Introduction
Greenwashing is a kind of advertisement strategy through which companies mislead the public into believing that they are environment friendly in order to attract more conscious customers and reap the benefits. Greenwashing gives consumers the impression they are making responsible choices that aren't responsible at all. A lack of proper regulation lets businesses make false sustainability claims. ESG awareness has led to much greenwashing in India, especially because the proper regulation for the same does not exist. The trend of green marketing, which refers to the sale of green products by companies, is getting on track due to stricter laws and climate change policies. For example, H&M's "Conscious" clothing line focuses on sustainable materials such as organic cotton and recycled polyester. This reflects the trend toward environmental responsibility in marketing.
Greenwashing is a cause for concern in terms of misleading consumers, which might call for financial crime oversight. Companies should instead work toward issuing credible, measurable sustainability claims and engaging in truly eco-friendly practice. This is achieved through measures such as shared sustainability journeys, circular economy models, or third-party audits. Many companies market their products as "eco-friendly," "carbon-negative," or "safe for the environment," and such claims are not supported; thus, consumers are misled about the sustainability of the products. Although greenwashing is not ethical and contributes to less environmental harm in sustainability, it has never been considered a form of white-collar crime. This state, however, with its increasing prevalence, raises the question of whether it is a form of financial crime because it sustains false advertisements and manipulation of consumers.
Laws regarding Greenwashing in India
According to the Guidelines for the Prevention and Regulation of Greenwashing by the Central Consumer Protection Authority under the Ministry of Consumer Affairs in 2024, Greenwashing refers to deceptive or misleading practices where companies exaggerate, omit, or make unsubstantiated environmental claims to mislead consumers1. It uses false words, symbols, or imagery to bring to the attention positive environmental aspects while de-emphasizing harmful attributes.
In India, the greenwashing issue is addressed under a combination of laws, regulations, and guidelines, which mainly target deceptive trade practices to shield consumers. Several significant legal frameworks regulate greenwashing in India. Some of them are: Consumer Protection Act, 2019, Guidelines for the Prevention and Regulation of Greenwashing, and other sector-specific regulations issued by the industry bodies like the Advertising Standards Council of India (ASCI), Reserve Bank of India (RBI), and Securities and Exchange Board of India (SEBI)2.
Consumer Protection Act, 2019
The Consumer Protection Act, 2019 is one of the strong arms to defeat greenwashing. Section 2(47) of the Act defines "unfair trade practices" broadly, meaning misleading representations concerning the quality of products, goods or services. Greenwashing falls under this category because it involves false claims about a product's or service's environmental benefits to attract consumers. The Act gives the right to the authorities to take steps against such malpractices carried out by a business, ensuring consumer rights are protected and clarity is maintained in the marketplace.
Guidelines for Prevention and Regulation of Greenwashing
The Central Consumer Protection Authority, under the Ministry of Consumer Affairs, has released extensive guidelines for preventing and regulating greenwashing. Such guidelines are set to regulate environmental claims in advertising. They insist that businesses provide reliable scientific evidence to support environmental claims. Transparency also requires that companies provide consumers with information, for example, by way of QR codes or links on packaging. Additionally, the rules outlaw such vague terms as "eco-friendly" or any misleading use of natural imagery that has long been associated with greenwashing.
Advertising Standards Council of India (ASCI)
The Advertising Standards Council of India performs a very crucial regulatory role in maintaining the advertising content in India. It has evolved self-regulatory norms that require advertisers to support every communication, environmental also, with completely transparent and well-researched factual evidence to back the advertisements. ASCI monitors all mediums of advertisements and also hears complaints against some misleading environmental ads. The decisions taken by ASCI are not strictly legally enforceable but might call for changes in non-compliant ads and removal, leading to greater ethical advertisement and reduction of greenwash. Despite ASCI's role in self-regulation, its recommendations are not legally binding, as highlighted in the Teleshop Teleshopping v. Advertising Standards Council of India case3.ASCI can only recommend advertisers to modify or withdraw misleading ads, with non-compliance leading to reputational harm. It can also refer cases to regulatory authorities like the Ministry of Consumer Affairs for further legal action or penalties. A key example is Ekam Eco Solutions Pvt. Ltd., whose Zerodar CARE Natural Hand Wash Liquid was advertised as "eco-friendly" without sufficient evidence, leading to ASCI's intervention4.
Reserve Bank of India (RBI)
The Reserve Bank of India (RBI) through its circular has addressed greenwashing in the financial sector. Called the "Framework for Acceptance of Green Deposits," it ensures that when financial institutions produce green investment products, they validate their environmental assertions. Third party verification and an impact assessment verify that the environment benefits from having funds allocated by green deposits. This initiative helps avoid labeling financial products as 'green' by financial institutions without substantive evidence regarding environmental impact. It will increase consumer trust in green financial products.
Securities and Exchange Board of India (SEBI)
The Securities and Exchange Board of India has also acted in the prevention of greenwashing within the financial sector. Through its circular on "Dos and Don'ts relating to green debt securities," the SEBI has defined greenwashing and issued guidelines for the issuers of green debt securities. The regulations intended to ensure that entities issuing green bonds or other green financial instruments had clear, verifiable environmental claims to support such claims without being deceptive in ways that would mislead investors and stakeholders.
Moreover, the Companies Act of 2013 requires certain firms to set apart a percentage of their profits from their business toward Corporate Social Responsibility (CSR). For example, TCS through initiatives like the "Tata Water Mission, providing clean drinking water and focusing on education, skilling, and entrepreneurship globally shows its commitment towards CSR .CSR activities enhance social well-being and, by extension, the environment around businesses. There is a convergence of legal fulfilment and positive results through sustainable business approaches. The BIS certification bolsters the credibility of products claiming to be environment friendly through which quality, safety, and environmental impact is maintained. Therefore, displaying eco-friendly labels without complying with BIS regulations invokes further legal consequences like fines, imprisonment or seizure. Regulations like these, therefore, play a crucial role in dealing with greenwashing in India by taking up the requirement of establishing legitimate environmental claims and holding companies liable for the same.
WHETHER GREENWASHING IS ILLEGAL OR IS IT AN ESG FRAUD?
Even though greenwashing is unethical, it is rarely seen as a criminal offense; however, it could be liable in court for some legal implications. That being said - courts are increasingly recognizing the issue of greenwashing and are holding offenders accountable for misleading environmental claims. Consumer protection acts and false advertisements are two regulatory laws under which companies indulge in greenwashing: they exaggerate or make false environmental claims about their products, misleading consumers to believe that the products are environment-friendly. India's Consumer Protection Act, 2019 deems greenwashing an "unfair trade practice," for which fines or cease-and-desist orders are imposed against deceptive advertising. However, it is not a crime unless it contains fraudulent intent or gross misrepresentation.
While greenwashing itself is not a white-collar crime, it can be associated with the elements of white-collar crime, which are frauds committed by professionals without using violence for financial gains. If companies are misrepresenting and deceiving environmental claims to achieve financial benefits, it can be classified as fraud or deceptive practice, just like other white-collar crimes, such as embezzlement or insider trading. Greenwashing often comes under the category of deceptive advertising and is subject to consumer protection laws. If it is fraudulent misrepresentation meant to attract investors or manipulate financial reporting it may be considered ESG fraud.
Greenwashing is considered ESG fraud under Environmental, Social, and Governance criteria. It happens when companies misrepresent their environmental or social performance to attract investments or enhance their image. In this sense, it can be considered a breach of trust. Hence, even though not always criminal, greenwashing can be in the nexus of white-collar crime and ESG fraud, leading to legal scrutiny and enforcement actions. Enforcement actions against greenwashing have increased, imposing heavy financial penalties and legal risks on companies. Allegations of greenwashing tarnish their reputations, leading to consumer distrust and loss of market share. As ESG regulations tighten, companies now have no choice but to embrace transparency and real sustainability to escape legal and reputational harm.
CONCLUSION:
In conclusion, greenwashing remains a major challenge in India, fuelled by the growing awareness of environmental, social, and governance (ESG) issues. The increasing legal and policy focus on climate change has not led to stringent regulations, which have been exploited by businesses to take advantage of misleading marketing practices for financial gain through the false promotion of environmentally responsible products. Though greenwashing does not find itself on the list of crimes, it still can be counted among unfair trade practices. For which there could be legal penalties, including fines, and discontinuing deceptive advertisement. Different pieces of legislation like Consumer Protection Act, 2019, as well as the directives issued by regulatory bodies, like CCPA, ASCI, RBI, and SEBI, are combating this phenomenon and raising awareness regarding truthfulness. However, the overlap of greenwashing with financial fraud under ESG criteria highlights the need for stronger enforcement and stricter regulations. As greenwashing practices evolve, both legal reforms and consumer awareness are crucial to safeguard environmental integrity and consumer rights.
Footnotes
1 Government of India, 2021. Greenwashing Guidelines. Available at: https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/Greenwashing_Guidelines.pdf [Accessed 30 January 2025].
2 https://pdfs.semanticscholar.org/6b91/a58ab5d393b0fcbd9747256479503f18e69f.pdf
3 2015 SCC OnLine Bom 8777
4 https://www.ascionline.in/complaint-outcomes-details/?case_id=2024-3-28-6-C.29006
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
