Greenwashing: The charade around ESG

What makes greenwashing particularly nefarious is that it preys on the consumer’s genuine desire to make responsible choices.

Greenwashing is the art of packaging products or corporate practices as environmentally friendly when, in reality, they are nothing more than eco-hogwash. With rapid industrialisation, fast-growing consumption and newly developing environmental, social and governance (ESG) regulations, India is no stranger to greenwashing. What makes greenwashing particularly nefarious is that it preys on the consumer’s genuine desire to make responsible choices. From corporate giants to local businesses, many have exploited this desire by affixing green labels to their products and services, creating an illusion of ecological mindfulness. Yet, the reality often tells a different story.

Greenwashing serves as a glaring betrayal of the fundamental principles underlying ESG initiatives. ESG is designed to promote genuine corporate responsibility, sustainability and accountability. However, when companies engage in greenwashing by misleadingly presenting themselves as environmentally friendly or socially responsible, they undermine the very essence of ESG. This deceit erodes trust among investors, consumers, and stakeholders, sowing scepticism about the authenticity of corporate commitments. Moreover, it diverts attention and resources away from enterprises genuinely striving to make meaningful positive impacts.

Rising Demand For Green Products

The increasing Indian consumer demand for ‘eco-friendly or green products’ is an incentive for companies to appear to be so. Consumers often find themselves susceptible to making purchasing choices rooted in deceptive or incomplete information, thereby posing potential harm to the environment. There is lack of stringent regulations governing environmental claims and eco-labelling. This regulatory gap provides companies with the leeway to make deceptive assertions about their products’ environmental virtues, allowing greenwashing to flourish unchecked. Genuine sustainability practices can be expensive to implement, tempting companies to opt for greenwashing as a more cost-effective alternative, thereby hindering genuine environmental progress. The limited enforcement capability of regulators and weak consumer protection measures by regulations embolden companies to indulge in greenwashing, as they perceive minimal risk of consequences for their actions.

Furthermore, a lack of consumer awareness compounds the problem. Many Indian consumers remain unaware of greenwashing and how to identify it, inadvertently providing companies with the freedom to engage in deceptive practices without facing consequences.

Consider the case of the Indian textile industry, notorious for its water-intensive and polluting processes. Some companies, in an attempt to ride the sustainability wave, brandish certifications that claim their products are “green” and “organic”. Yet, majority of these claims are little more than marketing gimmicks, with the actual practices falling far short of eco-friendly standards. Water pollution continues unabated, and hazardous chemicals are routinely used, all under the guise of sustainability.

Across various sectors, greenwashing concerns rear their head. In the energy sector, even renewable energy companies can grapple with complexities when measuring and conveying the true environmental impact of their operations. The real estate industry isn’t immune, with greenwashing manifesting in claims of sustainable building practices and energy-efficient designs that may not align with the actual environmental impact of construction projects and building materials. Consumer goods and packaging companies may employ greenwashing tactics through vague or unsubstantiated claims of eco-friendliness and recyclability. The food and agriculture sector isn’t exempt, as false organic farming practices, animal welfare claims and eco-friendly packaging claims contribute to the problem. Similarly, in the automobile and transportation sector, companies may engage in greenwashing by promoting fuel efficiency or low emissions without providing adequate evidence or transparency. The EV sector forgets its green paradox that it uses electric chargers powered by fossil fuel supply chain and many more challenges it still has.

Regulations To Combat Greenwashing 

Regulatory systems in India are making efforts to curb these. The Consumer Protection Act of 2019 officially designates greenwashing as an unjust trade practice. Furthermore, the Bureau of Indian Standards (BIS) operates a green product certification scheme, overseeing products labelled as eco-friendly. Notably, green labels such as Energy Star and EcoMark are awarded to products that adhere to strict criteria encompassing energy efficiency, water conservation and sustainable raw material sourcing. To bolster these efforts, the Advertising Standards Council of India (ASCI), an industry body for self-regulation, is collaborating with the department of consumer affairs in establishing a dedicated task force, aiming to combat greenwashing and deter brands from making false pro-environment claims across various sectors.

Stricter guidelines, enhanced transparency and tough financial penalties for false claims are urgently needed. Regulatory agencies should collaborate with independent auditors to verify environmental claims made by companies. Moreover, public awareness campaigns are crucial to educating consumers about the difference between true sustainability efforts and mere greenwashing. But then unless the regulatory processes make it simpler for consumers to complain about any greenwashing and for quicker grievance redressal, it won’t be able to solve for building consumer trust. It’s time for businesses to walk the talk and for the regulators to enforce the standards necessary for a genuinely sustainable future. Anything less is a betrayal of our planet and the principles of ESG itself.

Srinath Sridharan is author, policy researcher and corporate advisor. Twitter: @ssmumbai. Views are personal, and do not represent the stand of this publication.