Corporate Greenwashing and the Need for a Comprehensive Regulatory Framework
In a recent attempt at combatting greenwashing, the 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 meaningful action to further it, as the reports point out that its energy production continued to be composed mostly of fossil fuels up to 2024.
Greenwashing can take several forms, from misleading business practices to overstating the environmentally friendly practices a company has undertaken in furtherance of its sustainability goals.
I. Background
Greenwashing, according to the Central Consumer Protection Authority’s (CCPA) Guidelines for Prevention and Regulation of Greenwashing, 2024, and as per Section 2(f) thereof, refers to any deceptive or misleading practice, or use of misleading words or symbols, to downplay actions which have harmful impacts on the environment.
Claims of being ‘greener’, ‘environment friendly’ or ‘planet friendly’ need to be substantiated by authentic data, failing which they amount to greenwashing. Such a claim needs to be specific, ensure clarity on how the product or service affects the environment, and should not convey a false impression that the product is more beneficial than it actually is.
II. Legal Framework in India
Greenwashing has been given serious consideration by various governmental agencies, which have passed guidelines on the subject — principally the CCPA, ASCI, SEBI and the RBI. These have been an attempt at combatting misleading claims propagated by companies about their products or services.
A. CCPA
The CCPA, a governmental body which protects consumers from unfair practices by companies through guidelines and enforcement, issued on 15 October 2024 the Guidelines for Prevention and Regulation of Greenwashing or Misleading Environmental Claims, 2024. These have been monumental in defining what constitutes greenwashing and which practices are harmful to consumers.
The most significant part of these guidelines is the requirement that claims of being ‘eco-friendly’ or ‘green’ be substantiated by authentic data and no longer be used merely as a marketing tactic; the procedure for substantiation is also laid down. The entire research needs to be provided as per Section 6, and unfavourable observations cannot be hidden from consumers while showing only the favourable ones.
The main issue with these guidelines is that there is no penalty against the company for wrongdoing. This can render the guidelines redundant, as there are no consequences for harmful practices, and it allows for a very slow process in tribunals or courts since damages are not specified and are left to the authority with competent jurisdiction to decide.
B. ASCI
The Advertising Standards Council of India (“ASCI”), a regulatory body which protects consumers from misleading advertisements, has unveiled its Guidelines for Advertisements Making Environmental/Green Claims. These further prevent advertisers from making unfounded claims and require companies to provide the relevant research supporting their environmental or green claims.
The guidelines differentiate between various types of claims. An absolute claim states that the product has no ill effect; it must be backed by strong data and cannot be diluted by directing consumers to another site. A comparative claim asserts that the current product is better than a previous one; the advertiser must state clearly on what metric such change is measured. Any environmental claim — comparative, absolute or general — cannot mislead consumers.
On the basis of these guidelines, ASCI can issue notice to companies that have infringed them, as in complaints concerning claims that a hand wash liquid and a vegetable cleaning liquid are eco-friendly, and that the container of a strawberry shower scrub is made of 30 per cent recycled plastic.
C. SEBI
The Securities and Exchange Board of India (“SEBI”) regulates green debt securities, which raise funds for projects beneficial to the environment. Having taken up the concern that such securities may be misused by companies posing as environmentally friendly, it has released a circular which serves as a guide on what constitutes greenwashing and how funds from such securities may be used.
This also requires companies not to use funds for any purpose other than those mentioned in the NCS Regulations, which promote sustainable energy and projects deemed environmentally friendly. Such claims cannot be misleading so as to hide unfavourable data or cherry-pick “good” data, and companies cannot make false claims about third-party certification.
D. RBI
The Reserve Bank of India (“RBI”) has released the Framework for Acceptance of Green Deposits, which enables consumers to pursue sustainability goals and prevents greenwashing. These guidelines restrict the usage of such funds to green activities or projects that are beneficial to the environment and that:
“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 limits the activities for which such deposits may be used and allows only truly sustainable projects.
E. An ESG Oversight Body
In recent news, the Standing Committee on Finance has recommended to Parliament the establishment of an ESG oversight body to actively prevent greenwashing. The committee has also recommended statutory changes to the Companies Act, 2013.
It suggests that ESG goals should form part of directors’ duties under Section 166(2), which provides for the director’s role in promoting the company’s objects. This will ensure proper integration of ESG regulation into business practice and make it mandatory for the board to oversee that integration, moving sustainability from mere disclosure into core business strategy and transforming it into a fundamental corporate responsibility.
The committee has also found that there has been inconsistent application of such goals across sectors, and that small businesses face difficulty in adopting these practices. To address such issues, there should be an oversight body that supervises these matters, ensures compliance, and penalises greenwashing.
III. The Global Scenario
In recent years there has been a rise in greenwashing cases around the globe. Companies advertise their products with far-fetched and unachievable environmental goals, and many of their business practices are not in congruence with what they claim to achieve.
A. The Shein Case
Infinite Styles Services Co. Ltd, which operates Shein, a leading fashion company, faced a fine of €1 million from Italy’s competition authority, the AGCM. The fine was imposed because of vague and overly emphatic messaging on the Shein website. Shein promoted ‘evoluSHEIN by design’, advertising that its clothes were sustainable and recyclable. The AGCM emphasised that this misled consumers, as the fabric used was not fully recyclable, and therefore amounted to greenwashing. The notable increase in Shein’s emissions in 2023–2024 was seen as running against its commitment to cut greenhouse gas emissions by 25% over 2020–2030 — a commitment considered vague, unclear and generic in nature. Italy’s competition authority follows principles based on the Italian Consumer Code and broader EU directives to prosecute greenwashing. Rather than formally 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 broad terms such as ‘sustainable’ and ‘eco’ unless they can substantiate them with strong evidence.
B. Apple
Brands have been making far-fetched claims, one such being that their products are carbon neutral. Apple claimed that a product was carbon neutral on the basis that it operates a project in Paraguay to offset emissions by planting eucalyptus trees on leased land; but the Frankfurt court found that three-quarters of the land is leased only until 2029, and therefore there is no assurance that Apple will continue after the expiry of the lease. This misleads consumers into believing the product is carbon neutral when in reality the offsetting project is ineffective. The case shows that greenwashing is not limited to claims about the production process, but also extends to promises made in connection with the production of a particular product. In Germany, the rules on greenwashing are primarily shaped by the German Act against Unfair Competition (UWG).
There are several other cases of greenwashing across the globe, distinguished by differing national perspectives: countries such as the USA, the UK and Australia have meticulous guidelines against greenwashing, while others rely on precedent. From the above discussion it can be inferred that there is a need for codified, comprehensive and holistic guidelines on greenwashing which apply internationally and help prevent greenwashing beyond borders.
IV. Conclusion
Greenwashing undermines genuine sustainability efforts and misleads consumers. A robust, enforceable legal framework — both national and global — is essential to ensure corporate accountability and prevent deceptive environmental claims.