Greenwashing

Definition:
Greenwashing is the practice where companies, organizations, or even countries make misleading or unverifiable claims about their products, services, or operations being environmentally friendly. This often involves using deceptive symbols, language, or imagery to highlight eco-friendly aspects while concealing harmful practices.

Types of Greenwashing

1. Greenhushing:
   Companies deliberately withhold information about their sustainability goals or progress to avoid scrutiny.
2. Green-crowding:
   Organizations hide their unsustainable practices by blending into a group that appears environmentally conscious, avoiding individual scrutiny.
3. Greenshifting:
   The responsibility for sustainability is shifted onto consumers instead of companies taking meaningful action.
   Example: Promoting reusable bags but ignoring harmful production practices.
4. Greenlighting:
   Highlighting specific sustainable initiatives to distract from other harmful activities.
   Example: Advertising a product as eco-friendly while the overall supply chain is environmentally harmful.
5. Greenlabelling:
   Using eco-labels that suggest products are sustainable or environmentally friendly, but upon scrutiny, these claims are misleading or baseless.
   Example: Using terms like “100% natural” without credible evidence.

Key Guidelines from CCPA for Preventing Greenwashing

1. Substantiation of Claims:
   • Manufacturers, service providers, traders, advertisers, and endorsers must substantiate environmental claims with credible evidence.
   • Terms like “eco-friendly,” “green,” “sustainable,” and “natural” must include precise, verifiable information.
2. Penalties for Misleading Claims:
   • Companies making false environmental claims can face penalties under consumer protection laws for misleading advertisements and unfair trade practices.
3. Technical Term Clarification:
   • Environmental terms such as “greenhouse gas emissions” or “Environmental Impact Assessments (EIA)” must be explained in user-friendly language to improve consumer understanding.

Concerns about Greenwashing

1. Dilution of Climate Goals:
   Misleading environmental claims can dilute the authenticity of climate goals, hindering progress on global environmental targets.
2. Unwarranted Recognition:
   Entities engaging in greenwashing may receive undeserved recognition, awards, or market advantages, thus rewarding irresponsible behavior.
3. Market Distortion:
   Greenwashing distorts markets by giving deceptive companies an unfair advantage over those adhering to genuine sustainability practices.
4. Carbon Credit System Integrity:
   • Greenwashing compromises the integrity of carbon credit systems, especially in informal markets where certifications by unofficial entities lack transparency.
   • Note: One carbon credit equals one metric ton of CO₂ or equivalent GHGs removed from the atmosphere.

Key Drivers of Greenwashing in India

1. Regulatory Pressure:
   Government regulations like the Extended Producer Responsibility (EPR) policy compel companies to appear environmentally responsible, leading to exaggerated claims.
2. Corporate Social Responsibility (CSR):
   The mandatory 2% CSR spending requirement under the Companies Act, 2013, motivates companies to overstate their environmental contributions to gain public favor.

Provisions Related to Greenwashing in India

1. Consumer Protection Act, 2019:
   • Greenwashing is considered an unfair trade practice under this Act.
   • Consumers adversely affected by misleading environmental claims can seek penalties and remedies.
2. SEBI Guidelines:
   • The Securities and Exchange Board of India (SEBI) has issued guidelines for issuers of green debt securities.
   • These guidelines ensure transparency and aim to protect investors while promoting sustainable market development.
3. ASCI’s Role:
   • The Advertising Standards Council of India (ASCI) monitors advertising practices.
   • It holds jurisdiction over allegations of misleading environmental claims in advertisements.

Global Initiatives Related to Greenwashing

1. COP27 (2022):
   • The United Nations Secretary-General emphasized zero tolerance for greenwashing.
   • Urged private corporations to adopt transparent and verifiable sustainability practices.
2. European Green Bond Standards:
   • The EU introduced the world’s first green bond standards to combat greenwashing.
   • The “European Green Bond” label mandates 85% of funds to be directed toward EU-defined sustainable activities.

Way Forward

1. Enhanced Regulatory Oversight:
   Strengthen regulatory frameworks and enforcement mechanisms to prevent greenwashing and ensure companies adhere to genuine sustainability practices.
2. Transparency and Disclosure:
   Companies should disclose verifiable environmental data and provide third-party certifications for sustainability claims.
3. Consumer Awareness:
   Educate consumers on identifying greenwashing tactics and making informed purchasing decisions.
4. Incentivize Genuine Sustainability:
   Provide incentives for companies adopting verifiable and impactful sustainability measures, such as tax benefits or certifications.
5. Strengthen Carbon Credit Systems:
   Ensure robust verification and certification mechanisms to maintain the integrity of carbon credit systems and prevent fraudulent claims.