In modern times, consumers have started demanding goods that not only satisfy their needs but also are sustainably produced. Therefore, by creating an illusion of environmental responsibility, many unscrupulous companies, in an attempt to bolster their sales, end up exploiting consumers' growing environmental sensitivity. This deceptive practice not only misleads well-intentioned consumers but also diverts attention from broader environmental efforts.

Greenwashing is this process of conveying a false impression or misleading information about how a company’s products are environmentally sound. Greenwashing involves making an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly or have a greater positive environmental impact than they actually do.

The Reserve Bank of India, in its circular titled "Framework for Acceptance of Green Deposits (click here)" dated April 11, 2023, for the first time defined "greenwashing" as the act of promoting products or services as environmentally friendly when they do not meet the criteria for classification as green activities or projects. Similarly, in February 2023, the Securities and Exchange Board of India (SEBI) issued guidelines on green debt securities to prevent greenwashing (click here), defining the term as making false, misleading, unverified, or otherwise incomplete claims regarding the sustainability of a product, service, or business activity.

As a response to the need of crystallizing objective standards and limits for classification of projects and products as ‘green’ and to ensure that environmental claims made by advertisers are reliable, verifiable, and transparent, the Central Consumer Protection Authority (“CCPA”) introduced the Guidelines for Prevention and Regulation of Greenwashing or Misleading Environmental Claims, 2024 (“Greenwashing Guidelines”) (click here). These Greenwashing Guidelines aim to curb misleading environmental claims and greenwashing tactics and provide a framework to penalise companies engaging in these practices, thereby protecting consumers, and promoting sustainable practices.

1. Greenwashing Across Borders:

Greenwashing poses significant challenges in the global marketplace. Countries like the United States and the United Kingdom have developed robust frameworks to combat such practices, ensuring transparency and accountability in environmental advertising. By leveraging laws, guidelines, and enforcement mechanisms, these nations have aimed to protect consumers and promote genuine sustainability efforts across borders.

In the United States, greenwashing is addressed through various laws and agencies aimed at ensuring companies make honest environmental claims. The Federal Trade Commission (“FTC”) uses its Green Guides (click here) to help businesses understand how to advertise environmental benefits truthfully. The FTC also takes enforcement actions against deceptive marketing. The Environmental Protection Agency (“EPA”) runs programs like Safer Choice, which labels products with safer chemical ingredients to guide consumers (click here). Additionally, the Better Business Bureau’s National Advertising Division (“NAD”) reviews environmental claims in ads, investigates complaints, and recommends changes when necessary. Further, in the United Kingdom, Competition and Markets Authority (“CMA”) introduced (click here) the Green Claims Code in 2021(click here), which provides businesses with guidelines to ensure their environmental claims are accurate, transparent, and backed by evidence. Enforcement is supported by Trading Standards authorities, which can take legal action against misleading practices. The Advertising Standards Authority (“ASA”) also oversees environmental advertising, requiring that claims are truthful and well-substantiated (click here). Broader laws like the Consumer Protection from Unfair Trading Regulations 2008 prohibit deceptive practices, while the Companies Act, 2013 pushes larger companies to disclose environmental efforts in their annual reports. Together, these measures promote accountability and help consumers trust businesses’ environmental claims.

2. Highlights of the Greenwashing Guidelines:

The Greenwashing Guidelines define greenwashing to include exaggerating benefits, concealing harmful attributes, or using ambiguous terms like “natural” or “eco-friendly” without proper substantiation. However, practices such as obvious hyperboles or non-specific company mission statements are excluded from this definition. The Greenwashing Guidelines apply to all environmental claims and extend to manufacturers, service providers, traders, advertising agencies, and endorsers involved in promoting goods or services with environmental claims.

General terms such as “green,” “organic,” or “sustainable” must be backed by adequate qualifiers and verifiable evidence. Claims should be supported by third-party certifications or independent studies, and technical terms (e.g., “Ecological Footprint”) must be explained in consumer-friendly language to ensure clarity and prevent misuse. Disclosures must be accessible, clear, and comprehensive. All essential facts should be included in the communication, or relevant information should be made accessible through QR codes or other digital methods like URL links. Specific claims, such as “compostable,” “net-zero,” “100% natural,” “recyclable,” or “plastic-free,” should be backed by credible certifications and accessible, verifiable scientific data. These certifications must be received from regulatory bodies or trusted independent third parties, ensuring company accountability and allowing only genuine claims to promote products as environmentally friendly.

The Greenwashing Guidelines further provide that aspirational claims must outline clear actionable plans detailing how objectives will be achieved, ensuring accountability for future commitments. This provision obligates companies to detail their objectives and specify how they will achieve the claims in the future and ultimately places accountability on the companies themselves to justify the veracity of their claims. The Greenwashing Guidelines are designed to complement any other specific laws currently in effect that regulate environmental claims and state that in case of a conflict between the Greenwashing Guidelines and another specific law, the specific law would prevail.

In addition to the crystallisation of standards for calling products green, the Greenwashing Guidelines further, provide for a strict penalty framework to deter non-compliance with the provisions. Entities found in violation may face penalties under the Consumer Protection Act, 2019 ranging from fines upto Rs. 10,00,000 (Rupees Ten lakhs) to imprisonment upto 2 (two) years for their first infraction. Depending upon the number of repetitions of infractions, these penalties can go upto fine of Rs. 50,00,000 (Rupees Fifty lakh) and imprisonment upto 5 (five) years as well. These contraventions, however, are subject to review by the Central Authority, which holds final decision-making power in cases of disputes or ambiguities.

3. Implications upon Companies:

Usage of words such as "clean," "green," "eco-friendly," "natural," "carbon-neutral," "sustainable," "eco-conscious," "good for the planet," "minimal impact," "cruelty-free," "organic," "pure," or "regenerative," and similar terms in any advertisement should not be used without credible, accurate, accessible qualifiers, disclosures, and quantifiable data to support them. Thus, if a Business defines or advertises certain product or service as eco- friendly then the same shall be adequately backed by credible qualifier or disclosure.

Companies will have to ensure that the visuals they use in advertising align with the actual environmental benefits of their products or services. For example, using lush green forests or pristine oceans in ads without any evidence to back up claims of eco-friendliness is no longer acceptable. Companies need to focus on honest and factual representations rather than using images to create a misleading "green" impression. This means relying less on eye-catching visuals to imply sustainability and more on clear, substantiated facts that genuinely reflect their environmental efforts. Moreover, the guidelines have extended its application to manufacturers and ‘all environmental claims’ instead of ‘all advertisements’, thus broadening its scope of application. The Greenwashing Guidelines necessitate transparency in marketing practices, comprehensive substantiation and evidence for claims, and clear communication to avoid consumer misinterpretation. Businesses must adopt a rigorous approach to ensure compliance, including third-party certifications and credible scientific validation for their claims. This shift is not only essential for regulatory adherence but also for maintaining consumer trust in an increasingly eco-conscious market.

4. Conclusion:

The Greenwashing Guidelines present a transformative shift for businesses and consumers by enforcing transparency and accountability in environmental marketing. This proves to be a watershed moment for green advertising in India as companies and consumers move towards more honest marketing practices. These guidelines are designed not to stifle companies' environmental but to ensure that such claims are transparent and made with integrity. Companies are encouraged to highlight their environmental initiatives, provided these claims are backed with proper disclosures and credible evidence. The primary goal of these guidelines is to shield consumers from misleading information while promoting genuine environmental responsibility within the business community and by mandating that companies substantiate their environmental assertions, the guidelines seek to foster a marketplace where environmental claims are both truthful and meaningful, thus enhancing consumer trust and encouraging sustainable business practices.

Please find a copy of the Greenwashing Guidelines.

This update has been contributed by Jitendra Soni (Partner), Harsh Garg and Shivam Dubey (Associates).

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