Greenwashing law: A fresh start for green consumerism

In exercise of the powers conferred by Section 18 of the Consumer Protection Act, 2019, the Central Consumer Protection Authority (CCPA) issued the Prevention and Regulation of Greenwashing Guidelines.

CCPA is an executive agency established to promote, protect and enforce consumer rights, mitigate unfair trade practices and initiate recall, return and refund of products. One of the primary reasons for establishing the CCPA is to fill in the institutional void in the existing regulatory regime especially relating to:

• violation of rights of consumers

• unfair trade practices

• false or misleading advertisements.

Overall, it acts as a statutorily established sector regulator.

Chapter III of the Consumer (Protection) Act, 2019, enforced on July 24, 2020, led to the establishment of the CCPA. The body has initiated efforts aimed at protecting consumers and creating awareness among people regarding consumer rights by issuing guidelines such as - Guidelines for Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022; Guidelines for Prevention and Regulation of Dark Patterns, 2023; and Guidelines for Prevention of Misleading Advertisement in Coaching Sector, 2024.

The latest Guidelines deal exclusively with another set of misleading advertisements: misleading environmental claims. These guidelines promote truthfulness and accuracy in advertisements relating to environmental sustainability.

The crucial aspects of the Guidelines are as follows:

1. Defining Greenwashing

The Guidelines attribute a wide definition to Greenwashing as  “any deceptive or misleading practice, which includes concealing, omitting, or hiding relevant information, by exaggerating, making vague, false, or unsubstantiated environmental claims and use of misleading words, symbols, or imagery, placing emphasis on positive environmental aspects while downplaying or concealing harmful attributes”. Thus, the definition covers disinformation disseminated by an organisation, enterprise, etc, to promote itself as environmentally responsible. The definition exempts use of obvious hyperboles, puffery and the use of generic colour schemes or pictures that are not deceptive or misleading.

2. Defining environmental claims

Environmental claims mean any representation, in any form, regarding:

(i) a good (either in its entirety or as a component), the manufacturing process, packaging, the manner of use of the good, or its disposal.

(ii) a service (or any portion thereof) or the process involved in providing the service, suggesting environmentally friendly attributes.

These cover all types of environmental awareness shown by businesses through their green buildings, eco-labels, sustainability reports, industry pledges and clean technologies. It might include a positive impact on the environment or contributing to sustainability, causing less harm to the environment compared to a previous version of the same product or service, causing less harm to the environment than competing goods or services or being more beneficial to the environment or possessing specific environmental advantages.

3. Applicability

These Guidelines apply to every advertisement, regardless of the format and method of advertising, and to each person involved in advertising such goods or services. These include the service provider, product seller, advertiser, advertising agency, or endorser (Clause 3). Clause 5 imposes a flat ban on greenwashing by all those to whom these guidelines apply.

4. Non-applicability

The Guidelines (Clause 4) are completely non-applicable until the advertisement is somehow or other linked to the product or service being advertised. Once the advertisement is linked with the product or service provided, these Guidelines apply.

5. Substantiation of environmental claim

Further, any environmental claim made must be done by substantiating the same. Such substantiation must be backed by verifiable evidence. The Guidelines also prescribe use of consumer-friendly language. When technical terms such as Environmental Impact Assessment (EIA), Greenhouse Gas Emissions, Ecological Footprint, etc are used, the meaning of such technical terms must be explained for the better interest of the consumer (Clause 6).

6. Disclosure

Clause 7 deals with disclosure. Disclosures supporting environmental claims must provide material information through advertisements, communication, by QR Code, by URL or any other medium. All such disclosures must be easily accessible by the consumers and not contradict relevant environmental claims.

• The data being disclosed must point out all pertinent details and must include both favorable and unfavorable observations.

• Any person making an environment-related claim should specify whether it refers to the good (as a whole as part), manufacturing process, packaging, manner of use of the good or its disposal; or service (or part thereof) or the process of rendering the service.

• Comparative environmental claims that compare one product or service to another must be based on verifiable and relevant data that is disclosed to the consumers. Comparative claims must disclose exactly what aspects are being compared.

• Environmental claims relating to carbon offsets, carbon neutral, compostable, degradable, free-of, sustainability claims, non-toxic, 100% natural, ozone-safe and ozone-friendly, recyclable, refillable, renewable, and similar assertions must be backed by proper certification, reliable scientific evidence, or independent third-party verification.

7. Future environmental claims

The environmental claims which are aspirational and futuristic can be made when a clear plan denoting the objectives has been laid out and means of achieving the same have been formulated. (Clause 8)

8. Spirit of complementarity

In case the provisions of other laws regulate greenwashing, then the Guidelines shall work in aid of and not in derogation of such legislation.

In view of the above, let us analyse the effectiveness of this particular notification.

The Advertising Standards Council of India (ASCI) complements these efforts with its own set of guidelines, effective from February 2024. These guidelines also set stringent standards for environmental advertising, requiring absolute claims like "eco-friendly" to be supported by robust data or credible accreditations. They mandate that comparative environmental claims must provide clear evidence of benefits over alternatives, while general environmental claims must consider the full lifecycle of products. The ASCI framework also addresses visual elements in advertising, requiring them to directly link to substantiated claims, and establishes strict requirements for certification and material claims about properties like biodegradability and recyclability.

Similarly, the Securities and Exchange Board of India (SEBI) adds another crucial layer to this framework through its February 2023 circular, focusing on green debt securities. SEBI's guidelines require issuers to monitor sustainable pathways actively, ensuring that funds raised genuinely contribute to reducing adverse environmental impacts. The framework mandates strict fund utilisation protocols, transparent disclosure requirements and regular impact assessments. Importantly, it requires the quantification of negative externalities and maintains high standards consistent with assigned green debt security ratings.

Furthermore, the Reserve Bank of India (RBI) has further strengthened this regulatory landscape with its framework for green deposits, implemented in June 2023. This framework aims to mobilise resources for environmentally beneficial activities through regulated entities like Scheduled Commercial Banks and deposit-taking NBFCs. The RBI guidelines specify eligible activities including renewable energy, energy efficiency and clean transportation, while explicitly excluding certain projects like those involving fossil fuels and nuclear energy. The framework mandates annual third-party verification and impact assessments, with specific metrics for measuring environmental benefits such as greenhouse gas emissions avoided and energy savings.

The promotion of transparency in environmental communications will have fundamentally changed how businesses present their environmental claims. Companies must now provide clear, verifiable evidence for any green claims, moving away from vague statements and ensuring accurate representation of all environmental benefits. This framework effectively eliminates the possibility of using ambiguous terminology or selective disclosure that could mislead consumers about environmental attributes.

In protecting consumer interests, the regulatory regime ensures access to accurate and reliable information about environmental aspects of products and services. Consumers can now make informed decisions based on genuine environmental credentials rather than marketing hyperbole. Companies must present both favourable and unfavourable environmental impacts, allowing consumers to evaluate the true environmental cost of their purchasing decisions. This transparent approach builds consumer trust and prevents the exploitation of growing environmental consciousness among buyers.

The guidelines actively encourage genuine sustainable business practices by creating a level playing field. Companies that have made real investments in environmental sustainability can now effectively differentiate themselves from those making unsubstantiated claims. This framework incentivises businesses to invest in actual environmental improvements rather than superficial marketing campaigns. Organisations are motivated to develop concrete plans for environmental improvements and ensure their claims are backed by measurable achievements.

The creation of standardised disclosure norms across sectors brings consistency and comparability to environmental reporting. This standardisation helps investors, consumers and regulators evaluate environmental claims on a common basis. Companies must now follow uniform practices in how they present environmental information, whether through advertisements, sustainability reports, or product labels. This standardisation makes it easier to compare different products and services, while also simplifying compliance for businesses operating across multiple sectors.

The growing concern for environmental protection and rising consumer interest in sustainable business practices has made corporations name themselves as environmentally friendly corporations. This confers a moral authority and a public image that allows businesses to survive in the market. In order to develop such a public image, many enterprises are falsely portraying themselves, by manipulating and misleading the public, to influence consumers towards their goods and services. This green marketing tactic is aimed at being regulated by these Guidelines by promoting transparency via disclosures.

Prof Sairam Bhat is Professor of Law and Co-Director, CEERA, National Law School of India University, (NLSIU). Advocate Jaibatruka Mohanta is a Research Associate at CEERA-NLSIU.