In a recent attempt at combatting greenwashing, French oil and gas giant TotalEnergies was put on trial in Paris for misleading consumers with its claim of achieving carbon neutrality by 2050, while taking no action to further it as the reports point out that its energy production continues to be composed mostly of fossil fuels until 2024.

Greenwashing can take several forms from misleading business practices to overstating the environmental-friendly practices that they have undertaken to further their goal of sustainability and environmental impact.

I. Background

Greenwashing according to Central Consumer Protection Authority’s (CCPA) guidelines for prevention and regulation of greenwashing, 2024 which as per section 2(f), refers to any deceptive or misleading practice or use of misleading words, symbols etc to downplay actions which have harmful impacts on the environment.

Claims of ‘greener’ or ‘environment friendly’ or ‘planet friendly’ need to be substantiated by authentic data otherwise amounting to greenwashing. It needs to be specific and ensure clarity on how the product or service affects the environment and should not convey a false impression of the product being more beneficial than it actually is.

II. Legal Framework in India

Greenwashing has been given serious consideration by various governmental agencies and have passed guidelines on this, mainly by CCPA, ASCI, SEBI, RBI in particular. These have been an attempt at combatting misleading claims as propagated by various companies on their product or service.

CCPA

CCPA a governmental body which protects its consumers from various unfair practices by companies by creating various guidelines and laws, has issued on October 15, 2024 “Guidelines for prevention and regulation of greenwashing or misleading environmental claims, 2024”. This has been monumental in defining what constitutes greenwashing and practices which are harmful to consumers.

The most revolutionary part of these guidelines is that there is now a requirement that the claims made by the company of being ‘ecofriendly’ or ‘green’ need to be substantiated by authentic data and cannot be used as a marketing tactic anymore and the procedure for this is also laid down in this act. The entire research needs to be provided as per section 6 and the unfavourable observations cannot be hidden from consumers whilst showing only the favourable observations.

The main issue in respect to these guidelines is that there is no penalisation against the company for the wrong doing, these can lead to the guidelines becoming redundant as there are no consequences for harmful practices and allowing for a very slow process in tribunals or courts as damages are not specified and for the authority with competent jurisdiction to decide on this.

ASCI

Advertising Standards of Council of India (“ASCI”), a regulatory body which protects the consumers from misleading advertisements, has recently unveiled its “guidelines for advertisements making environmental/green claims”. These will further prevent the advertisers from making unfounded claims and require the companies to ensure the relevant research is provided as to its environmental or green claims.

These guidelines have further differentiated between various claims such as absolute claim which states that the product has no ill effect that needs to be backed by strong data and cannot be diluted by asking consumers to go to another site, etc. A comparative claim is a claim that the current product is supposedly better than the previous product, this claim needs to be clearly provided by the advertisers and on what metric they are measuring such change. Any such environmental claim, be it comparative or absolute or general cannot be misleading the consumers.

ASCI can on the basis of such guidelines give notice to various companies which have infringed upon it such as (i) hand wash liquid and (ii)vegetable cleaning liquid are eco-friendly; (ii) the container of a strawberry shower scrub is made of 30 per cent recycled plastic, etc.

SEBI

Securities Exchange Board of India (“SEBI”) issues green debt securities which raise funds for projects which are beneficial to the environment, having taken up the matter that such securities may be misused by companies posing as environmentally friendly, has released a circular which provides as a guide on what constitutes as greenwashing and how the fund from such security may be used.

This also requires the companies to not use funds for any other reasons except the ones mentioned in the NCS regulations which promote sustainable energy and projects which are deemed as environmentally friendly. These claims cannot be misleading so as to hide unfavourable data or cherry picking “good” data and cannot make false claims about its certification from third parties.

RBI

Reserve Bank of India (“RBI”) has released the framework for the acceptance of green deposits, which enable consumers to achieve sustainability goals and prevent greenwashing. These guidelines now restrict the usage of such funds to some green activities or projects which are beneficial to the environment and;

“Encourage energy efficiency in resource utilisation, reduce carbon emissions and greenhouse gases, promote climate resilience and/or adaptation and value and improve natural ecosystems and biodiversity.”

This framework now limits the activities it may be used for and only allows truly sustainable projects.

ESG Oversight Body

In recent news, the standing committee on finance has recommended to the parliament to establish an ESG oversight body to actively prevent greenwashing. This committee has also recommended that there should be statutory changes to the companies act, 2013.

It suggests that the ESG goals should be a part of directors’ duties as under section 166(2) that provides for the directors’ role in promoting companies’ goals. This will ensure that there is proper integration of such ESG regulations into their business practices and make it mandatory for the board to oversee such integration. This will integrate sustainability from mere disclosure into core business strategies and transform into fundamental corporate responsibility.

The committee has also found there has been inconsistent application of such goals across sectors and that small businesses face difficulty in adopting such practices. To address such issues, there should be oversight body that overlooks on such matters and ensure compliance and penalising for greenwashing.

III. Global Scenario

In recent years, there has been a rise in greenwashing cases around the globe. Companies advertise their product with a far-fetched and unachievable environmental goal. Many business practices of the company are not in congruence with what they claim to achieve.

The Shein Case

Infinite Styles Service Co. Ltd, which operates Shein, a leading fashion company, faced an imposition of 1 million euro fine by Italy’s Competition Authority AGCM. The fine was imposed because of the vague and overly emphatic messages on the Shein website. Shein promoted ‘evoluSHEIN by design’ on its website, advertising that its clothes were sustainable and recyclable. The AGCM emphasised that this misled the consumers as the fabric used was not fully recyclable and therefore amounted to greenwashing. The notable increase in Sheins’ emissions in 2023-2024 was seen as against Sheins’ commitment to cut greenhouse gas emissions by 25% by 2020-2030. This commitment given by the company was seen as being very vague, unclear, and generic in nature. Italy’s competition authority follows guidelines based on the Italian Consumer Code and broader EU directives to prosecute greenwashing. Instead of formal published guidelines, the AGCM applies core principles of fairness and accuracy by examining environmental claims on a case-by-case basis. This case showed that companies should avoid using broad terms that sustainable and eco, etc unless they can substantiate with strong evidence.

Apple

Brands have been making far-fetched claims, one such being that their products are carbon neutral. Apple has also made a claim that its products are carbon neutral as it operates a project in Paraguay to offset emissions by planting eucalyptus trees on leased land, but the Frankfurt court states that three fourth of the land is leased till 2029 only and therefore there is no affirmation that Apple will continue after the expiry of land lease. Thereby misleading the consumers that the product is carbon neutral, whereas in reality it is an ineffective offsetting project. This case implies how greenwashing is not just limited to the claims of the production process of the product but also concerns those claims or promises which are made in light of production of a particular product. In Germany, greenwashing guidelines are primarily shaped by the German Act against Unfair Competition (UWG).

There are several other cases of greenwashing across the globe but they are distinguished by various perspectives of greenwashing as in some countries like the USA, UK, Australia etc which have meticulous guidelines against greenwashing while some countries rely on precedents. From the above discussion, it can be inferred that there is a need for codified, comprehensive and holistic guidelines for greenwashing, which will be applicable internationally and help prevent greenwashing beyond borders.

IV. Conclusion

Greenwashing undermines genuine sustainability efforts and misleads consumers. A robust, enforceable legal framework which are both national and global are essential to ensure corporate accountability and prevent deceptive environmental claims.