With a steady rise in global awareness on environmental degradation, consumers want to increasingly associate themselves with ‘greener’, more sustainable products in the market.  To meet consumer expectations, manufacturers, service providers, advertising agencies etc. have a tendency of exaggerating or fabricating their environmental commitments. Viewing a rapidly growing market, companies remain quick to capitalize on the opportunity. However, not only do such tactics mislead consumers but they also undermine genuine environmental efforts. Coined in 1986 by environmentalist Jay Westerveld, the term ‘greenwashing’ gained prominence in tandem with increasing environmental awareness 1980s onwards. Westerveld used the term to refer to a set of practices, specifically of the kind wherein the hotel industry claimed to reuse towels as part of a broader environmental strategy where, in fact, it was a strategy undertaken to save costs.  Therefore, the very genus of the term greenwashing highlights the paradoxical nature of certain environmental claims made with the sole intention of making the product more appealing to the consumer.

 

Transforming ecological concerns into a market phenomenon, greenwashing of products was not explicitly regulated in India till recently, with the introduction of the Guidelines for the Prevention and Regulation of Greenwashing or Misleading Environmental Claims, 2024 (the Guidelines) by the Central Consumer Protection Authority (CCPA or Central Authority). Section 18(2)(l) of the Consumer Protection Act, 2019 (CPA) vests in the Central Authority the power to issue necessary guidelines to prevent unfair trade practices and protect consumers’ interest.  The Guidelines are issued under the same.

 

Greenwashing

 

Clause 2(f) of the Guidelines define ‘greenwashing’ under the connotations of practices and words, symbols or imagery. It encapsulates the evolution of the practice from 1986, when it was first termed and limited to ‘acts’ per se in its meaning. By including both, the definition has been given a wide scope of application. It also expressly mentions what may not constitute greenwashing. More generally, it is understood to be misleading the consumers by way of deceptive advertisement in favour of products being environmentally friendly in their manufacture, use and/or disposal.

 

Understanding the Guidelines

 

There are certain key components of the Guidelines. They mandate verification of environmental claims with scientific evidence, ensuring only credible information is put forth in public domain. The Guidelines emphasize the importance of using terms like ‘green,’ ‘eco-friendly,’ or ‘cruelty-free’ only when they are supported by adequate, accurate, and accessible qualifiers and disclosures. This approach aims to create an informed environment for consumers to make purchasing decisions. Technical terms, such as Environmental Impact Assessment, should be used in a way that is understandable to consumers. Additionally, the Guidelines allow for aspirational or futuristic environmental claims, expanding their scope.

 

Key points of the Guidelines include:

 

  1. Prohibition against Greenwashing: No person to whom these guidelines apply shall engage in greenwashing.

 

  1. Substantiation of Environmental Claims: All environmental claims in advertisements must be backed by verifiable evidence and should not use generic terms like ‘clean,’ ‘green,’ or ‘eco-friendly’ without adequate qualifiers and substantiation.

 

  1. Adequate Disclosures: Environmental claims must be accurate and disclose all material information either in the advertisement or through a QR code, URL, or similar digital medium. Comparative claims must be based on verifiable and relevant data.

 

  1. Truthfulness and Accuracy: Environmental claims must be truthful and accurate, based on verifiable information from credible authorities or internal evidence.

 

  1. Clarity and Unambiguity: Environmental claims should be clear and unambiguous, specifying what terms like ‘green’ or ‘sustainable’ mean in the context of the product or service.

 

The Guidance Note appended to the Guidelines is crucial for shaping and implementing the Guidelines effectively. It includes broad concepts such as truthfulness and accuracy, fair and meaningful comparisons, and clarity and unambiguity, which support the Guidelines’ clauses in a beneficial manner. The Note helps contextualize greenwashing through topic-specific illustrations.

 

The implementation of these guidelines needs to be observed closely to be able to assess their impact and address the concerns of all stakeholders. There are certain foreseeable challenges to implementation. Primarily, the guidelines need to be introduced in a way that ensures consumers are aware of them. As long as the public is unaware of the prohibition of greenwashing, they may continue to support and facilitate the cycle of financial incentive to the product maker, at least in the short term, until the consequences for non-compliance become apparent. Additionally, smaller businesses may face financial burdens in meeting the level of substantiation required by the Guidelines.

 

Global Best Practices

 

The Guidelines are largely in line with the present global practice to combat greenwashing, such as the European Union’s Green Claims Directive (GCD) and the Federal Trade Commission’s Green Guide in the United States (FTC). However, it needs to be understood that the rationale behind bringing these guidelines in India is to curb a very specific kind of problem that plagues the Indian Market, that is the dominance of the unorganized sectors and low level of consumer literacy about environmental claims. To address these, it is rather beneficial that the Guidelines are more practical in their prohibition than giving a mere comprehensive recommendation.

 

India has adopted certain key characteristics from international practices on regulating greenwashing such as creating a consumer-centric disclosure of claims, scientific substantiation and penalties for non-compliance. However, there is still scope to advance these provisions by tailoring some of the unique aspects of regulations from other countries. For instance, Japan has an Eco-Mark Program where the government itself certifies products that meet their set standards. A similar program could simplify compliance and increase public trust. Another instance could be of the Australian Competition and Consumer Commission which conducts market sweeps to monitor compliance. Such a proactive monitoring mechanism could strengthen enforcement capabilities as well as make businesses more accountable. The guidelines of other countries are but a roadmap for enhancing the effectiveness of India’s Guidelines, however given its nascent stage it might be better to wait and observe their implementation and potential lacunae before introducing another layer of compliance.

 

Analysis

 

The Guidelines must be analysed in context of being the first in what they prescribe and the unique nature of the Indian market. Given this background, the Guidelines are bound to have a different impact on each stakeholder, depending on the capacity in which they are associated with the product being advertised. As a matter of policy, guidelines on greenwashing are essential to better protect consumers as well as bring the Indian standard at par with global practice. With such guidelines un force, companies that do have credibility to back their claims become more accessible to the public.

 

 

Economists have highlighted the inverse relationship between shareholder primacy, which focuses on profit maximization, and stakeholder theory, which advocates for balancing the interests of all stakeholders, including consumers. The responsibility of striking this balance falls on the producers, manufacturers, and service providers obligated under the Guidelines, making it a delicate task. From the consumer’s perspective, the guidelines are crucial to prevent misleading advertising and protect their best interests.

 

Conclusion

 

The Guidelines are a reflection of India’s commitment towards creating a safer and informed environment for the consumers in order to increase their trust in the market. The gap left by the absence of a regulation on greenwashing was a critical one, devoid of accountability and verifiability. While there is still scope for further additions to these guidelines in the form of mandating lifecycle assessment like under the EU’s GCD which could work towards enhancing credibility and making the entire process more transparent. In context of India, such an approach should either be held off till businesses build up their capacity to comply with the new guidelines or financial support to small businesses be provided in order to strain them financially, leaving them incapable of performing basic functions essential to their work. A key aspect of its effective implementation will be the extent of collaboration among stakeholders. The Central Authority must work closely with the multiple stakeholders involved, including certifying agencies, to streamline compliance and address practical challenges in a uniform manner. It is imperative to firstly observe the unfolding of these Guidelines and especially the consequences they have on both the consumers as well as the businesses and only then look at potential re-working.

 

Authors & Contributors

Partner(s):

Ramya Suresh

 

 

Associate:

Amitabh Abhijit