What is Greenwashing?
Greenwashing is an unethical marketing tactic that companies use to deceive consumers into believing that their products are environmentally friendly and have a positive impact on the environment. This involves making false and unproven claims to mislead customers into thinking that their products are eco-friendly.
Furthermore, greenwashing is commonly used to overshadow a company’s involvement in environmentally damaging practices by emphasizing the sustainable aspects of a product. This is often achieved through the use of misleading labels, environmental imagery, and by concealing trade-offs.
It is important to note that greenwashing is a form of deception and is a serious offense. Companies that engage in this practice are intentionally trying to mislead consumers and should be held accountable for their actions. Therefore, it is crucial for consumers to be aware of this tactic and to do their own research before making any purchase decisions.
This article aims to demystify greenwashing, outline its consequences, and explore the regulatory frameworks and consumer actions in India designed to counteract such practices, including the pivotal role of the Securities and Exchange Board of India (SEBI) and the Consumer Protection Act, 2019.
How can consumers report instances of greenwashing in India ?
Under the Consumer Protection Act, 2019, greenwashing can be addressed through the provisions related to unfair trade practices. Section 2(47) of the Act defines unfair trade practices to include false or misleading representation concerning the standard, quality, or grade of goods or services.
If a company engages in greenwashing, it can be held liable under the Act if it is found to be making false or misleading claims about the environmental benefits of its products or services. Consumers who are affected by such practices can file a complaint with the appropriate consumer dispute redressal commission seeking relief and compensation.
Consumers need to be aware of greenwashing and exercise caution while making purchasing decisions. They should look for credible certifications, labels, or independent third-party verifications to ensure the environmental claims made by a company are legitimate.
SEBI’S Initiative to address the menace caused by Greenwashing.
To tackle greenwashing in Indian markets, the Securities and Exchange Board of India (SEBI) has implemented various measures through its Listing Obligations and Disclosure Requirements (LODR) Regulations. These measures aim to promote transparency and ensure accurate disclosure of environmental, social, and governance (ESG) information by listed companies.
1. Mandatory ESG Reporting: SEBI has made it mandatory for the top 1,000 listed companies based on market capitalization, to disclose their ESG-related information in Business Responsibility and Sustainability Reporting (BRSR) annexed to their annual reports. This includes reporting on environmental impact, social responsibility, and governance practices.
Further, SEBI has introduced assurance of ‘BRSR Core’ in respect of the top 150 listed companies of the country by market capitalisation. This has expected to provide comfort to investors, regulators and various ESG rating agencies.
Put simply, BRSR Core brings out the critical elements of BRSR and mandates 49 parameters for ESG reporting. BRSR is intended towards having quantitative and standardised disclosures on environment, social and governance (ESG) parameters to enable comparability across companies, sectors and time. Such disclosures will be helpful for investors to make better investment decision
2. Materiality Assessment: Companies are required to assess the materiality of ESG factors and disclose only those that are relevant to their business operations and have a significant impact. This helps prevent greenwashing by ensuring that companies focus on disclosing meaningful and relevant information.
3. Independent Assurance: SEBI encourages companies to obtain independent assurance on their ESG disclosures to enhance credibility and reliability. This can be done through third-party audits or certifications
4. Whistleblower Mechanism: SEBI mandates the establishment of an effective whistleblower mechanism to encourage employees, stakeholders, and the public to report any instances of greenwashing or misleading disclosures.
5. Investor Education and Awareness: SEBI promotes investor education and awareness programs to help investors understand the importance of ESG factors and make informed investment decisions. This helps investors identify greenwashing practices and encourages companies to be more transparent.
These measures aim to create a more transparent and responsible investment environment, discouraging greenwashing practices and promoting sustainable business practices. However, it is important to note that tackling greenwashing requires continuous monitoring, enforcement, and awareness among all stakeholders.
Further the case of National Securities Depository Limited v. Securities And Exchange Board Of India (2017 SCC 5 517, Supreme Court Of India, 2017) entails the quasi-judicial powers of SEBI and its authority to impose penalties for violations of securities regulations. It emphasizes the need for SEBI to take action against fraudulent practices, including greenwashing, to protect investors and maintain market integrity.
Measures for tackling Greenwashing
To tackle greenwashing by consumers, there are several measures that can be implemented:
1. Consumer Education: It is crucial to educate consumers about greenwashing and how to identify misleading claims. This can be done through public awareness campaigns, consumer protection organizations, and educational materials that provide information on sustainable practices and certifications.
2. Labeling and Certification: Governments can enforce stricter regulations on labeling and certification of products claiming to be eco-friendly. This can include standardized certification processes and clear labeling guidelines to ensure transparency and accuracy in environmental claims.
3. Independent Verification: Independent third-party verification can help validate environmental claims made by companies. This can involve certifying bodies or organizations that assess and verify the sustainability practices of products and services.
4. Strengthening Consumer Protection Laws: Governments can strengthen consumer protection laws to include specific provisions against greenwashing. This can include penalties and fines for companies found guilty of misleading environmental claims.
5. Collaboration with Industry: Collaboration between government agencies, consumer organizations, and industry associations can promote responsible advertising and discourage greenwashing practices. This can involve setting industry-wide standards and guidelines for environmental claims.
Conclusion: Greenwashing is a significant barrier to achieving genuine sustainability in products and services, posing challenges for consumers seeking to make ethical decisions and for companies striving for real environmental progress. The Indian regulatory landscape, notably through the Consumer Protection Act, 2019, and SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, provides a robust framework for addressing greenwashing. These measures, including mandatory ESG reporting, materiality assessment, independent assurance, whistleblower mechanisms, and investor education, signify a comprehensive approach to mitigate greenwashing’s impact. However, the effectiveness of these measures relies on vigilant enforcement, consumer education, and a collective commitment to transparency and sustainability. By prioritizing credible environmental claims and holding companies accountable, consumers and regulators can together foster a more sustainable and honest marketplace.
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Nice information.