Greenwashing and Corporate Deception(Examining the Need for Regulatory Intervention)

Jul 8

3 min read

Author: Varshini

Introduction

In a time when investor and consumer confidence is strongly influenced by sustainability, businesses are increasingly tying their public image to environmental responsibility. But this phenomenon has also led to the deceptive practice of "greenwashing", which is the process of deceptively portraying a company's policies, procedures, or goods as environmentally friendly when they are not.

Greenwashing undermines real sustainability initiatives and amounts to environmental deception that misleads stakeholders. While the ethical ramifications of greenwashing are widely known, the legal response is still insufficient. This essay analyzes corporate greenwashing from a legal standpoint, examines relevant laws and international regulatory responses, and argues for a robust legal framework to combat false ecological claims and environmental fraud.

Understanding Greenwashing as a Legal Issue

The term "greenwashing" was first used in the 1980s to describe business activities that deceive the public about the environmental benefits of goods or services.

Greenwashing is deceptive and may be prosecuted under:

Unfair commercial practices
Environmental laws
Consumer protection laws

Common Examples Include:

False claims without certification, e.g., “biodegradable” or “eco-friendly”
Advertisements that overstate environmental efforts
Hiding harmful environmental practices behind fictitious “green” initiatives

These practices may constitute:

False advertising
Unfair business practices
Deceptive marketing
Breach of international or national environmental standards

Statutory Framework in India

Though greenwashing is not currently criminalized in India, several statutory tools indirectly address such practices:

a) Consumer Protection Act, 2019

Section 2(28): Defines deceptive advertisement as one that misrepresents a product or creates a false impression.
The Central Consumer Protection Authority (CCPA) is empowered under Sections 10 and 21 to take action against such ads.
Deceptive environmental claims used to influence consumer behavior may fall under this category.

b) Environment Protection Act, 1986

Empowers the Central Government to regulate environmental quality and enforce compliance.
Section 15 (penalty clause) may be invoked where businesses make false claims about emission norms or waste management.

c) Legal Metrology (Packaged Commodities) Rules, 2011

Green claims on product packaging may violate labelling standards if deemed misleading.
Rule 6(1): All label statements must be accurate and substantiated.

d) Companies Act, 2013

Under Section 134, Board’s Reports must disclose environmental sustainability policies as part of CSR.
Sections 447 (fraud) and 448 (false statements) may apply to misrepresentations or failure to disclose.

Judicial Attitude and Legal Doctrines

While there is no direct ruling on greenwashing, Indian courts have addressed corporate environmental accountability.

a) M.C. Mehta v. Union of India (1997) 2 SCC 353

The Supreme Court reinforced the Precautionary Principle and Polluter Pays Principle.
These doctrines are relevant in assessing corporate responsibility behind misleading green claims.

b) PIL Watch Group v. Union of India (2007) 6 SCC 171

This case emphasized transparency in industrial environmental performance.
Greenwashing, which deliberately hides true environmental impact, directly violates this principle.

Courts have acknowledged that environmental compliance must go beyond formal obligations, especially where public interest is at stake.

International Legal Approaches

Several countries have adopted legislative and regulatory responses to tackle greenwashing:

a) European Union

The Unfair Commercial Practices Directive prohibits deceptive environmental claims.
The proposed Green Claims Directive (2023) mandates that businesses provide scientific proof for green claims—failing which may invite penalties.

b) United States

The Federal Trade Commission (FTC) publishes Green Guides to prevent misleading green advertising.
Under Section 5 of the FTC Act, violations of unfair/deceptive practices can result in fines.

c) Australia

The Australian Competition and Consumer Commission (ACCC) has adopted a proactive stance.
In 2022, it initiated greenwashing investigations and warned against unsubstantiated claims like “carbon neutral” or “net zero.”

Challenges in Legal Enforcement

a) Lack of a Clear Definition

Indian law does not define greenwashing, creating legal ambiguity.

b) Burden of Proof

Consumers or authorities must prove that a green claim is false or exaggerated.

c) Data Access and Verification

Companies often conceal internal audits, making third-party validation difficult.

d) Cross-border Advertising

Many deceptive green claims originate from global digital campaigns, complicating jurisdiction.

The Way Forward: Legal Reform and Regulatory Vigilance

a) Criminalizing Greenwashing

Greenwashing should be a distinct offense under Indian consumer and environmental laws, with clear definitions and enforcement procedures.

b) Environmental Disclosure Requirements

Mandatory third-party audits and transparency protocols should be introduced for companies making sustainability claims.

c) Sectoral Guidelines

Agencies like SEBI, FSSAI, and BIS must issue industry-specific standards for valid green marketing.

d) Consumer Empowerment

Public awareness campaigns and easy complaint mechanisms under CCPA can aid consumers in challenging misleading green claims.

Conclusion

Greenwashing is not just a marketing concern—it is a form of environmental and consumer fraud. It erodes public trust, dilutes genuine sustainability efforts, and allows corporate profit through misinformation.

India’s current legal system provides only indirect protection against greenwashing. As climate change intensifies, so must legal safeguards.

It is time for lawmakers to: