Greenwashing

Context (IE): The Central Consumer Protection Authority (CCPA) under the Consumer Affairs Ministry has issued guidelines for the ‘Prevention and Regulation of Greenwashing and Misleading Environmental Claims‘. This initiative is part of the government’s crackdown on misleading advertisements.

About Greenwashing

Greenwashing refers to the practice where companies, organisations, or even countries make questionable or unverifiable claims about their products, services, or activities being environmentally friendly.
It includes using misleading symbols, imagery, or language that highlights positive environmental aspects while concealing harmful ones.
Example: Dieselgate by Volkswagen.

Greenhushing: Companies withhold information about their sustainability goals and progress.
Green-crowding: Hiding in a group to avoid scrutiny of unsustainable practices.
Greenshifting: Shifting the responsibility of adopting sustainable measures onto consumers or individuals instead of taking meaningful corporate action.
Greenlighting: Highlighting specific sustainability initiatives to distract from harmful activities.
Greenlabelling: Using labels that suggest products are green or sustainable, which, upon closer examination, are misleading.

Regulatory Pressure: Government regulations, such as the Extended Producer Responsibility (EPR) policy, create pressure on companies to appear environmentally responsible.
Corporate Social Responsibility (CSR): The mandatory 2% CSR spending requirement under the Companies Act, 2013, encourages companies to overstate their environmental efforts.

Dilution of Climate Goals: Greenwashing presents a risk by diluting the authenticity of climate goals through misleading or exaggerated claims about environmental initiatives.
Unwarranted Recognition: Entities engaged in greenwashing may receive undue recognition or benefits, thus rewarding irresponsible behaviour.
Market Distortion: Greenwashing can distort markets by creating an uneven playing field, where entities using deceptive practices gain an unfair advantage over those adhering to genuine standards.
Lack of Regulation: The absence of comprehensive regulations and standards for environmental claims allows greenwashing to continue without adequate scrutiny.
Carbon Credit System Integrity: Greenwashing introduces challenges to the integrity of carbon credit systems, especially in informal markets where the expansion of credit sources and certification by unofficial entities raises concerns about transparency and reliability.

One carbon credit equals one metric ton of CO2 or equivalent GHGs removed from the atmosphere.

These guidelines target manufacturers, service providers, traders, ad agencies, and endorsers, requiring them to substantiate environmental claims.
Sustainable Growth Claims: Terms like “eco-friendly,” “green,” “sustainable,” “natural,” and others must be backed by credible evidence. E.g., terms like “100% eco-friendly” or “zero emissions” must be qualified with precise information on the product or service.
Penalties for Misleading Claims: Companies found violating these guidelines may face penalties for misleading advertising and unfair trade practices under consumer protection laws.
Technical Terms: To improve consumer understanding, it is required to explain technical terms like “greenhouse gas emissions” or “Environmental Impact Assessments (EIA)” in user-friendly language.

Consumer Protection Act, 2019: Under this Act, greenwashing is designated as an unfair trade practice. It outlines penalties and remedies for consumers adversely affected by these practices.
SEBI Guidelines: SEBI issued guidelines for issuers of green debt securities to ensure transparency. These aim to protect investors, promote market development, and regulate the securities market.
ASCI’s Role: The Advertising Standards Council of India (ASCI) monitors advertising practices and holds some jurisdiction over allegations of greenwashing.

COP27: At the 27th Conference of Parties (COP27), the United Nations Secretary-General declared zero tolerance for greenwashing, urging private corporations to rectify their practices.
European Green Bond Standards: The EU approved the world’s first green bond standards to combat greenwashing. The “European Green Bond” label mandates transparency, directing 85% of funds to EU sustainable activities, supporting the EU’s climate neutrality transition.