- Introduction
In today’s global marketplace, environmental consciousness significantly influences consumer choices, leading to the rise of “greenwashing” – the deceptive practice of exaggerating or misrepresenting environmental commitments. This phenomenon not only misleads consumers but also undermines genuine sustainability efforts and distorts market competition. In India, where environmental concerns are increasingly prominent, greenwashing has gained significant attention across various sectors. This article examines the regulatory landscape surrounding greenwashing in India, analysing current and proposed measures, legal frameworks, regulatory initiatives, and challenges in combating this deceptive practice.
- The Indian Regulatory Context
While India lacks a specific legal definition of greenwashing, several existing laws and regulatory guidelines implicitly address misleading marketing practices that exploit environmental claims.
The Consumer Protection Act, 2019 plays a crucial role in addressing greenwashing practices by defining unfair trade practices as those employing deceptive methods to promote goods or services. This definition encompasses false representations of product quality and characteristics, such as unsubstantiated claims of being “carbon neutral” or “100% organic.” The Act provides a comprehensive framework for consumer protection, including provisions that can be applied to greenwashing cases. For instance, Section 2(47) of the Act defines “unfair trade practice” broadly, covering false or misleading facts disparaging goods, services, or trade of another person. This definition can be interpreted to include greenwashing practices where companies make false environmental claims to gain an advantage over competitors.
The Act also establishes the Central Consumer Protection Authority (CCPA), empowered to conduct investigations, issue guidelines, and impose penalties for violations. In the context of greenwashing, the CCPA can investigate companies suspected of making false environmental claims and take appropriate action. The Act prescribes penalties for violations, including fines up to INR 10 lakhs and imprisonment for up to 2 years, with more severe penalties for subsequent offenses. These stringent penalties serve as a deterrent against greenwashing practices.
Moreover, the Act introduces the concept of product liability, holding manufacturers or service providers responsible for defective products or deficient services. This provision could potentially be applied to cases where products fail to meet advertised environmental standards, providing an additional legal avenue for addressing greenwashing.
The Act also empowers consumers to file complaints against deceptive practices, enabling individuals to play an active role in combating greenwashing. Consumers can file complaints with the District, State, or National Consumer Disputes Redressal Commission, depending on the value of goods or services and compensation claimed. This consumer-centric approach complements regulatory efforts by allowing direct action from affected individuals.
- Draft Guidelines for the Prevention and Regulation of Greenwashing
The Ministry of Consumer Affairs released draft Guidelines on the Prevention and Regulation of Greenwashing to address the rising incidence of greenwashed advertisements. These guidelines provide a comprehensive framework for regulating environmental claims in advertising, including a broad definition of greenwashing and wide applicability covering various stakeholders in the advertising process.
The guidelines establish comprehensive requirements for environmental claims in advertising. They mandate that all claims must be substantiated by reliable scientific evidence, with detailed information made accessible to consumers through links or QR codes on packaging. The guidelines prohibit selective presentation of data, restrict the use of natural imagery to directly related environmental benefits, and require specific substantiation for vague terms like “eco-friendly.” Applying to a wide range of entities involved in advertising, from service providers to endorsers, the guidelines ensure accountability across the board. Violations can result in significant penalties under the Consumer Protection Act, 2019. Currently open for public comment, these draft guidelines, once finalized, are expected to profoundly influence how companies in India communicate their environmental credentials.
- Trademarks Act, 1999
The Trademarks Act, 1999 indirectly prevents greenwashing by disallowing the registration of trademarks that consist exclusively of generic “green” terms. Section 9 of the Act prohibits the registration of trademarks that consist exclusively of marks or indications which may serve in trade to designate the kind, quality, intended purpose, or other characteristics of the goods or services.
This provision can be applied to prevent companies from monopolizing common environmental terms and potentially using them to greenwash their products. For example, a company attempting to register “EcoClean” as a trademark for its cleaning products might face rejection if the term is deemed to be merely descriptive of the product’s purported environmental benefits. Similarly, a trademark application for “100% Green” for a range of household goods could be denied on the grounds of being too generic and potentially misleading.
However, implementation faces several challenges:
- Oversight: The Trademarks Registry may sometimes accept applications without thorough verification of the environmental claims associated with the mark.
- Time and Cost: The process of opposing or canceling misleading trademarks can be time-consuming and costly, potentially allowing some greenwashed trademarks to slip through the cracks.
- Unregistered Trademarks: The fact that trademark registration is not compulsory, and proprietors of unregistered and registered trademarks can avail the common law remedy of passing off, presents further complications in effectively using this Act to combat greenwashing.
Despite these challenges, the Trademarks Act serves as an important tool in the regulatory framework against greenwashing, complementing other legislative and regulatory measures.
- Regulatory Efforts by Various Bodies
In addition to legislative measures, various regulatory bodies in India have taken steps to address greenwashing. These efforts complement the legal framework and provide industry-specific guidelines for environmental claims.
- Advertising Standards Council of India (ASCI)
The Advertising Standards Council of India (ASCI)’s Code for Self-Regulation of Advertising Content in India, while not specifically mentioning greenwashing, asserts that all claims must be substantiated by transparent factual evidence and research. This requirement extends to environmental claims made in advertisements. For instance, if a car manufacturer claims its vehicle is “the most fuel-efficient in its class,” ASCI’s guidelines would require the company to provide concrete data supporting this assertion, including details of the testing methodology and comparisons with competitor vehicles. Furthermore, the ASCI’s Guidelines for Celebrities in Advertising place a burden on celebrities to conduct due diligence on the brands they endorse, particularly regarding sustainability claims. This measure aims to ensure that high-profile endorsements do not inadvertently promote greenwashing. For example, if a popular Bollywood actor endorses a clothing brand claiming to use “100% recycled materials,” the guidelines would expect the celebrity to have verified this claim to a reasonable extent before lending their name to the campaign. This approach recognizes the significant influence celebrities have on consumer behavior and seeks to leverage this influence responsibly. ASCI also conducts regular monitoring of advertisements across various media and investigates complaints regarding misleading claims, including those related to environmental benefits. Their decisions, while not legally binding, carry significant weight in the industry and can lead to the modification or withdrawal of non-compliant advertisements.
- Securities and Exchange Board of India (SEBI)
The Securities and Exchange Board of India (SEBI) has taken proactive steps to address greenwashing in the financial sector. Its circular on ‘Dos and Don’ts relating to green debt securities to avoid occurrences of greenwashing’ provides a definition of greenwashing and guidelines for issuers of green debt securities. The circular defines greenwashing as “making false, misleading, unsubstantiated, or otherwise incomplete claims about the sustainability of a product, service, or business operation.” This definition sets a clear standard for companies issuing green bonds or other environmentally-focused financial instruments. SEBI’s guidelines require issuers of green debt securities to clearly define the criteria for classifying projects or assets as ‘green’, establish processes for tracking the use of proceeds from green debt securities, provide regular updates to investors on the allocation of funds and the environmental impact of funded projects, and obtain third-party verification or certification for their green projects. These measures aim to ensure that funds raised through green debt securities are genuinely used for environmentally beneficial projects, preventing companies from misusing the ‘green’ label for financial gain. SEBI’s efforts extend to approving a regulatory framework for ESG (Environmental, Social, and Governance) rating providers. This framework is expected to reduce greenwashing practices in the financial markets by standardizing the criteria used to evaluate companies’ environmental performance. The framework requires ESG rating providers to disclose their methodologies and rating processes transparently, implement measures to avoid conflicts of interest, and regularly review and update their rating criteria to reflect evolving environmental standards. By regulating ESG rating providers, SEBI aims to improve the reliability and comparability of environmental performance assessments, making it more difficult for companies to greenwash their financial products or overall corporate image.
- Reserve Bank of India (RBI)
The Reserve Bank of India (RBI) has also addressed greenwashing concerns in its Circular on ‘Framework for acceptance of Green Deposits.’ The circular proposes the use of third-party verification/assurance and impact assessments for the allocation of funds from ‘green deposits.’ This approach aims to retain consumer trust and prove the veracity of eco-friendly practices claimed by financial institutions. Key aspects of the RBI’s framework include clear definition of eligible green projects, where banks must establish and disclose criteria for projects that qualify for funding through green deposits; transparent fund allocation, requiring banks to maintain separate accounts for green deposits and provide regular reports on fund utilization; impact assessment, mandating banks to conduct and disclose assessments of the environmental impact of projects funded through green deposits; and third-party verification, encouraging banks to obtain independent verification of their green practices and impact assessments. This framework helps prevent financial institutions from simply labeling their products as ‘green’ without substantive environmental benefits. It also provides consumers with more reliable information when choosing green financial products.
- Recent Developments and Future Outlook
The release of the draft Guidelines for the Prevention and Regulation of Greenwashing, 2024 by the Central Consumer Protection Authority (CCPA) marks a significant step in India’s efforts to combat greenwashing. These guidelines, once finalized, will provide a comprehensive framework for regulating environmental claims in advertising. Key features of the draft Guidelines include clear definitions of “greenwashing” and “environmental claims,” providing specific definitions to help identify and prevent deceptive practices. For instance, “environmental claims” are defined as any representation suggesting that a product or service has a neutral or positive impact on the environment, causes less harm than competitors, or possesses specific environmental advantages. The guidelines also include detailed requirements for substantiation of environmental claims, mandating that advertisers must provide clear, verifiable evidence to support any environmental claims made. This could include scientific studies, third-party certifications, or detailed explanations of manufacturing processes. Provisions for adequate disclosures and transparency are also included, mandating that all material information related to environmental claims must be readily accessible to consumers, either directly in the advertisement or through easily accessible digital means like QR codes. The guidelines also place restrictions on the use of vague terms and misleading imagery, requiring terms like “eco-friendly” or “green” to be accompanied by specific explanations of the environmental benefits. The use of natural imagery must be directly related to verifiable environmental attributes of the product or service. Mechanisms for addressing ambiguities in interpretation are also provided, with the guidelines stating that the Central Consumer Protection Authority will have the final say in cases where the interpretation of the guidelines is disputed. The draft Guidelines are currently open for public comment, with stakeholders and the public invited to offer their views and suggestions by March 21, 2024. This consultative process aims to ensure that the final guidelines are comprehensive, practical, and effective in addressing the complexities of greenwashing. The finalization of these guidelines will likely shape the future landscape of environmental advertising in India. They represent a shift towards more stringent regulation of environmental claims, potentially leading to increased scrutiny of green marketing campaigns, a rise in third-party verification and certification services, greater transparency in corporate environmental reporting, and enhanced consumer awareness and education about environmental claims. As these guidelines are implemented, we may see a period of adjustment in the advertising industry, with companies reassessing their environmental claims and marketing strategies. This could lead to a more authentic and substantive approach to sustainability communication in the Indian market.
- Challenges and Recommendations
Despite the proposed guidelines and existing regulations, several challenges remain in effectively combating greenwashing in India. These include enforcement difficulties, the need for technical expertise to verify complex environmental claims, raising consumer awareness, keeping pace with evolving marketing techniques, balancing regulation with innovation, and addressing international greenwashing issues. To address these challenges, several recommendations are proposed, including implementing robust third-party verification systems, enhancing transparency mechanisms, establishing a dedicated monitoring body, fostering collaboration between stakeholders, launching consumer education initiatives, regularly updating guidelines, incentivizing genuine sustainability, engaging in international cooperation, leveraging advanced technologies like blockchain, and strengthening the legal framework with specific anti-greenwashing provisions. These measures, if implemented effectively, could significantly improve India’s ability to combat greenwashing and promote authentic environmental practices.
- Conclusion
The regulatory landscape surrounding greenwashing in India is evolving, with recent developments demonstrating a commitment to addressing this issue comprehensively. The proposed Guidelines for the Prevention and Regulation of Greenwashing, along with existing legal frameworks and regulatory efforts, provide a solid foundation for combating deceptive environmental claims. However, the effectiveness of these measures will depend on robust implementation, consistent enforcement, and ongoing adaptation to market dynamics. By addressing the challenges outlined and implementing the recommended measures, India can create a regulatory environment that promotes transparency, accountability, and authenticity in environmental claims, benefiting consumers, supporting genuine sustainability efforts, and contributing to broader environmental protection goals.
This Blog is authored by Tanvi Krishnan, student of Symbiosis Law School, Pune.