Greater awareness amongst consumers of the environmental impact of goods and services they consume has made a focus on Environmental, Social and Governance ("ESG") principles unavoidable for businesses.
The significance of ecological sustainability to consumers has led to corresponding concerns relating to "greenwashing", and over the veracity of the claims made by corporations in respect of the goods and/or services that they provide. This phenomenon has the potential to undermine the credibility of genuine sustainability efforts and eroding consumer trust in businesses.
Recognizing the need for clear guidelines and enforceable measures to prevent and regulate greenwashing, the Central Consumer Protection Authority ("CCPA"), India's primary regulatory body tasked with protecting the rights of Indian consumers issued the Guidelines for Prevention and Regulation of Greenwashing and Misleading Environmental Claims ("Guidelines"), which were first released as a draft for seeking public comments on 20 February 2024 and officially notified on 15 October 2024. The Guidelines have been notified under India's primary consumer protection law, the Consumer Protection Act, 2019 ("CPA").
The Guidelines aim to ensure that companies provide accurate, transparent, and substantive information about the environmental impact and sustainability of their products or operations.
Why were the Guidelines needed?
The introduction of the Guidelines was necessary to address several key issues:
- Misleading consumers through Greenwashing
As Indian consumers become more conscious of the environmental impact of the goods and services they consume, this has increasingly started affecting their buying decisions, leading to manufacturers and service providers consequentially highlighting the potentially misleading positive impact of their goods and services on the environment. Often these product claims prove to be vague or unverifiable with businesses labelling their products as "green", "organic", "biodegradable", or "carbon neutral" without substantive proof.
For example, in 2019, a popular fast-food chain launched a campaign in the United Kingdom to replace plastic straws with paper alternatives, positioning the act as eco-friendly. These paper straws however were found to be non-recyclable, leading to a well-publicised public pushback on the campaign. In another instance, a major global soft drinks manufacturer over-extracted groundwater in the state of Kerala through its activities in its manufacturing plant, causing severe water shortages for local communities and eventually losing its license to operate the factory, but continued to publicise its business as environmentally sustainable.
Similarly, in 2012, a major homegrown consumer goods brand faced a significant penalty from the Advertising Standards Council of India ("ASCI") for misleading advertising related to its mosquito repellent product. The company had promoted it as "100% natural" and "chemical-free," suggesting it contained only natural ingredients. These claims were later proved to be false.
- Lack of Clear Regulations on Environmental Claims
Before the introduction of these Guidelines, Indian law did not specifically regulate environmental claims made by companies. While the CPA and the Guidelines for Prevention of Misleading Advertisements and Endorsements, 2022 ("Misleading Advertisements Guidelines") covered general misleading advertisements, they lacked focus on greenwashing and misleading environmental claims.
The Guidelines aimed to remedy this by providing clear definitions for environmental claims, rules on what constitutes a misleading claim, requirements for substantiating claims with scientific or third-party verification, and more, thereby ensuring that companies making false or misleading environmental claims are held accountable.
Legal Enforceability and Consequences of Violation
Under the CPA, any manufacturer or service provider who engages in what is classified as 'false' or 'misleading' advertising is the subject of strict penalties. A first-time offence is punishable with a fine of up to approximately USD 11600 and/or with imprisonment, while a repeat offence means the penalties are multiplied five-fold. The CPA also empowers the CCPA to issue directions instructing the discontinuance of misleading advertisements or the prohibition of endorsers from making endorsements for up to a year.
The Guidelines have been made enforceable under the CPA, as they explicitly state that in the event of any contravention, penalties under the CPA shall be applicable. The Guidelines extend the scope of misleading advertisements to include false environmental claims and greenwashing. As such, any exaggerated, unsubstantiated, or deceptive claims about the environmental benefits of a product or service will be treated as false or misleading advertising under the CPA, thereby attracting the corresponding legal consequences as have been stated above.
By integrating these Guidelines within the CPA framework, the law aims to strengthen consumer protection, ensure accountability in advertising, and promote ethical business practices, particularly in the realm of environmental claims.
Applicability, Scope and Provisions
The Guidelines apply to all environmental claims by product manufacturers, service providers, and traders whose products/services are the subject of an advertisement, and to advertising agencies or endorsers whose services are availed for advertising the product/service.
The Guidelines have included several novel provisions to enhance transparency and accountability:
- Environmental Claims and Greenwashing Defined
Environmental claims have been defined under the Guidelines as any representations regarding goods, their manufacturing and packaging, manner of use or disposal, or services and the manner in which they are provided, which suggest environmentally friendly or neutral attributes, with the intention of communicating that the manufacturer or service provider is environmentally conscious.
The Guidelines categorise greenwashing as a deceptive or misleading practice, which includes concealing, omitting, or hiding relevant information, by exaggerating; making vague, false or unsubstantiated environmental claims; or using misleading words, symbols, or imagery, to emphasise perceived positive environmental effects while downplaying or concealing harmful ones.
The Guidelines do however clarify that obvious hyperbole and puffery do not fall within the definition of greenwashing.
- Substantiation of environmental claims
The Guidelines make several stipulations on advertisements making environmental claims. These include:
- not using generic terms such as 'clean', 'green', 'eco-friendly', 'eco-consciousness', 'cruelty-free', sustainable, regenerative or other similar claims without adequate, accurate, and accessible qualifiers and substantiation and adequate disclosures (as have been discussed below);
- providing verifiable evidence from independent sources or third-party certifications. Claims suggesting endorsements, certifications, or seals of approval that are non-existent, intentionally misleading, or originate from non-official bodies and lack recognition from credible authorities are to be treated as misleading; and
- ensuring technical terms (such as environmental impact assessment, greenhouse gas emissions, ecological footprint, etc.) are explained using consumer-friendly language.
The Guidelines also provide additional clarifications under a Guidance Note with the Guidelines. For instance, claiming that a packaging is made from 100% recyclable materials without verifiable evidence or certification will be treated as misleading. Additionally, the Guidance Note also highlights any form of visual environmental claim attempting to manipulate the consumer into believing that a product or service is eco-friendly as being potentially violative. For instance, a detergent advertisement showcasing the tagline 'Gentle on Clothes, Gentle on Nature' implies a connection between the product and an environmentally conscious lifestyle which will have to be substantiated.
The Guidelines add that any aspirational or futuristic environmental claims should be made only when clear and actionable plans detailing how these objectives would be achieved have been developed.
- Adequate Disclosures Required
The Guidelines lay down clear requirements for making disclosures along with environmental claims to ensure transparency and prevent misleading representations. These include:
- ensuring that the disclosures being made are easily accessible to the consumer and do not contradict the environmental claim itself;
- disclosing all relevant material information in the advertisement or communication itself, which may also be done through a QR code, URL, or other accessible means to ensure consumers have access to complete information;
- Relying on verifiable and relevant data when making comparative environmental claims between products or services that specify the aspect being compared; and
- explicitly specifying what part the environmental claim refers to – whether it pertains to the entire product, a specific component, the manufacturing process, packaging, usage, disposal, or the service as a whole or in part.
Several helpful Illustrations have been provided regarding the abovementioned requirements. For instance, a claim stating that a product is greener than its competition without providing specific details regarding which environmental attributes are being compared would be misleading.
Conclusion
While these Guidelines are intended to complement the Misleading Advertisement Guidelines, they extend beyond advertising alone. They also impact business strategy and action plans related to sustainability and ESG commitments.
The Guidelines are not intended to discourage businesses from pursuing genuine environmental initiatives but rather aim to ensure that corresponding claims are transparent and credible. They have been introduced in response to the increasing impact such claims have on environmentally conscious and responsible consumers. The Guidelines are an important and welcome step towards transparency and consumer trust, but do mean that advertisers need to keep environmental compliance in mind when making claims. This may mean busier in-house legal and compliance teams, or having to seek advice on the defensibility of claims from specialist external counsel.
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.
