and consumers while taking focus away from truly sustainable businesses.[2] In India, the rules on sustainability reporting have developed quickly. In 2021, SEBI introduced the Business Responsibility and Sustainability Report, requiring the top 1,000 listed companies to disclose ESG information. This was strengthened in 2023 with BRSR Core, which added limited third-party assurance for key sustainability data. More recently, in 2024, the Central Consumer Protection Authority issued guidelines to prevent and regulate greenwashing in advertising—marking India’s first direct step toward addressing false environmental claims.

Despite these advances, India’s regulatory landscape remains fragmented and reactive. Several key questions persist:

• Are disclosure requirements under BRSR sufficiently granular to detect misleading ESG claims?
• Do existing enforcement mechanisms deter corporations from engaging in deceptive sustainability reporting?
• What role can corporate governance mechanisms boards, independent directors, and ESG committees play in ensuring truthful and accountable disclosures?

The paper adopts a three-pronged approach:

1. To examine the effectiveness of India’s ESG and disclosure frameworks in curbing greenwashing;
2. To evaluate legal and regulatory measures available to hold corporations accountable for false ESG claims; and
3. To analyze corporate governance mechanisms that can prevent and mitigate greenwashing.

This study compares India’s ESG framework with global models like the EU’s Corporate Sustainability Reporting Directive and the UK’s anti-greenwashing rule, which stress strong assurance, double materiality, and strict penalties. It highlights where India has progressed and where gaps remain, aiming to shift from symbolic compliance to genuine accountability based on transparent actions, verified data, and enforceable responsibility.

HYPOTHESIS

Stricter ESG disclosure rules and independent checks under India’s new laws help reduce corporate greenwashing. Stronger board control and tighter regulation make companies’ sustainability claims more genuine and trustworthy.

CHAPTER 2: TYPOLOGIES, HARMS AND IMPACT OF CORPORATE GREENWASHING

Greenwashing, a term coined by Jay Westerveld in 1986, refers to when companies falsely present themselves or their products as environmentally friendly. It involves using vague words like “eco-friendly” or “natural,” exaggerating small benefits, or using green packaging to appear sustainable. In simple terms, it’s about pretending to care for the environment to gain trust. To stop it, awareness and understanding of these misleading practices are essential.[3]

2.1. What Constitutes and Why Greenwashing Matters

Greenwashing takes many forms using vague terms like “eco-friendly,” exaggerating small benefits, displaying fake labels, or promoting products as sustainable while hiding larger environmental harms. The TerraChoice framework calls these the “Seven Sins of Greenwashing,” ranging from lack of proof to outright falsehoods all designed to create a false impression of environmental responsibility.[4] Greenwashing may seem profitable at first, especially where rules are weak, but it ultimately harms companies and the market. False sustainability claims might boost image briefly, yet they damage trust, reduce investor confidence, and hurt long-term credibility. The Volkswagen emissions scandal showed how misleading claims can destroy brand loyalty and reputation. Beyond individual firms, greenwashing misleads investors who depend on accurate ESG data, distorting market decisions and weakening public trust in genuine sustainability efforts.[5]

The Sahara case underscores the importance of full and honest disclosure, a principle equally vital for sustainability reporting.[6] Consumers are misled into paying more for products that only appear “green,” which the Consumer Protection Act, 2019 recognizes as an unfair trade practice. Honest businesses that invest in real sustainability face unfair competition from those faking it, undermining genuine progress. The Advertising Standards Council of India’s 2024 guidelines define greenwashing as making false or misleading environmental claims—or hiding key facts— to appear more eco-friendly than a company truly is.

McDonald’s paper straws that turned out to be non-recyclable,[7] Coca-Cola Life’s Green label claiming it has lower calories but had 6.6% sugar[8] , Starbucks’ straw-less lid (2018),[9] that had more plastic than the previous lid and straw combination, and Windex’s claim of that its bottles were made from 100%ocean plastic are a few examples of greenwashing. In India, HUL falsely claimed in its advertisement that its Surf Excel Easy Wash detergent was ‘100% natural’ and ‘environment- friendly’, but in reality, it contained synthetic ingredients. Similarly, Voltas Limited, was accused of making false claims that its ACs were eco-friendly and had a ‘5-star energy rating’, but in reality, they had a lower energy rating. Voltas was fined Rs. 50,000 by the ASCI. Even Godrej Consumer Products Limited was accused of making false claims that its soap was ‘100% natural’, ‘biodegradable’, and ‘eco-friendly’, but in reality, it contained synthetic ingredients and they fined Rs. 15 lakhs by the ASCI.

2.2. Drivers, Impact, and Governance Consequences of Greenwashing

Greenwashing often arises from the growing pressure on companies to appear sustainable in today’s competitive market. Being “green” has become essential for investor appeal and public image, tempting some firms to exaggerate or manipulate their environmental claims. Since companies usually possess more information about their environmental impact than consumers or investors, they can selectively disclose positives while concealing negatives. Weak governance, lack of board expertise in ESG matters, and lenient penalties make it easier for such practices to go unchecked. When executive bonuses or brand value depend on ESG ratings, the focus often shifts from real improvement to appearance.[10] This behavior undermines both CSR and ESG goals. While the Companies Act, 2013 mandates CSR spending and SEBI’s ESG reporting encourages transparency, greenwashing reduces these efforts to marketing exercises.

Genuine sustainability, as demonstrated by Infosys’ verified “zero waste” certification, depends on honesty, accountability, and measurable progress. Greenwashing, in contrast, erodes public trust, misleads stakeholders, and weakens good governance. [11] The consequences for governance are severe. Companies that engage in misleading disclosures risk reputational damage, investor withdrawal, and legal scrutiny.[12] The Satyam scandal, though unrelated to ESG, serves as a warning of how false reporting can destroy market confidence and force systemic regulatory reform the same danger now posed by deceptive sustainability claims.[13]

CHAPTER 3. INDIA’S REGULATORY AND DISCLOSURE LANDSCAPE

India’s approach to ESG and sustainability reporting is improving but still fragmented. This chapter looks at how laws like SEBI’s BRSR, the Consumer Protection Act, 2019, and ASCI Guidelines work in practice and where key gaps remain.

3.1. SEBI and Business Responsibility and Sustainability Report

The SEBI has been central in institutionalizing sustainability reporting. In 2021, SEBI introduced the BRSR, replacing the earlier Business Responsibility Report, to align India’s disclosure norms with international ESG benchmarks.[14] The BRSR mandates that the top 1,000 listed entities disclose quantitative and qualitative sustainability metrics across nine principles covering governance, environmental responsibility, and stakeholder engagement.

In 2023, SEBI introduced the BRSR Core, a more detailed sub-framework that requires assurance for high-priority ESG parameters such as greenhouse gas emissions, energy mix, and gender diversity.[15] This initiative marks India’s first move toward third-party verification of sustainability data. The phased implementation will expand to the top 1,000 listed companies by FY 2026–27.

From FY 2024–25, top companies must report Scope 3 emissions from their value chains. While this encourages transparency, the “comply or explain” option weakens accountability and may allow superficial reporting. The BRSR Core requires limited third-party assurance of ESG data, but SEBI has not defined clear standards for who can provide it. This gap risks conflicts of interest if the same consultants both advise and verify companies.[16]

3.2. SEBI’s Green Debt Securities

Recognizing the vulnerability of green financial instruments to greenwashing, SEBI issued a 2023 circular on Dos and Don’ts relating to Green Debt Securities, mandating that issuers disclose how proceeds will be deployed exclusively for “green activities.[17] The circular prohibits funding of non-green projects and requires third-party certification for environmental impact.

3.3. Consumer Protection and Advertising Regulation

The CCPA issued the Guidelines for Prevention and Regulation of Greenwashing and Misleading Environmental Claims in 2024, India’s first targeted legal instrument against greenwashing. These guidelines prohibit exaggerated or unverifiable environmental claims in marketing and product labeling, requiring that all such representations be substantiated by scientific evidence.

The Guidelines apply to all manufacturers, advertisers, and endorsers. Section 4 explicitly forbids practices that conceal material information, exaggerate benefits, or misuse environmental imagery. Violations can result in imprisonment up to five years or fines up to ₹50 lakhs under Section 89 of the Consumer Protection Act, 2019. In tandem, the ASCI released its Guidelines for Environmental/Green Claims (2024), emphasizing that vague descriptors such as “eco-friendly,” “green,” or “sustainable” must be avoided unless scientifically verifiable. Advertisements must specify whether the environmental benefit applies to the product, packaging, or process. The ASCI’s self-regulatory mechanism, though non-statutory, plays a crucial corrective role through reputational enforcement.

3.4. Institutional and Enforcement Challenges

Despite these initiatives, enforcement remains weak. The BRSR applies only to top-listed companies, leaving thousands of mid-sized and unlisted firms unregulated. Similarly, while CCPA and ASCI guidelines address advertising-level greenwashing, they fail to reach corporate-level ESG misreporting in annual disclosures and investor communications. Moreover, absence of a science-based taxonomy defining what constitutes a “green” activity leads to inconsistent reporting. Unlike the EU Taxonomy Regulation, India lacks standardized technical criteria, allowing firms to self-define sustainability.[18] Finally, enforcement fragmentation between SEBI, CCPA, and ASCI creates regulatory overlap and jurisdictional ambiguity. This multiplicity undermines deterrence and compliance monitoring.

CHAPTER 4: ADEQUACY OF THE CURRENT LEGAL FRAMEWORK

India has improved its sustainability rules, but they still aren’t strong enough to stop greenwashing. This section looks at the main gaps in disclosure, assurance, and enforcement to see if current ESG systems can really prevent false sustainability claims.

4.1. Fragmented Legal Regimes

India’s anti-greenwashing ecosystem is spread across several statutes—the Companies Act, 2013, the Consumer Protection Act, 2019, and various SEBI circulars—but lacks a unified legislative backbone. The Consumer Protection Act provides an avenue for affected consumers to seek redress in cases of misleading and deceptive advertisements, and the CCPA Guidelines have taken the right step in defining and prohibiting greenwashing, its strict enforcement is yet to be seen. The ASCI Guidelines focus purely on the advertising and marketing aspect of greenwashing, but these frameworks do not fully address greenwashing in corporate reporting, investor communication or other areas of business. In other words, the former is limited in operation to the protection of consumers while the latter is limited to the scope of advertisements only.

Unlike jurisdictions that have enacted comprehensive ESG statutes, India regulates sustainability indirectly through disclosure obligations and consumer protection norms. This fragmented approach results in regulatory gaps, especially regarding corporate-level ESG misreporting, which often falls outside the CCPA or ASCI’s jurisdiction.[19]

4.2. Limited Scope of BRSR

The BRSR is a major step toward institutionalizing transparency but remains limited in its c coverage and credibility. It applies only to the top 1,000 listed companies, leaving thousands of smaller or unlisted entities outside scrutiny. The framework also fails to mandate independent third-party verification for all ESG data, thereby enabling selective disclosure. The voluntary “comply or explain” clause under the BRSR for Scope 3 emissions further weakens its deterrence power. Companies may evade full disclosure through generalized explanations, eroding comparability and accountability. Moreover, SEBI has yet to issue penalties specifically for greenwashing, treating false ESG claims under generic misrepresentation provisions of the Prohibition of Fraudulent and Unfair Trade Practices Regulations, 2003.

4.3. Lack of Taxonomy and Materiality Standards

India’s regulatory approach does not define what qualifies as “green” or materially sustainable. Without a formal taxonomy, corporations retain wide discretion in self-defining sustainability, facilitating “selective greening.”[20] Similarly, materiality standards under the BRSR remain ambiguous companies report dozens of ESG metrics without guidance on prioritizing what is truly significant for stakeholders. In contrast, the EU CSRD and Taxonomy Regulation employ double materiality, requiring firms to disclose both how their operations impact sustainability and how sustainability affects them financially.[21] India’s single-lens approach focuses only on internal impact, ignoring broader ecological consequences.

4.4. Weak Enforcement and Sanctions

SEBI possesses extensive powers under Section 11 of the SEBI Act, 1992 to issue directions and impose penalties, yet there have been no major enforcement actions against greenwashing or false ESG claims. The absence of visible punitive action significantly weakens deterrence. By comparison, the UK Financial Conduct Authority and EU regulators routinely impose multi- million-euro fines for misleading sustainability disclosures.[22]

The Consumer Protection Act, 2019, though providing for imprisonment and fines, has not yet been invoked in any high-profile greenwashing prosecution. ASCI’s enforcement relies largely on voluntary compliance and reputational pressure, insufficient to discipline large corporations.

4.5. Institutional Coordination Deficit

India’s multi-agency model spanning SEBI, RBI, CCPA, ASCI, and MCA creates jurisdictional overlaps and accountability gaps. For instance, misleading ESG disclosures in investor reports may not fall squarely under consumer protection law, while SEBI lacks a direct mandate over product-level claims. This fragmented enforcement ecosystem allows corporations to operate in regulatory grey zones, exploiting ambiguity to evade liability.

CHAPTER 5. COMPARATIVE REGULATORY FRAMEWORKS: EU AND UK BENCHMARKS

To fix the gaps in India’s greenwashing laws, this section looks at global examples like the EU’s CSRD and the UK’s Anti-Greenwashing Framework, which improve corporate accountability through clear rules, independent checks, and strong enforcement.

5.1. EU’s Corporate Sustainability Reporting Directive

The EU’s CSRD sets strict and transparent standards for sustainability reporting.[23] It follows a double materiality approach, requiring companies to report not only how sustainability issues affect their business but also how their activities impact the environment and society. To ensure consistency, the European Sustainability Reporting Standards provide uniform definitions and metrics across industries. The CSRD also mandates independent assurance, meaning all sustainability data must be verified by accredited auditors. Reporting is done digitally through the European Single Electronic Format, allowing easier access and comparison between companies. Importantly, the CSRD covers the entire value chain, ensuring companies disclose the impact of both their operations and their suppliers. For violations, strict enforcement measures allow authorities to impose heavy fines up to 5% of global turnover creating real accountability. Overall, the CSRD promotes genuine transparency by combining detailed reporting, independent verification, and strong penalties for non-compliance.

5.2. UK’s Anti-Greenwashing Framework

The United Kingdom uses a comprehensive approach to tackle greenwashing by combining financial, advertising, and corporate regulations. The Financial Conduct Authority introduced the 2024 Anti-Greenwashing Rule, which requires all sustainability-related claims for financial products to be fair, clear, and not misleading.[24] The FCA has strong powers to enforce this through warnings, fines, and product bans. Its Sustainability Disclosure Requirements further ensure that investment products use evidence-based and standardized ESG labels. The Advertising Standards Authority monitors environmental claims in advertisements and has penalized companies, such as Lloyds Banking Group, for misleading “carbon neutral” ads.[25] Additionally, the Competition and Markets Authority enforce the Green Claims Code (2021),[26] which demands that all environmental claims be honest, clear, and backed by proof, with penalties for violations. Together, these agencies create a coordinated system that promotes truthful sustainability communication and holds corporations accountable for misleading claims.

5.3. Lessons for India

A comparative look at global practices shows key lessons for improving India’s ESG system. India should create a science-based national taxonomy that clearly defines what counts as “green,” “sustainable,” or “transitional,” reducing vague self-reporting. The BRSR framework should include double materiality, requiring companies to disclose both how sustainability affects them and how they impact the environment. Mandatory assurance should be expanded so that all large listed companies have their ESG data independently verified by qualified auditors approved by SEBI or ICAI. SEBI should also develop a national digital ESG database for easier comparison and monitoring. To strengthen accountability, penalties should be based on company revenue, and enforcement actions should be made public. Better coordination among regulators—like SEBI, the CCPA, ASCI, and MCA—can help manage cross-sector greenwashing. Finally, a public registry of accredited ESG assurance providers would build trust by showing which firms are qualified and transparent in their audit work.

The EU and UK approaches demonstrate that credible ESG regulation requires both procedural rigor and punitive enforcement. While India’s frameworks remain largely compliance-driven, EU and UK systems are substantive, focusing on verifiable outcomes and continuous assurance. The result is higher market credibility and investor confidence.[27]

CHAPTER 6. ASSURANCE AND VERIFICATION OF ESG CLAIMS

The trustworthiness of sustainability reports depends on independent checks. Without them, ESG reports can turn into marketing tools that enable greenwashing. This section explains how strong assurance systems, in India and globally, can make ESG data more reliable and prevent false claims.

6.1. The Importance of Assurance

Assurance means an independent review of ESG data to check if it is accurate, complete, and follows proper standards. Just like financial audits, independence and objectivity make ESG reporting more reliable by turning voluntary claims into accountable ones. For companies, assurance builds investor trust and supports access to green finance. For regulators, it helps detect exaggeration or false claims, acting as a safeguard against greenwashing and unchecked managerial bias.[28]

6.2. International Assurance Frameworks

ISAE 3000 (Revised): Sets global standards for assuring non-financial data like ESG reports and requires auditors to verify the reliability of sustainability claims.

ISAE 3410: Provides a framework for verifying greenhouse gas emissions, a core part of environmental disclosures.

Limited vs. Reasonable Assurance: Limited assurance offers only basic review, while reasonable assurance involves deeper verification and stronger confidence in data accuracy. Most countries are now shifting toward reasonable assurance as ESG information becomes more important.[29]

6.3. Assurance Mechanisms in India

India has only recently begun integrating ESG assurance into its regulatory system. Under SEBI’s BRSR Core (2023), companies must get limited assurance for key indicators like energy use, greenhouse gas emissions, and gender diversity. While this can be done by any independent professional, SEBI has not clearly defined what qualifies as “independent,” raising doubts about reliability. The Institute of Chartered Accountants of India is also developing national sustainability reporting standards to improve consistency.[30] These are positive steps, but assurance still covers only a small part of ESG data, leaving areas like social impact, governance culture, and biodiversity outside the scope of verification.

6.4. The Independence Dilemma

A significant challenge in ESG assurance lies in conflict of interest. Many assurance providers also offer consulting or sustainability advisory services to the same clients. This dual role compromises independence, replicating the structural weaknesses that led to corporate scandals like Satyam. The OECD Guidelines for Multinational Enterprises emphasize that assurance must be free from economic or managerial influence. Accordingly, assurance providers should be accredited and rotated periodically, with disclosure of their fee structures to prevent bias.

6.5. Legal Liability and Accountability

Independent assurance also raises the question of liability for inaccurate verification. In the EU and UK, assurance providers can face administrative sanctions or civil liability for negligent verification under the CSRD and FCA regimes. India currently lacks equivalent statutory liability—auditors or consultants face consequences only under generic misconduct provisions of the Chartered Accountants Act, 1949.

Including assurance liability under SEBI’s framework would make ESG audits as strict as financial audits, where negligence or bias is punishable. To make ESG disclosures more credible, India should require independent verification for major companies, ensure auditor independence, and hold assurance providers legally responsible for errors or misconduct.

• In Volkswagen AG (2015), assurance failures allowed falsified emissions data to persist undetected for years—showing how lack of independent verification magnifies corporate deceit.[31]
• Vedanta Ltd. (2018) before the NGT illustrated how unverifiable CSR and sustainability claims could mask environmental harm.[32]
• The Satyam scandal demonstrated that governance failure in assurance and auditing can destabilize entire markets an important analogy for ESG verification.

CHAPTER 7. CORPORATE GOVERNANCE MECHANISMS AND BOARD ACCOUNTABILITY

Greenwashing is not only about false claims but also about weak corporate governance. Company boards must make sure that sustainability statements are truthful, verified, and reflect their duty to act responsibly. This section explains how stronger internal governance can help Indian companies prevent or reduce greenwashing.

7.1. The Governance–Greenwashing Nexus

Corporate governance serves as the internal control system that aligns managerial behavior with stakeholder interests. When directors fail to exercise oversight over sustainability claims, they not only breach disclosure norms but also violate their fiduciary duties of care, skill, and diligence under Section 166 of the Companies Act, 2013. Greenwashing thus reflects an ethical blind spot in board conduct where environmental rhetoric substitutes for genuine corporate reform. The board’s complacency in validating unverified ESG claims undermines the principles of transparency and accountability central to governance frameworks such as the OECD Principles of Corporate Governance.

7.2. Strengthening Board Oversight and Governance Model

Under the Companies Act, 2013, boards are responsible for ensuring the honesty and accuracy of all company disclosures. They must review sustainability strategies, set measurable ESG goals, and ensure independent verification of reported data. Audit committees should oversee ESG assurance providers and confirm that all communications meet SEBI and Companies Act standards. [33] To build stronger accountability, companies should establish mandatory ESG committees led by independent directors and officially recognize a Chief Sustainability Officer as part of top management. [34] Regular ESG audits—conducted alongside financial audits—can improve transparency, while directors should face liability for false or misleading sustainability statements. Embedding these practices into governance frameworks transforms sustainability from a voluntary initiative into a core board duty. .[35]

7.3. Independent Directors and ESG Committees

Independent directors play a key role in ensuring transparency and accountability in companies. As required by Section 149(4) of the Companies Act, 2013, they are meant to provide objective oversight and protect stakeholder interests. They can strengthen ESG accountability by asking for verified evidence before approving environmental claims, setting up board-level ESG committees to monitor progress, and working directly with assurance providers and auditors instead of depending only on management reports. For instance, Infosys Ltd. established a Sustainability and Diversity Committee chaired by an independent director, ensuring that ESG metrics undergo internal verification prior to disclosure.[36] False or misleading ESG disclosures can lead to liability under company, securities, and consumer laws, reinforcing that directors must lead ethically and ensure honest sustainability reporting.

• UOI v. Satyam Computer Services Ltd., (2009) 8 SCC 110 – The Satyam scandal exposed how board negligence in verifying disclosures led to catastrophic loss of market trust.
• Vedanta Ltd. v. Tamil Nadu Pollution Control Board, NGT (2018) – Demonstrated how governance apathy toward environmental compliance led to operational shutdown and reputational damage.

These precedents collectively affirm that board-level diligence and verification are not optional ethics but enforceable obligations.

7.4. ESG Governance Disclosure under SEBI (LODR) Regulations

Recent SEBI amendments require top-listed entities to disclose board-level ESG governance structures, including whether the company has a dedicated sustainability committee and how ESG matters are integrated into risk management. However, compliance remains largely symbolic— companies disclose committee existence without demonstrating substantive oversight. Effective ESG oversight requires informed and trained directors, so institutions like the IICA and NFCG should provide regular ESG training programs to strengthen board competence and prevent misleading sustainability claims.[37]

7.5. Internal Audit and Whistleblower Mechanisms

An empowered internal audit function can independently verify ESG metrics, while whistleblower mechanisms encourage employees to report misrepresentation. Section 177(9) of the Companies Act, 2013 mandates that listed companies establish a vigil mechanism—this can be extended to include ESG misreporting. Companies such as Tata Steel and Mahindra Group have integrated sustainability verification into internal audit processes, illustrating good practice in prompting potential greenwashing.

CHAPTER 8. LIABILITY, ENFORCEMENT, AND REMEDIES

The real test of any system is enforcement. Without strict penalties, laws lose meaning. This section looks at how stronger enforcement and director accountability can help stop greenwashing and false ESG reporting.

8.1. Legal Avenues for Liability in India

India’s legal system currently provides fragmented yet overlapping remedies for greenwashing. These arise from corporate, securities, consumer protection, and environmental laws.

A. Companies Act, 2013

• Section 447 defines fraud to include any act or omission intended to deceive or gain undue advantage, regardless of whether wrongful gain is realized. False or misleading ESG disclosures could thus amount to corporate fraud.
• Section 166 imposes fiduciary duties on directors to act in good faith and with due care, skill, and diligence. Failure to verify sustainability claims could constitute a breach of fiduciary duty.
• Section 134 requires the Board’s Report to provide truthful information on energy conservation and corporate social responsibility; falsity attracts penalties under Section 134(8).

B. SEBI Regulations:

The SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 prohibit misstatements and misleading advertisements in connection with securities. Misleading ESG disclosures made to investors can fall under Regulation 3(b) and 4(2)(k). SEBI can impose penalties up to ₹25 crore or three times the amount of profits made.[38]

C. Consumer Protection Act, 2019:

The CCPA Guidelines on Greenwashing (2024) prohibit deceptive environmental claims and empower authorities to issue injunctions, order corrective advertisements, and impose fines up to ₹50 lakh or imprisonment for five years.[39]

D. Environmental Jurisprudence:

The NGT has applied the polluter pays and precautionary principles to hold corporations liable for environmental misrepresentation. In Sterlite Industries (Vedanta) (2018), the NGT rejected sustainability defenses, emphasizing that “self-proclaimed environmental compliance” does not override factual harm.[40]

8.2. Enforcement Agencies and Jurisdictional Overlaps

India’s enforcement system for greenwashing is scattered across multiple agencies, leading to confusion and weak action. SEBI handles listed company disclosures, the CCPA deals with consumer deception, the MCA oversees director liability, and the NGT addresses environmental issues. Because these areas often overlap, no single body takes full responsibility. For instance, a false “carbon-neutral” claim by a listed company could fall under both SEBI and CCPA, causing delays and inconsistent outcomes. Setting up a National ESG Enforcement Taskforce under SEBI or MCA could solve this problem by improving coordination, data sharing, and joint enforcement.

8.3. Civil and Criminal Remedies

India offers several ways to act against greenwashing through civil, criminal, and administrative remedies. Civil measures include court orders to stop false environmental claims, compensation for affected investors or consumers, and requiring companies to fund genuine environmental projects. Criminal penalties can involve imprisonment of directors for fraudulent disclosures, fines for misleading advertisements, or prosecution for submitting false environmental compliance reports. On the administrative side, SEBI has the power to issue cease-and-desist orders, suspend trading, or bar companies from accessing capital markets.

8.4. Emerging Global Precedents

Globally, regulators are taking stronger action against greenwashing. In 2023, Australia’s ASIC fined Mercer Superannuation AUD 11 million for false ESG claims, while the US SEC created a dedicated Climate and ESG Task Force that has already taken action against BNY Mellon for exaggerating its sustainability credentials.[41] The UK’s ASA also banned HSBC ads for overstating their environmental efforts. These examples show a clear global shift toward viewing greenwashing as a serious form of corporate fraud rather than just misleading marketing.[42]

8.5. Indian Enforcement Record

In contrast, India has yet to see a major greenwashing prosecution. Most interventions have been limited to ASCI warnings or small fines. This lack of visible enforcement undermines deterrence. The HUL Surf Excel, Voltas, and Godrej cases resulted in penalties under ₹20 lakh insufficient to influence corporate behavior.[43] Furthermore, Indian regulators have not yet imposed sanctions on assurance providers or directors for ESG misreporting, reflecting a regulatory gap compared to the EU’s CSRD, which extends liability to verifiers.

8.6. Judicial Role and Evolution of Accountability

Indian courts have begun to recognize the duty of truthful environmental representation as integral to corporate accountability. The Delhi High Court, in Reckitt Benckiser v. Hindustan Unilever Ltd. (2023), held that comparative advertising must not mislead consumers by exaggerating environmental benefits.[44] This judicial acknowledgment of environmental misrepresentation as actionable deception paves the way for a jurisprudential expansion into corporate ESG reporting.

8.7. Strengthening Enforcement: From Punishment to Prevention

Effective enforcement should go beyond punishment and focus on restoring trust and accountability. Companies caught greenwashing should be required to issue public corrections and direct penalties toward genuine environmental projects like in the case of Vellore Citizens Welfare Forum v. UOI (1996). Repeat offenders could face independent monitoring, while investors should have access to channels to report false ESG claims and seek redress. At the same time, enforcement must be transparent and consistent. SEBI should formally classify greenwashing as an offence, strengthen data sharing with the CCPA and ASCI, and publish enforcement actions to ensure visibility. Companies penalized for false reporting should also disclose who on the board was responsible. These steps would move India’s approach from surface-level compliance to real prevention, reinforcing integrity and credibility in corporate sustainability practices.

CHAPTER 9. POLICY RECOMMENDATIONS AND REFORM ROADMAP FOR INDIA

Having reviewed India’s regulatory, governance, and enforcement responses to greenwashing, it is clear that stronger, unified reforms are needed. A comprehensive framework built on accountability, transparency, and verified disclosure can help curb corporate greenwashing and promote genuine sustainability.

9.1. Legislative and Regulatory Reforms

India needs a unified and clear legal framework to tackle greenwashing effectively. Greenwashing should be defined as a distinct offence under SEBI and consumer protection laws to enable focused enforcement. A National Sustainability Taxonomy, modeled after the EU, should classify activities as green, transitional, or unsustainable, with regular expert updates. SEBI’s BRSR Core should evolve into a mandatory, independently verified ESG assurance system, ensuring disclosures are credible and reliable.[45] ESG reporting must extend beyond the top 1,000 listed firms to include large unlisted and high-impact sectors such as energy, mining, and FMCG. Assurance providers should be legally accountable for negligent or false verification, while companies must disclose details about their ESG governance and board activities to enhance transparency. Finally, penalties should be restorative, requiring violators to fund genuine sustainability or carbon-offset projects, turning enforcement into meaningful environmental action.[46]

9.2. Institutional Reform and Coordination

Effective enforcement requires strong coordination among regulators. A National ESG Coordination Council should unite SEBI, the CCPA, MCA, RBI, and ASCI to share data, harmonize definitions, and streamline enforcement. SEBI could maintain a public database of enforcement actions to improve transparency and deterrence, alongside a registry of accredited ESG assurance providers detailing qualifications, track records, and conflict-of-interest declarations. The whistleblower mechanism under the Companies Act should extend to ESG frauds, offering protection and potential rewards to those reporting misconduct. Additionally, specialized ESG benches in the NCLT could handle sustainability-related disputes swiftly and with greater expertise.[47]

9.3. Governance, Data, and Stakeholder Reforms

At the corporate level, all major listed companies should establish board-level ESG committees chaired by independent directors to ensure sustainability oversight. The Chief Sustainability Officer should be recognized as a KMP, directly accountable for ESG performance. Executive pay should link to verified, not self-reported, sustainability results, while directors should undergo ESG training programs offered by the Indian Institute of Corporate Affairs to build capacity and awareness. To enhance transparency, SEBI could develop a centralized digital ESG database, using blockchain to secure data integrity and AI-based tools to detect false or inconsistent claims. Finally, stakeholder empowerment should be prioritized through ESG grievance portals, PILs on greenwashing, and NGO participation in sustainability audits—ensuring accountability extends beyond corporations to investors, consumers, and civil society.[48]

CHAPTER 10: CONCLUSION

Greenwashing remains a serious challenge to corporate integrity and sustainable growth. By making false sustainability claims, companies mislead investors and consumers while undermining the credibility of genuine ESG efforts. Although India’s frameworks—like SEBI’s BRSR and BRSR Core, and the CCPA’s 2024 greenwashing guidelines—are steps forward, major gaps persist. The absence of a clear national green taxonomy, limited assurance coverage, weak board oversight, and poor enforcement continue to allow misleading practices to thrive. To move forward, India needs stronger and clearer ESG rules—mandatory independent verification, uniform assurance standards, and expanded reporting for all listed and major unlisted firms. Regulators like SEBI, CCPA, and MCA should work together under a unified ESG framework to ensure consistency and strict enforcement.

Public disclosure of penalties, protection for whistleblowers, and ESG training for directors can further build accountability. Lessons from the EU and UK show that transparency, independent assurance, and visible penalties together create real deterrence. For India, tackling greenwashing is not just about compliance it is about restoring trust, integrity, and responsibility in corporate governance. With coordinated action and political will, India can turn sustainability from a slogan into a credible, accountable commitment to society and the planet.