GUARDING GREEN CLAIMS: INDIAN APPROACH TOWARDS A SUSTAINABLE FUTURE

– By Riddhi Paritosh Vyas*

BACKGROUND

In today’s world, an increasing number of consumers are showing a preference for purchasing products and services that are marketed as environmentally friendly. Supermarkets, grocery stores, and e-commerce platforms offer a wide variety of products – ranging from cereal to soft drinks, cleaning products to clothing, and skincare to personal wellness – touting ‘all-natural’ claims. A recent survey conducted by Hewlett-Packard titled ‘Parents and the Planet: How Sustainability Impacts Purchasing Decisions’ revealed that 85% of Indian parents expressed a preference for sustainably sourced products, and 84% believed that a company’s sustainability practices played significant role in influencing their choice of product.

In today’s rapidly evolving economic landscape, the pursuit of sustainability has emerged as a paramount concern for consumers, businesses, and policymakers alike. With increasing awareness of environmental issues and the growing demand for eco-friendly products and services, companies are under immense pressure to demonstrate their commitment to environmental sustainability. The international community is also directing its efforts towards adopting measures that can lead to sustainable development.[1]

However, despite this increased focus, there remains a lack of adequate regulatory framework that prescribes clear obligations of states and companies with respect to the production, marketing, advertisement and sale of products and services with environmental claims. Due to this regulatory vacuum, the problem of misleading consumers by exaggerating or misrepresenting the company’s environmental efforts or achievements has become rampant. This issue is popularly referred to as ‘Greenwashing’ – a term first coined by the environmentalist Jay Westerveld in a 1986 essay as a rebuke to companies that claimed to be environmentally friendly without offering any evidence to back up their claims.

Over the years, the concept of greenwashing has evolved, and it continues to have a significant impact, especially considering the increase in environmental consciousness and sustainability among consumers all over the world. Accordingly, countries have started to respond by either introducing or amending their regulations to address the issue greenwashing.[2] In 2022, France not only became the first country to ban fossil fuel advertising altogether, it also became the first to introduce fines for greenwashing.

Such measures are vital for safeguarding consumers, maintaining market fairness, fostering trust, advancing sustainability, and furthering environmental objectives. A robust regulatory framework also plays a pivotal role in nurturing a business environment that is transparent, accountable, and that values environmental sustainability.

Against this background, the author in this article explores the imperative for adopting robust regulations to curb greenwashing regulations in current times. The author examines the detrimental impacts of deceptive environmental marketing, and advocates for regulatory measures to safeguard consumers, promote genuine sustainability, and uphold the integrity of the marketplace. Additionally, the author explores the Indian stance on greenwashing, and offers suggestions and recommendations to enhance the existing regulations on greenwashing in India in order to align them more closely with international best practices and standards.

GREENWASHING – AN INDIAN PERSPECTIVE

Until recently, India did not have a dedicated law that addressed greenwashing expressly. However, broader consumer protection laws and regulations could address deceptive market practices, including those involving environmental claims (‘ECs’).

The Consumer Protection Act, 2019 (‘CPA’), gives the Central Consumer Protection Authority (‘Central Authority’) the power to issue necessary guidelines to prevent unfair trade practices and protect consumers’ interest.[3] By virtue of this power, in January 2024, the Central Authority issued the draft Guidelines for Prevention and Regulation of Greenwashing (‘Draft Guidelines’).[4] The issuance of the Draft Guidelines marks the first instance of a dedicated law on greenwashing in India. These guidelines apply to all advertisements, service providers, product sellers, advertisers, or advertising agencies involved in promoting specific goods or services.[5]

A pioneering development within the Indian legislation, the Draft Guidelines define[6] ‘Greenwashing’ as any deceptive or misleading practice. This encompasses actions such as concealing, omitting, or obscuring relevant information by exaggerating, making vague, false, or unsubstantiated environmental claims, by utilizing misleading language, symbols, or visuals. Moreover, it involves highlighting favourable environmental aspects while minimizing or concealing detrimental attributes.

Furthermore, the Draft Guidelines also introduce a new definition of ‘Environmental Claims’ (‘ECs’). [7] This refers to any statement, in any form, about – First, a product, including how it’s made, packaged, used, or disposed of; and second, a service, including how it’s provided, suggesting that it is environmentally friendly. Such claims might suggest that a said good/service has a positive impact on the environment, is more sustainable, causes less harm than before or compared to similar products, or offers specific environmental benefits. Putting it simply, these claims aim to show that the product/service is environmentally responsible or eco-friendly. The Draft Guidelines lay down provisions which act as a guide when making such ECs.

First and foremost, the Draft Guidelines state that all ECs should be substantiated.[8]

1. ECs should be clear and unambiguous and therefore it is necessary that such claims have case adequate qualifiers and substantiation.[9]
2. Usage of generic environmental terms: The Draft Guidelines state that all advertisements making ECs should avoid using generic terms such as ‘clean’, ‘green’, ‘eco-friendly’, ‘eco-consciousness’, ‘good for the planet’, ‘minimal impact’, ‘cruelty-free’, ‘carbon – neutral’ etc., without adequate explanation, substantiation, or disclosures.
3. Usage of technical environmental terms: The Draft Guidelines state that while using technical terms like Environmental Impact Assessment, Greenhouse Gas Emissions, Ecological Footprint, etc., consumer friendly language should be used, and the meaning/ implications of such terms should be duly explained.

Second, all ECs should have adequate disclosures.[10]

1. The Draft Guidelines mandate all ECs to be accurate and to disclose all material information either in the relevant advertisement or communication or by inserting a QR Code, URL which will be linked to such relevant information.
2. When making these disclosures, data from research should not be selectively chosen to showcase only positive findings while hiding negative ones.
3. Any individual making ECs must clarify whether these claims pertain to the product itself, including its manufacturing process, packaging, usage, or disposal, or to the service or the process of delivering the service. Hence, it is important that ECs are absolute and relevant. This means that if an EC relates to a particular feature, component, or stage, it should be fully disclosed that it is relevant only to that aspect of the product/ service.[11]
4. Comparative ECs, which compare one product or service to another, must rely on verifiable and pertinent data that is shared with consumers. Additionally, these claims must specify precisely which aspects are being compared. Such a comparison should be fair and meaningful. [12]
5. Specific ECs such as 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 supported by disclosure about credible certification, reliable scientific evidence, or independent third-party verification.
6. The information provided/ disclosures made regarding ECs should be readily available to consumers and should not conflict with the corresponding EC.
7. While making an EC, utilizing imagery without substantial alterations to the same could be misleading. Any visual representation suggesting environmental responsibility or eco-friendliness without providing pertinent details or context to the consumer should not be used.[13]

Third, all ECs should be accurate.[14]

1. ECs should be truthful and accurate. They should rely on verifiable information, either through certificates from official bodies, endorsements from reputable sources, or internal evidence that can be verified.
2. Further, ECs indicating endorsements, certifications, or seals of approval that are either non-existent, deliberately deceptive, or issued by unofficial bodies lacking recognition from credible authorities are misleading and should not be made.[15]

In addition to the above, in January 2024, the Advertising Standards Council of India (“ASCI”) (a self-regulatory body), issued the Guidelines for Advertisements Making Environmental/Green Claims (“ASCI Guidelines”). These guidelines signify a paradigm shift in India’s regulatory landscape concerning greenwashing, aiming to enhance transparency and accountability in ECs while empowering consumers to make informed decisions. The ASCI Guidelines meticulously delineate various types of claims and prescribe precise standards to address each category. Notably, advertisers are mandated to substantiate absolute claims such as ‘eco-friendly’ with substantial empirical evidence. Comparative claims necessitate proof of environmental superiority over previous iterations or rival products. Moreover, ECs must encompass the entire product life cycle, with explicit delineation of the claimed benefits. Misleading representations or manipulative visual elements are strictly proscribed. It also mandates that future environmental objectives must be accompanied by actionable plans and that any carbon offset claims necessitate unequivocal disclosure and substantiation. Further, assertions regarding compostability, biodegradability, etc., mandate scientific validation and unambiguous qualification.

However, with increasing awareness on greenwashing and making unsubstantiated ECs, there is scope for improving the current draft law to bring it in line with international best practices. A comprehensive law on greenwashing would serve as a crucial tool in advancing sustainability agendas and ensuring corporate accountability in India’s burgeoning market, while catering to the growing demand for sustainable products and services.

SUGGESTIONS/ RECOMMENDATIONS

Today there is a growing concern over accusations of greenwashing. Major brands worldwide are increasingly using slogans to appeal to their eco-conscious consumers. Recently, a Dutch court ruled against KLM Royal Dutch Airlines (“KLM”), banning its use of the slogan ‘fly responsibly’ and disputing its claims of using Sustainable Aviation Fuels to make flying more eco-friendly. This decision stemmed from a legal action by the FossielFree Foundation, alleging that KLM’s advertising misled consumers by implying its flights were environmentally sustainable. Addressing this issue, and others like this, requires evaluating ECs made by companies accurately. This decision comes at a time when policy experts and regulators are already scrutinising ECs. This necessitates developing comprehensive rules/guidelines to help consumers recognize and report instances of greenwashing effectively.

Given this context, it is evident that the Draft Guidelines are well-structured and comprehensive. However, we propose a few policy recommendations to align Indian law with international standards and best practices:

1. Misleading advertisements leading to greenwashing should be penalised –

In India, misleading advertisements that promote greenwashing are not yet penalised.

However, the laws on misleading advertisements, as they stand today, are a cautionary tale for businesses which may lean towards making misleading claims. For instance, the CPA gives power to the Central Authority to impose a penalty extending to INR 10 lakhs, on an endorser or a manufacturer, for a false/ misleading advertisement – which may further extend to INR 50 lakhs for subsequent contraventions.[16] Similarly, the Food Safety and Standards Act, 2006, also imposes a penalty of INR 10 lakhs[17] on anyone who publishes any advertisement that falsely describes the food item being sold or which is likely to mislead the consumer about the nature/ substance/ quality of any food or gives false guarantee. To make the businesses more vigilant of the same, the Food Safety and Standards Authority of India website, under FAQs on Compliance, also reflects the said penalty provision[18].

This does not address or bridge the gap created by the absence of penalties in India’s greenwashing laws, but it does serve as a warning to businesses that might make deceptive environmental claims. However, there are numerous reasons why penalties should be enforced for such misleading ECs.

The state’s monopoly over violence in society can be used to enact a rule that bans certain behaviour, backed with the threat of penalties for non-compliance.[19] Such measures safeguard the consumers, advance environmental sustainability efforts, uphold fair market practices, and cultivate trust and accountability in business conduct and towards the environment as well.  This is because the threat of penalties acts as a deterrent, dissuading companies from making false/ exaggerated claims about their environmental practices. Penalties may also lead to forming regulatory requirements for greater transparency in advertising claims – this may further the goal of substantiation of ECs under the Draft Guidelines[20], thereby maintaining accuracy and honesty in marketing communications. Under the French law, for example, companies are penalized under the consumer code[21] in France for false advertising – with administrative fines, the amount of which may not exceed €3,000 for a natural person and €15,000 for a legal person (which may be increased to the full amount of the expenditure on the noncompliant advertisement), a correction on billboards or in the media, and a 30-day clarification on the company website. In addition to these measures, France – known for being the world’s fashion capital, planned a fashion revolution by bringing in measures such as climate-impact labels. In other words, every item of clothing sold within the borders of France would require a label detailing its precise climate impact.[22]

It is also notable that South Korea has pioneered in Asia by imposing fines for false or exaggerated green claims. In 2023, the Korea Fair Trade Commission (“KFTC”), responsible for overseeing labelling and advertising practices to ensure market fairness and transparency, proposed amendments to its Review Guidelines for Environment-related Labels and Advertisements. These amendments aimed to strengthen the fight against greenwashing, aligning with global standards while providing clearer regulations for companies under its jurisdiction. Under their Regulation on Unfair Labelling and Advertising, if a business engages in unfair labelling or advertising, the KFTC can issue corrective orders, require publication of the corrective action taken, or impose penalty surcharges, potentially up to 2% of sales or 500 million won. Additionally, criminal charges may be pursued against the business or its employees.

Similarly, in July 2023, the Australian Competition and Consumer Commission (“ACCC”) issued Draft Guidance on Environmental and Sustainability Claims. Under these guidelines, ACCC can take legal action against individuals or corporations for making false or misleading representations and engaging in deceptive conduct, with liability and penalties determined by the court based on the specifics of each case. For corporations, the maximum penalty per violation is the greater of $50 million, three times the benefit obtained from the contravention, or 30% of adjusted turnover if the benefit cannot be determined. Individuals face a maximum penalty of $2.5 million per violation. Criminal liability may also apply for certain claims.

2. Simplified check-list essential for businesses to assess their ECs –

A check-list would be advantageous for businesses to evaluate their environmental claims and prevent greenwashing. Such a check-list would have instructions from the Draft Guidelines for compliance, and that would transform complex instructions into understandable guidelines. This in turn would ensure compliance with legal standards and bring in consistency, by reducing the risk of misinterpretation, particularly for small and medium-sized businesses. Businesses would thus be able to save their reputation and not incur punishments or litigations for misleading ECs. A simplified check-list for assessing ECs, if provided to businesses, would also promote ethical marketing and genuine environmental commitments, leading to healthier competition in the market. Moreover, staying ahead of evolving regulations/ guidelines, and maintaining documented processes would aid in regulatory preparedness and accountability.

This type of self-checklist has been proposed in the South Korean law for businesses to assess the legality of their environmental labelling and advertising practices in advance. Including such a feature in the Indian market and jurisprudence would streamline the assessment process for ECs made by businesses and would further save time and resources, allowing businesses to focus on their core activities and sustainability innovations. Such a self-checklist may be inserted in the Draft Guidelines as an Annexure to facilitate businesses with a step-by-step compliance of these guidelines while making any ECs.

CONCLUSION

As the global shift towards sustainability accelerates, the issue of greenwashing will continue to garner increasing attention. This coupled with the increasing consumer demand for environmentally friendly products and the proliferation of green claims attached to the products, underscores the necessity for stringent regulations to address greenwashing. Especially, after the onset of Covid-19 pandemic, India has become a hub for home-businesses and small-business, selling on portals such as Facebook Marketplace or Instagram. These businesses often use sustainable tags while advertising their products & hence India’s Draft Guidelines come at a very critical and opportune time, when the entire world is talking about responsible advertising.

These Draft Guidelines signify a pivotal moment in India’s regulatory landscape. However, to be truly effective, these guidelines must be further refined to align with international best practices. For this we have suggested implementing penalties for deceptive advertisements, akin to laws in France, South Korea, and Australia, and providing businesses with simplified self-checklists for compliance with the law. This will help prevent misinterpretation, protect consumer trust, and foster genuine sustainability efforts by businesses. By adopting these guidelines, India can build a marketplace where authentic environmental initiatives are recognized and rewarded, paving the way for a sustainable future.

***

* Riddhi Paritosh Vyas is a Research Fellow working with the Policy Research Group at Shardul Amarchand Mangaldas & Co., New Delhi. Her main areas of focus are banking & finance, insolvency, and dispute resolution.

[1] Such as the Paris Agreement of 2015 and the UN’s 2030 Agenda for Sustainable Development.

[2] A few examples are – a) Draft Guidelines for Prevention and Regulation of Greenwashing [2024] – India; b) Regulation on Unfair Labelling and Advertising – South Korea; c) Australian Consumer Law, etc.

[3] See, Section 18(2)(l) – Consumer Protection Act, 2019

[4] Comments were sought on the Draft Greenwashing Guidelines and it is pending finalisation [as in July 2024].

[5] See, Guideline 3 – Draft Greenwashing Guidelines, 2024.

[6] See, Guideline 2(e) – Draft Greenwashing Guidelines, 2024.

[7] See, Guideline 2(f) – Draft Greenwashing Guidelines, 2024.

[8] See, Guideline 6 – Draft Greenwashing Guidelines, 2024.

[9] See, Serial No. 2 of Annexure 1: Guidance Note – Draft Greenwashing Guidelines, 2024.

[10] See, Guideline 7 – Draft Greenwashing Guidelines, 2024.

[11] See, Serial No. 4 of Annexure 1: Guidance Note – Draft Greenwashing Guidelines, 2024.

[12] See, Serial No. 3 of Annexure 1: Guidance Note – Draft Greenwashing Guidelines, 2024.

[13] See, Serial No. 5 of Annexure 1: Guidance Note – Draft Greenwashing Guidelines, 2024.

[14] See, Guideline 7(a) & Serial No. 1 of Annexure 1: Guidance Note – Draft Greenwashing Guidelines, 2024.

[15] See, Serial No. 6 of Annexure 1: Guidance Note – Draft Greenwashing Guidelines, 2024.

[16] See, Section 21 – Consumer Protection Act, 2019

[17] See, Section 53 – Food Safety and Standards Act, 2006

[18] See, Question 12 – FAQs on Compliance <https://foscos.fssai.gov.in/faqs-license-registration?faqType=C > updated on 13 April 2023

[19] Vijay Kelkar, Ajay Shah, In the Service of the Republic – The Art and Science of Economic Policy (Penguin Random House India, 2019) 15

[20] See, Guideline 6 – Draft Greenwashing Guidelines, 2024.

[21] Decree No. 2022-538 of 13 April 2022 Defining the System of Penalties Applicable in the Event of Disregard of the Provisions Relating to Carbon Neutrality Claims in Advertising.

[22] Elizabeth Paton, ‘The New Laws Trying to Take the Anxiety Out of Shopping’ The New York Times (New York, 30 September 2022)

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