What is Greenwashing?

Greenwashing is a deceptive marketing practice where companies or organizations present themselves as environmentally friendly or sustainable, even when their actions or products do not align with such claims.

The term originated in the 1980s, coined by environmentalist Jay Westerveld, who criticized the hospitality industry's practice of promoting towel reuse programs as eco-friendly while neglecting broader environmental issues. Hence it is a combination of the words “green” and “washing”, referring to a "whitewashing" of a company's image, but in this case in an environmental context.

Greenwashing occurs because companies seek to capitalize on the growing consumer demand for sustainable products and services, often without making significant changes to their practices. It typically works by using misleading labels, vague claims, or advertising campaigns that highlight minor environmental efforts while obscuring more significant environmental harm. This tactic misleads consumers, erodes trust, and undermines genuine sustainability efforts by creating confusion and skepticism about what constitutes environmentally responsible behavior.

Types of Greenwashing

1) Green - Labelling 

2) Green - Lighting 

3) Green - Shifting 

4) Green - Hushing 

5) Green - Crowding 

Understanding Greenwashing and its Different Forms

As environmental awareness grows among consumers and investors, companies increasingly face pressure to appear sustainable. Unfortunately, some businesses misuse this pressure to exaggerate or misrepresent their environmental efforts. This practice, known as greenwashing, can take on various forms. While traditional greenwashing often involves misleading claims about products or services, newer strategies, like green-hushing or green-shifting, also contribute to misleading environmental practices. Mentioned below is the breakdown of greenwashing and its extended variants:

1. Green-Labelling
This involves using labels or certifications that suggest a product is eco-friendly, even when the claims are misleading or unsubstantiated.
Example: A cleaning product labelled "natural" or "non-toxic" without specifying ingredients or meeting recognized standards.

2. Green-Lighting
Highlighting a minor eco-friendly initiative to distract from a company’s broader environmental harm.
Example: An oil company promoting its small investment in renewable energy while continuing to expand fossil fuel extraction.

3. Green-Shifting
Shifting the blame for environmental problems onto consumers instead of taking corporate responsibility.
Example: A fast-food chain encouraging customers to recycle their packaging while doing little to reduce plastic use in its supply chain.

4. Green-Hushing
Companies intentionally underreport or avoid promoting their sustainability efforts to avoid scrutiny or backlash.
Example: A fashion brand implementing sustainable practices but choosing not to advertise them to avoid being accused of greenwashing.

5. Green-Crowding
The collective act of multiple companies flooding the market with vague or dubious green claims, making it hard for consumers to discern truly sustainable products.
Example: Competing detergent brands all claiming to be "eco-friendly" without clear evidence, creating confusion in the marketplace.

Factors Driving Greenwashing in India

Eco-friendly claims and socially conscious initiatives are gaining traction, it’s easy to be captivated by a company’s ESG (Environmental, Social, Governance) disclosures. However, not all claims are as genuine as they appear. Some businesses engage in greenwashing, exaggerating or falsifying their efforts to appear more sustainable or ethical than they are. Whether you’re a tech company, an e-commerce brand, or an investor, recognizing the signs of greenwashing in ESG disclosures is essential.

Some key indicators to help you identify when these claims might not be what they seem:

i.  Vague or Ambiguous Disclosures

Companies often use terms like "net-zero," "ethical," or "sustainable" without providing concrete evidence or detailed explanations. These terms can be misleading unless supported by specific data or verified methodologies.

Example: A company states that it is committed to "achieving carbon neutrality" but does not specify how it will measure, reduce, or offset emissions.

ii.  Lack of Transparency in Reporting

Authentic ESG efforts include detailed reporting with clear methodologies, benchmarks, and progress updates. A lack of transparency or incomplete disclosures is a significant red flag.

Example: A firm claims to align with the Paris Agreement but does not disclose scope 3 emissions (indirect emissions in their value chain) or provide third-party verification of their data.

iii.  Selective Highlighting of Positive Metrics

Some companies showcase a single successful initiative while concealing broader negative practices or performance. This selective disclosure can mislead stakeholders about the company’s overall ESG impact.

Example: A company highlights its use of renewable energy in certain facilities while failing to mention that the majority of its operations rely on coal-powered plants.

iv. Unverified Certifications or Self-Created Labels

Using unofficial certifications or creating internal labels to give an appearance of compliance can be a tactic to mask inadequate ESG practices. Reputable certifications are issued by third-party organizations with rigorous standards.

Example: A product is labelled as "green-certified" without any indication of the certifying body or criteria used to determine compliance.

v. Failure to Link ESG Goals to Business Strategy

ESG goals should be integrated into the company’s core strategy rather than existing as standalone, superficial commitments. A disconnect between ESG goals and operational practices can signal insincerity.

Example: A company pledges to "enhance workplace diversity" but does not implement measurable policies, such as diversity hiring targets or training programs.

Strategies to avoid greenwashing as a company : 

1) Embed Sustainability into Robust ESG Policies

Sustainability shouldn’t be a box-ticking exercise—it needs to be part of company’s DNA. Developing and adhering to robust Environmental, Social, and Governance (ESG) policies indicates company’s efforts are comprehensive and long-term. This includes addressing everything from ethical sourcing and energy efficiency to labor practices and board diversity.

2) Prioritize Truthful and Adequate Disclosures

Transparency isn’t optional; it’s the foundation of trust. Companies must provide detailed and accurate information about their environmental initiatives, backed by evidences. Gone are the days of vague promises—customers demand specifics. For instance, instead of saying “We’re reducing emissions,” share how much, by when, and through what initiatives. Truthful disclosures are not just ethical; they set the stage for meaningful connections with stakeholders.

3) Substantiate Every Claim

Whether it’s a product labelled “100% recyclable” or a commitment to being carbon-neutral, companies must ensure these assertions are backed by science, audits, or third-party certifications. Think of it as an insurance policy for a brand’s credibility. Always be ready to answer the “how” behind green statements with facts that hold up to scrutiny.

4) Embrace Adequate Monitoring and Transparent Reporting

Effective sustainability strategies require constant oversight. Implement robust monitoring systems that track the environmental impact of company’s operations in real-time, and ensure alignment with established ESG frameworks like the Global Reporting Initiative (GRI) or the Task Force on Climate-Related Financial Disclosures (TCFD). These frameworks not only guide company’s efforts but also provide a standardized way to communicate progress, enhancing credibility. Share findings through public sustainability reports. Consumers value brands that share their journey honestly, including setbacks—transparency and alignment with ESG standards signal accountability and a genuine commitment to sustainable practices.

Greenwashing Regulations – Indian and International Perspective

In order to address the issue of misleading claims about environmental practices, measures have been introduced both in India and around the world. In India, steps have been taken to ensure that companies back their claims about being environmentally friendly with clear proof. Around the globe, similar efforts are being made to set standards and guidelines that prevent businesses from misleading people about their impact on the planet. These actions aim to promote honesty, ensure accountability, and protect individuals from being misled, encouraging companies to adopt genuine environmentally friendly practices.

The evolution of greenwashing regulations in India highlights a growing focus on curbing misleading environmental claims and promoting transparency. Various regulatory bodies have taken significant steps to address greenwashing practices, ensuring that businesses operate with greater accountability.

1. Securities and Exchange Board of India (SEBI):

SEBI has been proactive in regulating green financial products. On February 3, 2023, it issued a circular outlining the dos and don’ts for green debt securities to prevent greenwashing. This framework, introduced in 2021, was updated in 2023. Additionally, SEBI's Operational Circular for Non-Convertible Securities (August 10, 2021) reinforced its commitment to promoting transparency in green financial markets.

2. Reserve Bank of India (RBI):

To ensure accountability in green financial products, RBI via notification in April 2023 introduced the Framework for Acceptance of Green Deposits. This framework aimed to curb greenwashing in deposit products offered by regulated entities.

3. Ministry of Corporate Affairs (MCA):

Recognizing the importance of responsible business practices, MCA introduced the National Guidelines on Responsible Business Conduct on March 13, 2019. Building on earlier guidelines from 2011, these non-binding standards emphasized corporate accountability in social, environmental, and economic dimensions, paving the way for SEBI’s later ESG reporting regulations.

4. SEBI (ESG Disclosures):

To enhance transparency, SEBI introduced the Business Responsibility Report (BRR) on November 4, 2015, followed by the Business Responsibility and Sustainability Reporting (BRSR) requirements on May 10, 2021. In 2023, SEBI refined these with the BRSR Core Framework, focusing on ESG assurance and disclosure across value chains.

5. Advertising Standards Council of India (ASCI):

ASCI took steps to combat greenwashing in advertisements. In January 2024, it issued guidelines promoting honesty in environmental claims. On February 15, 2024, ASCI released the Guidelines for Advertisements Making Environmental Claims to prevent misleading practices.

6.  Central Consumer Protection Authority (CCPA):

The CCPA played a crucial role in addressing greenwashing. Starting in November 2023, it initiated consultations and released Guidelines for Prevention and Regulation of Greenwashing on October 15, 2024. The guidelines provide a robust framework to tackle misleading environmental claims.

Global Initiatives

Governments and international organizations are also stepping up efforts to combat greenwashing with stringent standards and frameworks. Below mentioned are four key initiatives making an impact:

i. EU Taxonomy for Sustainable Activities

The EU Taxonomy establishes clear criteria for defining environmentally sustainable activities. It ensures only genuinely green projects are labelled as such, promoting transparency and helping investors make informed decisions.

ii. Corporate Sustainability Reporting Directive (CSRD)

The CSRD mandates detailed and standardized ESG reporting for companies operating in the EU. Effective from 2024, it replaces the NFRD and aligns with global frameworks to ensure consistent and reliable sustainability disclosures, reducing the risk of exaggerated claims.

iii. Conference of the Parties (COP 28)

In recent years, the COP 28 had addressed the issue of greenwashing, recognizing the need for greater transparency and accountability in corporate climate pledges.

At COP28, held in 2023, provided a platform for country-level regulators to share best practices and explore legally binding rules on corporate climate claims. The goal was to establish clear guidelines on what qualifies as genuine climate action, preventing corporations from exaggerating their environmental efforts. However, concerns over greenwashing, youth-washing, and pink-washing surfaced throughout the conference. This highlights significant regulatory focus on ensuring that companies align their climate commitments with real, measurable actions rather than deceptive marketing.

iv. European Green Bond Standards (EUGBS)

The EUGBS introduced strict criteria for green bond issuance, requiring alignment with the EU Taxonomy. Independent reviews ensure the funds raised are genuinely used for sustainable purposes, boosting investor confidence and reducing greenwashing risks. The EU approved the world’s first green bond standards to combat greenwashing. The “European Green Bond” label mandates transparency, directing 85% of funds to EU sustainable activities, supporting the EU’s climate neutrality transition.

Conclusion:
Regulations in India and globally are evolving to curb misleading environmental claims, reinforcing the need for companies to integrate sustainability into their core strategies. By prioritizing honesty, measurable actions and credible reporting, businesses can foster trust and contribute to meaningful environmental progress rather than mere greenwashing.

References:

https://www.drishtiias.com/daily-updates/daily-news-analysis/guidelines-to-combat-greenwashing

https://www.pmfias.com/greenwashing/

https://www.computer.org/publications/tech-news/trends/esg-greenwashing-in-reports 

https://t3-consultants.com/2024/06/esg-greenwashing-na-challenges-with-t3-consultants/