'Greenwashing' Mandate Good, But Will It Make A Difference?

For the unversed, greenwashing is a phenomenon where corporations market their products as 'green', 'eco-friendly' or 'Carbon Neutral', etc. without actually substantiating these claims through actions, data or other verifications.

Such deceitful claims by corporations or companies aren’t exactly new. Since climate change emerged as a pertinent global issue, governments and corporations have been trying to walk the sustainable path. 

However, in doing so, corporations often sell themselves as saviors, even when they have made little to no difference. The CCPA guidelines may just regulate and bring in much-needed scrutiny.

What Are The Guidelines?

The CCPA issued the guidelines on October 15. From mandating transparency requirements on companies to utilising third-party certifications for substantiating the claims, the authority seems to have checked all the boxes.

The guidelines define ‘greenwashing’ as deceptive or misleading practice, including concealing, omitting or hiding relevant information by exaggerating or making vague, false, or unsubstantiated environmental claims.

This includes the use of misleading words, symbols or imagery that emphasises positive environmental aspects while downplaying or concealing harmful attributes. Besides, the use of hyperbole and even generic environmental-linked colour schemes or pictures has been categorised in the definition.

The guidelines apply to all service providers, product sellers or endorsers, and advertisers regardless of form, format, or medium.

Companies need to back up environmental claims with evidence. They can no longer just claim to be 'clean', 'green', 'eco-friendly', and 'cruelty-free'.

Technical terms have to be in consumer-friendly language and data must not be cherry-picked. The brands can't even make comparative environmental claims without verifiable data.

Claims like 'Recyclable' or 'Non Toxic' will need credible certification, scientific evidence, or independent third-party verification. Even aspirational or futuristic environmental claims can only be made if there are clear and actionable plans.

Is Regulation The Answer?

Experts welcome these guidelines, but are unsure if they will deliver.

Anushree Joshi, sustainability researcher at the Boston Consulting Group (BCG), told The Secretariat, “Greenwashing hasn’t been addressed in a regulatory manner in many other countries. The EU has the best benchmark, and even that is in a developmental stage. Hence, for India to have greenwashing guidelines is a great step.”

Sankalp Suman, a climate change expert, called the CCPA guidelines well-written, creative and a timely step. He also called it encouraging that India is tackling this at a policy level, as many South Asian countries struggle to address greenwashing legally.

Experts have also emphasised the need for guidelines to evolve with time, as the nature of greenwashing keeps changing. Joshi noted that it's difficult to assess if this alone can reduce greenwashing.

“The challenge in implementation lies in defining greenwashing, which is hard to classify. The EU uses existing regulations and sustainability directives to define it,” she added.

The EU has a comprehensive structure of disclosures and implementation reports for corporates, which includes three directives — Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CS3D), and the Digital Product Passport (DPP) — which attempt to implement transparency by reporting, disclosing and tracking the environmental impact.

Joshi pointed out that the EU's directives on reporting and action effectively help regulate greenwashing. “These directives make it easier to differentiate between green activity and greenwashing, given the robustness of the reporting ecosystem,” she added.

Back home, the disclosure mandates fall short. Joshi noted that unlike the EU, India lacks implementation and reporting of Environmental, Social and Governance (ESG) requirements.

ESG reporting allows companies to demonstrate their commitment to sustainability and environmental responsibility, using the Business Responsibility and Sustainability Reporting (BRSR) standard in India. However, the BRSR framework is not as comprehensive as the EU directives.

India's ESG reporting framework, established by the Securities and Exchange Board of India (SEBI), applies to only the top 1,000 listed companies by market capitalisation, which limits the robustness of ESG reporting.

Suman said, “The real challenge would be in the enforcement of these guidelines, given the rapidly tightening timelines of climate change.” 

While some argue that stricter disclosure standards could help with transparency, the truth is it doesn’t. Despite the EU’s strict legislation, the reality of enforcement remains subservient to the business interests of the respective countries, noted Suman.

Despite the stricter ESG scrutiny in the EU, it was reported that banking regulators have witnessed a rise in alleged greenwashing. Nevertheless, in India, while the greenwashing guideline may not remedy the problem fully, it is a great start. 

Future Outlook

The outlook on greenwashing in the country will hinge on how the reporting mechanisms evolve over time. That said, despite the hesitancy regarding their effectiveness, experts are optimistic.

The guidelines can play a crucial role in enhancing transparency and strengthening the reporting of actions, implementations and disclosures related to green initiatives. “In the coming time, these regulations will have a great outlook and may complement ESG reporting in India, which should logically expand in outreach by then,” said Suman.

Beyond Guidelines

There are some elements of the guidelines that go beyond just policy. The ambiguous definition of greenwashing remains a concern.

“It all hinges on how these guidelines are interpreted by the regulatory authorities,” noted Suman. He added, “The interpretation of guidelines will also have to evolve equally pragmatically.” 

The mention of third-party verifications of these environmental claims is another area of concern. Experts note that here too, the lack of robustness of the directives framework will play a role. “Third party-certification will be tough, until a structured framework is developed that comprehensively takes up implementation and disclosure,” said Joshi.

Besides the lack of robustness, experts agree that third-party verification can lead to corruption, and they do not foresee India fully preventing this in the next decade.

Other factors that also need to be considered is CCPA’s role in regulating greenwashing claims. Suman underscored the need for CCPA to not succumb to the pressures of big businesses. “The climate point of view needs to be considered by the regulator,” he added.

Joshi said, “Just a slap on the wrist on defaulters won’t remedy greenwashing.” She added that the regulatory authorities need to promptly make these companies pay fines for them to prioritise the delivery of actionable steps.

Another concern is the transparency within the regulatory authority. “An important component of enforcement would be transparency on the empanelment of the third party auditors, and having a system of checks and balances to avoid corruption, etc.,” noted Suman.

In all, while these guidelines are a great step, the chances of corporates losing sleep over these are not very high. 

Joshi noted the case of Walmart in the US, which was slapped with a US$ 3 million fine for greenwashing. She said, “While the company’s greenwashing action attracted penal fines, it didn’t reflect in stock price and consumer behaviour.” 

Until consumers also consider the verifiability of the claims, the corporates won't budge.  

A more existential question is about the hidden environmental costs of products that appear green. For example, electric vehicles are marketed as eco-friendly, but in India, the reliance on coal for electricity generation, and the utilisation of lithium, complicates the claim.

While these questions and apprehensions remain, a systematic change has been put in motion. For now, the new guidelines may have made the opaque initiatives translucent at best.