Too Green to be True?

Greenwashing in its Many Avatars…

• Misleading or vague claims – The use of broad, ‘green jargon’ such as ‘eco-friendly’ or ‘sustainable’, but without defining the relevant benchmarks or providing evidence of compliance. The fashion industry frequently markets supposedly ‘recycled’ materials, while food and beverage companies use catch-all terms like ‘organic’ and ‘natural’. H&M's 2022 ‘Conscious Collection’ campaign drew ire for claiming that some of its items had a greater (positive) environmental impact than their ‘standard’ equivalents. Low-cost carrier Ryanair’s claims, in 2020, that it was Europe’s lowest-emissions airline were challenged for want of evidence. The UK Advertising Standards Authority ruled it misleading, citing a lack of industry-wide comparisons and missing emissions data. Paint-manufacturers, similarly, tend to  exaggerate the eco-friendliness of their low-VOC paints, without offering scientific backing.

• Hidden trade-offs – Emphasising the positive aspects of a product or a company’s operations while concealing or downplaying significantly negative environmental impacts elsewhere. Some tech companies promote energy-efficient devices but downplay the carbon-intensive manufacturing processes that go into them. Similarly, electric vehicle (EV) manufacturers promote zero-emission driving while omitting the environmental consequences of lithium mining and battery disposal. Globally, as well as in India, leading players in the energy sector have positioned themselves as champions of renewable energy, even as they continue to expand their coal, oil and gas operations.

• Outsourced emissions – In an era of net-zero targets, more and more companies are ‘outsourcing’ their emissions, either to vendors or by shifting high-carbon production to third-party suppliers in countries with less stringent environmental regulations. Zara and Nike tout their sustainability initiatives while continuing to manufacture in regions with lower compliance standards.

• False carbon neutrality claims – Instead of actually cutting emissions, many businesses rely on carbon offsets to supposedly meet their ‘targets’ – something that the energy sector is notorious for doing. For instance, while pledging to achieve net-zero by 2050, Shell continues to expand its fossil fuel operations.

• Selective disclosure – Cherry-picking positive environmental achievements while concealing negative impacts. For example, in 2015, Volkswagen marketed its diesel vehicles as low-emission, but it was later revealed that VW had installed devices to bypass emissions tests. This resulted in hefty fines and  significant reputational damage. In the same vein, many companies report reductions in their direct (scope 1 & 2) emissions while omitting indirect (scope 3) emissions, which often make up the largest share of their carbon footprint. At times, even while reporting  the scope 3 numbers, they may disclose only a few selected categories (of the 15 in total) or fail to indicate the boundaries within which their scope 3 emission are confined.

Global regulations on greenwashing…

Regulations on green claims vary in scope and enforcement across the globe. Countries like Australia, the UK, Canada and the US have issued guidance under their consumer protection laws to ensure environmental claims are truthful and substantiated. The EU is advancing stricter frameworks, including the proposed Green Claims Directive (GCD) and Ecodesign for Sustainable Products Regulation (ESPR), which will set mandatory substantiation requirements. The GCD, expected to be adopted by early 2026, will require companies to provide verifiable proof for environmental claims, addressing widespread greenwashing. Once enforced, penalties for non-compliance could include fines of up to 4% of annual turnover, exclusion from public funding, and public naming and shaming. Meanwhile, the UN is working to create a common forum to evaluate the impact and structure of sustainability standards.

…and the Indian context

India currently lacks a dedicated greenwashing law but it has taken a big step toward corporate sustainability regulation through the Business Responsibility and Sustainability Reporting (BRSR) framework. Mandated by SEBI, the top 1,000 listed companies are required to disclose their sustainability efforts, integrating multiple laws into a unified compliance structure. The framework acts as an ‘Aadhaar-like’ identifier for corporations, ensuring a degree of transparency and consistency across disclosures. However, even with the new reporting requirements, misleading sustainability claims persist, and it may be a while before the BRSR achieves its intended outcome. Further, while consolidating various regulations, it creates new challenges in terms of the sheer volume and scope of data that must be reported.

While the BRSR is a step forward, it remains a work in progress. There are challenges around both interpretation and enforcement, and in many cases, meaningful reporting remains elusive. Partly, this is because many organisations continue to approach ESG disclosure with a minimal-compliance mindset, making vague commitments and engaging in selective data sharing. Without a stronger carrot and stick approach, misleading disclosures will persist. To effectively curb greenwashing and drive genuine sustainability action, what is required is stricter penalties, streamlined reporting structures and expanding the BRSR’s coverage beyond the top 1,000 listed firms.

The Business Case Against Greenwashing

Greenwashing may bring short-term benefits, but its long-term consequences can be severe. Misleading sustainability claims undermine consumer trust, making it harder for genuinely responsible businesses to stand out and discouraging conscious choices. With regulatory scrutiny intensifying, companies face growing financial, reputational and litigational risks. Moreover, ESG-focused investors prioritise transparency, meaning that businesses that are caught greenwashing risk divestment, exclusion from ESG funds and declining valuations. As financial institutions and governments tighten their compliance requirements, companies with weak sustainability credentials may struggle to secure funding. While deceptive marketing might bring some gains, stricter oversight will inevitably expose misleading claims. In contrast, businesses with verifiable ESG commitments will build long-term resilience and competitive strength.

Avoiding Unintentional Greenwashing: Best Practices

Even businesses with genuine sustainability commitments can inadvertently misrepresent their efforts. Some best practices to ensure transparency and credibility include the following:

• Set clear and measurable goals: Sustainability targets must be well-defined, achievable and consistently disclosed across all reporting platforms. Aligning targets with recognised standards such as SBTi or the SDGs enhances credibility.

• Ensure consistency in reporting: To prevent discrepancies that might undermine trust, sustainability disclosures – across annual reports, investor presentations and corporate websites – must be uniform.

• Adopt recognised ESG frameworks: Structured and credible reporting requires adherence to established frameworks. Listed companies should align with the BRSR, while unlisted firms can follow the GRI (Global Reporting Initiative) or Integrated Reporting. Outward-facing businesses should consider the TCFD (Task Force on Climate-Related Financial Disclosures).

• Disclose challenges honestly: Sustainability transitions are complex, particularly in the early years. Instead of presenting an overly optimistic narrative, companies should acknowledge gaps and outline corrective actions, fostering authenticity and trust. In the Indian context, BRSR reporting should honestly cover both, genuine achievements and any shortfalls. This has the benefit of ensuring that, even when regulators come across discrepancies, they are likelier to help remedy the situation than to impose penalties.

• Seek third-party validation: Independent verification, such as ISO 14001 certification or third-party audits, strengthens ESG credibility. Self-certification lacks objectivity and may not withstand scrutiny. As Anthesis, a global ESG advisory, argues, a truly ‘carbon neutral’ product requires rigorous carbon footprint calculations, SBTi alignment, high-quality offsets and third-party-audited data. Given the huge variability in certification standards, companies must carefully select credible frameworks to maintain transparency and consumer trust.

• Engage the supply chain: Sustainability efforts should extend beyond direct operations to include suppliers. Setting Scope 3 emission reduction targets without supplier involvement can create compliance risks and reporting inconsistencies.

• Avoid green marketing traps: Organisations must prioritise substantive sustainability commitments over superficial marketing tactics. Vague claims like ‘eco-friendly’ must be supported by specific, verifiable data to avoid misleading consumers.

• Maintain stakeholder trust: Continuous engagement with investors, regulators, NGOs and customers ensures alignment with evolving expectations. Regular feedback collection and benchmarking against industry best practices can further strengthen a company’s ESG strategy.