Introduction
Have you ever purchased a product that was marketed as environmentally friendly, only to later learn that its claims were far from the truth? Perhaps you found out that the ‘eco-friendly’ label was more of a marketing strategy than a reflection of the product’s actual impact. How did it feel when you realized that the company may have misled you? Did you feel betrayed, frustrated, or sceptical about other sustainability claims? Now, imagine this happening on a larger scale, with companies across industries using clever tactics to create a false image of sustainability. This growing phenomenon is known as ‘greenwashing’—and it’s something consumers must be aware of.
What is Greenwashing?
In 1986, Jay Westerveld, an environmental activist, coined the term greenwashing after observing a hotel in Fiji that encouraged guests to reuse towels to ‘save the environment’. However, the hotel’s real motive was not environmental concern but rather to cut laundry costs and increase profits. Westerveld noted that hotels often placed similar signs in rooms, promoting eco-friendly practices while disregarding actual environmental impact. This hypocrisy led him to link the deceptive practice to the term ‘greenwashing’, derived from ‘environmental whitewash’, which has since evolved to describe any misleading environmental claims made by businesses.
Why in News?
On October 15, 2024, the Central Consumer Protection Authority (CCPA), established under the Consumer Protection Act, 2019, issued the ‘Guidelines for Prevention & Regulation of Greenwashing & Misleading Environmental Claims, 2024’.
Evolution of Guidelines
The evolution of greenwashing regulations in India is marked by significant actions from various bodies, addressing concerns over misleading environmental claims.
- Securities And Exchange Board of India (SEBI) took early action, issuing a circular on February 3, 2023, regarding the dos and don’ts of green debt securities to prevent greenwashing. SEBI also provided a revised framework in 2021 for green debt securities, and further amended it on February 6, 2023. The Operational Circular for Non-Convertible Securities was issued on August 10, 2021, reinforcing SEBI’s commitment to regulating green financial products.
- Reserve Bank of India (RBI) followed in April 2023, with its circular on the Framework for Acceptance of Green Deposits aiming to curb greenwashing in deposit products by regulated entities.
- Ministry of Corporate Affairs (MCA) introduced the National Guidelines on Responsible Business Conduct on March 13, 2019, revising the 2011 guidelines and setting the stage for more robust corporate social, environmental, and economic responsibility. Although non-binding, these guidelines influenced SEBI’s later regulations on business responsibility and sustainability reporting.
- SEBI, building on MoCA’s framework, issued several circulars to promote transparent ESG disclosures. These included the Business Responsibility Report (BRR) format on November 4, 2015, and the Business Responsibility and Sustainability Reporting (BRSR) requirements on May 10, 2021. In 2023, SEBI further refined its approach with the BRSR Core framework, focusing on assurance and ESG disclosures across value chains.
- Advertising Standards Council of India (ASCI) also played a pivotal role in addressing greenwashing in advertising. On January 18, 2024, ASCI issued a press release introducing guidelines for honest environmental claims. Shortly after, on February 15, 2024, it published the Guidelines for Advertisements Making Environmental/Green Claims to prevent deceptive advertising practices.
- CCPA(Central Consumer Protection Authority), through the Department of Consumer Affairs, took significant steps towards regulating greenwashing. A committee was formed in November 2023, followed by consultations. After three meetings, the Draft Guidelines for Prevention and Regulation of Greenwashing were released on February 20, 2024, inviting public suggestions until March 21, 2024. These guidelines culminated in the issuance of the final Guidelines for Prevention and Regulation of Greenwashing and Misleading Environmental Claims on October 15, 2024.
What is the Need for Regulation?
Greenwashing is a growing corporate problem, where companies make false or exaggerated environmental claims. In 2015, a global automaker marketed its diesel cars as eco-friendly, only to be exposed for cheating emissions tests, leading to billions in fines and a shattered reputation.
In the UK, a supermarket chain was fined £300,000 for falsely claiming light bulbs were carbon neutral, while a fast-food chain misrepresented its coffee’s sustainability certification. Recently, a fashion retailer was sued for overstating its green efforts.
In India, companies like a consumer goods brand and a detergent manufacturer were penalized for misleading claims about their products’ natural and eco-friendly qualities. These cases highlight the growing scrutiny on green marketing—companies must now back their claims with real action, or risk legal consequences and reputational damage.
Understanding the Guidelines
The following table outlines the essential aspects of the guidelines on environmental claims, greenwashing, and their enforcement, providing a comprehensive overview of the key requirements, compliance standards, and potential penalties:
| Key Aspect | Definition | Key Details |
|---|---|---|
| Environmental Claim | Environmental claims refer to representations regarding goods, services, or processes that suggest positive environmental attributes, such as eco-friendliness or sustainability. | Scope: Includes goods (or components), manufacturing processes, packaging, usage, disposal, or services.
Nature of Claims:
|
| Greenwashing | Greenwashing refers to deceptive practices that mislead consumers about the environmental benefits of a product, service, or process. | Misleading Practices:
Exclusions:
|
| Applicability | Defines who the guidelines apply to and their scope. | Scope: These guidelines cover all environmental claims as specified in Para 2(e) of the 2024 Guidelines. Who it Applies To:
|
| Compliance | Refers to the compliance requirements for making environmental claims. |
Prohibition on Greenwashing: Entities must avoid making false or misleading environmental claims. Substantiation Requirements: Environmental claims must be supported by clear, accurate, and accessible evidence. This includes providing adequate details for any terms used (e.g., eco-friendly, carbon neutral, etc.). |
| Substantiation | Substantiation of environmental claims is mandatory to ensure transparency. | Requirements:
|
| Safeguards & Disclosures | Safeguards and disclosures to ensure transparency and prevent misleading information. | Key Disclosures:
|
| Other Claims | Guidelines regarding aspirational or future-oriented environmental claims. | Future-Oriented Claims: Claims related to future environmental objectives (e.g., ‘carbon neutral by 2030’) must be supported by actionable plans and detailed steps explaining how these goals will be achieved. |
| Contravention & Penalties | The consequences for violating these guidelines, including penalties and enforcement mechanisms. |
General Penalties: Non-compliance may result in penalties and legal actions. Monetary Penalties: Fines ranging from INR 10 lakhs to INR 50 lakhs, based on the severity and recurrence of the offense Criminal Penalties: Imprisonment for a period of 2 to 5 years. Endorser Penalties: Endorsers may be prohibited from promoting products for 1 to 3 years. Enforcement: CCPA has the authority to take legal action, and consumers can file complaints. |
Way Forward for Companies and Businesses:
To stay ahead in the evolving green economy and avoid greenwashing pitfalls, companies must prioritize authenticity and transparency. Here’s how:
- Be Transparent, Be Clear: Ditch vague terms like ‘eco-friendly’ without proof. Back every environmental claim with independent certifications and easy-to-understand evidence.
- Embrace Robust Compliance Systems: Regular audits, third-party checks, and employee training ensure your claims are not only truthful but legally sound, keeping you ahead of regulations.
- Disclose, Disclose, Disclose: Make it effortless for consumers to verify your sustainability claims. Use digital tools like QR codes and URLs to provide real, accessible information.
- Show Real Commitment to Sustainability: Don’t just talk the talk—walk the walk. Provide actionable plans for future goals and back them with clear steps to achieve them.
- Avoid the Greenwashing Trap: Don’t exaggerate or mislead. Build trust with genuine efforts and transparent communication, or risk facing heavy fines, lawsuits, or reputational damage.
- Turn Sustainability into a Superpower: True environmental commitment isn’t just about compliance; it’s a powerful differentiator in today’s competitive market. Be the brand consumers trust for authentic eco-friendliness.
By leading with integrity and transparency, businesses can turn sustainability into their biggest competitive advantage, driving consumer loyalty and long-term success. The future is green are you ready to own it?
Disclaimer
The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.
