GREENWASHING- A CORPORATE FRAUD

INTRODUCTION

Greenwashing, quite an infamous concept, can be defined as the fraudulent practice of intentionally misleading the public by exaggerating or fabricating claims about a company’s environmental, social, or governance (ESG) performance.[1].

Those doing so exploit consumer trust and investor capital in order to boost brand image and profits without considering its aftermath[2]. It provides companies a way to continue expanding not just their businesses, but also polluting and other related harmful activities, all while deceiving the system, the public, the Government.

The term was actually coined for the first time in 1986 in an essay by environmentalist, then a student, Jay Westerveld.[3] During his stay at a hotel in Fiji, he noticed a contradiction in its operations. While it asked guests to reuse towels apparently for the planet’s sake, that would consequently, obviously save the hotel’s expenditure as well. However, the contradiction was that the hotel, located near sensitive island ecosystems, was in the middle of an expansion.

In his essay, he formally introduced the term ‘Greenwashing’, as a combination of ‘Green’ and ‘whitewashing ’, to describe this deceptive marketing strategy. Regulators and legal experts increasingly classify these false sustainability claims as corporate and financial fraud.

The concept gained massive recognition for two main reasons: –

• Rise in Eco-friendliness: In the late 20^th century, there was an increase in levels of environmental awareness among consumers, which made companies realize being eco-friendly could be highly profitable for them.
• Corporate PR Strategies: Major corporations spent millions on advertising campaigns to project themselves as environmentally friendly instead of truly altering their polluting business models.

As demand for sustainable options emerges on a global level, consumers are now increasingly favouring products that claim to be eco-friendly. This change is not unnoticed by companies, who have thus started branding their products as ‘green’, ‘sustainable’ or ‘eco-conscious’.

However, beyond this glossy, hi-fi, vibrant packaging and marketing, the darker trend of deceptive techniques like greenwashing is coming to light. This practice not only misleads consumers but also compromises genuine efforts towards sustainability for the greed of higher profits.

WAYS OF GREENWASHING

It is not possible to define greenwashing as one specific deceptive technique, but it may be a combination of two or more fraudulent strategies, such as: –

• Greenlighting[4]: Spreading positive PR about some minor eco- friendly initiative as a distraction from a major, massive environmental threat.
• Greenhushing: Intentionally hiding or underreporting relevant information to escape regulatory guidelines and authorities.
• Greenshifting: Transferring the blame for pollution and waste directly onto consumers using marketing campaigns.
• Greenrinsing: Postponing target dates for ESG goals just before they are due to avoid accountability.
• Vague terminologies[5]: Using broad, undefined terms like ‘all-natural’, ‘eco-friendly’, or ‘sustainable ’ that have no specific legal definitions.
• Irrelevant claims: Openly lying about an environmental benefit, such as a company advertising its plastic packaging as “lead-free” when the use of lead in such packaging is already prohibited under existing regulations.

WHY IS GREENWASHING A PROBLEM?

Greenwashing has wide-ranging negative effects not just on the environment, but on consumers as well. By making misleading environmental claims, businesses deceive consumers who truly seek sustainable products, while at the same time undermining authentic environmental initiatives. As a result, greenwashing not only influences consumer decision-making but also poses a broader threat to environmental safety.

For the Consumer[6]It is unethical; it misleads consumers who actively seek environmentally friendly products. Also, green products are often sold at a higher price and may be fraudulently expensive for such consumers.

This is particularly significant because sustainability increasingly influences purchase decisions. A late 2022 survey found that over 35% of Australian consumers always consider sustainability when shopping, while 41% were willing to pay extra for ethical and sustainable products. Globally, more than one-third of consumers are prepared to pay a premium for environmentally friendly alternatives. As a result, companies may use greenwashing to attract environmentally conscious consumers and increase profits.

For the environment: Greenwashing also undermines efforts to address major environmental challenges such as climate change, plastic pollution, air pollution, and biodiversity loss.[7]. By unknowingly supporting greenwashed products or services, consumers may inadvertently contribute to environmental damage.

At the same time, genuinely sustainable businesses often face an unfair disadvantage, as they must compete with companies that rely on misleading environmental claims to attract consumers.

REGULATORY FRAMEWORK IN INDIA

Till 2024, India did not have a dedicated regulatory framework specifically addressing greenwashing. The guidelines for prevention of Misleading Advertisements, 2022 mainly dealt with general misleading advertisements and did not adequately address environmental claims. To bridge this gap, the CCPA issued draft guidelines on 20 February 2024, with the purpose of regulating and preventing greenwashing.[8].

During the public consultation process, the Citizen Consumer and Civic Action Group (CAG) submitted recommendations to strengthen the proposed framework.

These guidelines are presently known as the Guidelines for Prevention and Regulation of Greenwashing or Misleading Environmental Claims.

This regulatory framework[9] helps to combat greenwashing and protect consumers and investors from misleading environmental claims. It is led by the CCPA (Central Consumer Protection Authority) and ASCI (Advertising Standards Council of India).

1. The Guidelines prohibit the use of terms such as “green”, “eco-friendly”, and “sustainable” unless backed by accessible evidence, independent studies, or third-party certifications; and also prevents concealment of negative environmental impacts.

Any violation of the guidelines may invite action by the Central Consumer Protection Authority (CCPA) under the Consumer Protection Act, including fines ranging from Rs.10 lakhs to Rs. 50 lakhs for repeated offences, as well as criminal penalties that may extend from two to five years of imprisonment.

2. The ASCI regulates environmental claims in advertisements, requiring them to be transparent, substantiated, and free from exaggeration.
3. SEBI has introduced strict requirements for Green Debt Securities, including continuous monitoring of environmental impact, third-party verification of fund usage, and restrictions on misleading sustainability claims. It also mandates significant investment in companies following the Business Responsibility and Sustainability Reporting (BRSR), framework for ESG mutual funds.
4. Similarly, the RBI’s Green Deposits Framework requires banks to adopt board-approved financing policies and obtain third-party assessments to ensure funds are used for genuinely green projects.
5. Certain sector-specific standards have also been set. The FSSAI regulates sustainability-related claims in food products and packaging, particularly labels such as “organic” and “natural”. Additionally, Ecomark, administered by the Bureau of Indian Standards (BIS), certifies products that meet prescribed environmental standards, helping ensure reliable ecological labelling.

WAY FORWARD

Mere regulation is not sufficient to eliminate greenwashing; a comprehensive approach involving regulators, businesses, and consumers is essential. Some steps that can be followed are explained as follows: –

1. Stronger regulatory framework: The government should try to focus on creating clearer and more comprehensive regulations on environmental safety. Terms like “green”, “sustainable”, and “eco-friendly” must be clearly defined so as to avoid ambiguity and prevent misuse.
2. Enhanced disclosure requirements: It must be made mandatory for businesses to provide clear, genuine, and accessible information regarding the environmental impact of their products and operations.
3. Stricter penalties for misleading claims: Imposing stricter penalties and enhanced legal consequences on the guilty can act as a deterrent against greenwashing and encourage compliance with environmental standards.
4. Consumer awareness and education[10]It is the consumer’s duty to be well aware of market trends and marketing techniques that are highly likely to influence their buying decisions. So, they must consider the sustainability of product or service before buying it or availing them respectively.
5. Responsible ESG reporting: Companies should adopt standardized ESG reporting frameworks and ensure that their sustainability commitments are measurable, transparent, and regularly reviewed.
6. Greater role of Consumer Protection Authority: Regulatory bodies such as the CCPA should more actively regulate environmental advertisements and marketing strategies, and penalise those who violate consumer trust through deceptive claims.

Author(s) Name: Riddhima Bhattacharya (Symbiosis Law School, Pune)

References:

[1] MR Mim and M Mim, ‘Greenwashing as Corporate Fraud: Evidence from Sustainability Reporting in Bangladesh’.

[2] Abbie Staiger, ‘Greenwashing: Misleading Consumers for Profit’ (ACFE Insights Blog, January 2025) <https://www.acfe.com/acfe-insights-blog/blog-detail?s=greenwashing-misleading-consumers-for-profit>accessed 13 June 2026. (acfe.com)

[3] Courtney Lindwall, ‘What Is Greenwashing?’ (Natural Resources Defense Council, 9 February 2023) <https://www.nrdc.org/stories/what-greenwashing> accessed 13 June 2026.

[4] University of the West of England Bristol, ‘Greenwashing’ <https://www.ube.ac.uk/whats-happening/articles/greenwashing/> accessed 14 June 2026.

[5] Rebecca Huntley, ‘A Beginner’s Guide to Greenwash and Four Ways to Avoid Falling for It’ (The Conversation, 25 October 2024) <https://theconversation.com/a-beginners-guide-to-greenwash-and-four-ways-to-avoid-falling-for-it-241585> accessed 15 June 2026.

[6] Murielle Weyers, ‘What Is Greenwashing and Why Is It a Problem?’ (Anávo) <https://www.anavo.com/learn/what-is-greenwashing-and-why-is-it-a-problem/> accessed 15 June 2026.

[7] Ibid

[8] Citizen Consumer and Civic Action Group, ‘How India’s Greenwashing Guidelines Can Protect Consumers’ <https://www.cag.org.in/blogs/how-indias-greenwashing-guidelines-can-protect-consumers> accessed 15 June 2026.

[9] Shardul Amarchand Mangaldas & Co, ‘Greenwashing: An Overview’ (S&R Associates) <https://www.snrlaw.in/greenwashing-an-overview/> accessed 15 June 2026.

[10] United Nations, ‘Greenwashing’ <https://www.un.org/en/climatechange/science/climate-issues/greenwashing> accessed 16 June 2026.