Authored By: Aaryan Pandit
Chanakya National Law University
Abstract
Greenwashing has gained more attention as Environmental, Social, and Governance (ESG) frameworks have become a rising concern in India’s corporate landscape. Greenwashing is the practice of making false or inflated environmental claims appear more environmentally responsible than it actually is. Although there has been introduction of rules such as SEBI’s Business Responsibility and Sustainability Reporting (BRSR)[1] framework and guidelines under Companies Act, 2013 [2]and the Consumer Protection Act, 2019[3], there still is not a proper legal provision for dealing with greenwashing. This article examines how Indian law currently deals with greenwashing, highlighting important gaps in enforcement and clarity of the law, compares international approaches, and suggests reforms to improve reliability of sustainability claims and strengthen accountability of companies.
Introduction
Environmental, Social, and Governance (ESG) concerns have started to play a more serious role in how businesses are regulated in India. What used to be voluntary goals are now part of official requirements. One of the major steps has been SEBI’s introduction of the Business Responsibility and Sustainability Reporting (BRSR) framework, which applies to the top 1,000 listed companies.
As ESG reporting becomes more common, companies are expected to show that they act responsibly. These disclosures affect how the public and investors view them. This shift has led to a new problem that many companies are trying to look more sustainable than they really are.
This is known as greenwashing. It happens when a company makes environmental claims that are false, overstated, or not backed by proper facts. For example, they may use vague terms or show only selected data to appear more responsible. These practices make it hard for investors and consumers to trust the ESG reports.
This article looks at how Indian law currently deals with greenwashing, points out major gaps in enforcement and clarity, compares how other countries have approached the issue, and suggests legal reforms to improve how sustainability claims are handled.
Understanding Greenwashing
Greenwashing is the practice of using false, exaggerated, or unsupported environmental claims by companies to appear more environmentally responsible than they actually are. Although the term was first used in the context of marketing, it now applies to formal ESG disclosures, investor documents, and other forms of public communication.
Companies may engage in greenwashing for reputational advantage, to attract sustainability-focused investors, or to meet the expectations of regulators and consumers without undertaking actual environmental reform.
Common forms of greenwashing include:
- Using vague or unverified terms like “eco-friendly” or “climate-conscious” without providing evidence to support these claims.
- Selective disclosure of only positive environmental data while omitting harmful environmental impacts.
- Use of misleading labels or imagery falsely suggesting approval or certification by third party.
- Falsely presenting a company as carbon neutral by depending on carbon offsets rather than making genuine efforts to reduce its own emissions.
For example, a fashion brand might highlight its use of recycled materials in a single product line while the majority of its products are sourced from environmentally harmful suppliers. Similarly, an FMCG brand may use green-coloured packaging or plant-based messaging, even though it continues to produce large amounts of plastic waste or carbon emissions.
The Central Consumer Protection Authority (CCPA) recognised the growing misuse of environmental claims and, in 2024, issued guidelines requiring companies to substantiate all environmental marketing claims with scientific evidence or verified certifications. SEBI, too, cautioned against cherry-picking favourable data in a 2023 circular, particularly in the context of green-labelled financial instruments.
Internationally, the OECD has observed that more than half of all environmental claims are either vague or cannot be verified, and around 40 percent have no supporting evidence. Greenwashing, therefore, is a serious policy and regulatory concern, as it weakens the reliability of sustainable finance and reduces public trust in environmental disclosures.
India’s Legal Framework Against Greenwashing
Indian company law sets out certain duties when it comes to corporate reporting and director conduct, but the rules aren’t always clear-cut when applied to greenwashing. Under the Companies Act, 2013, Section 134 requires the Board’s Report to mention efforts like energy conservation and how the company is handling risk. If this kind of information is wrong or misrepresented, the company can be held responsible under existing provisions. Section 166 adds that directors are expected to act in good faith and in the best interest of all stakeholders. So if they allow ESG claims that are clearly misleading, and those claims lead to reputational damage or financial loss, that can be seen as a breach of duty.
On the consumer side, the Consumer Protection Act, 2019 gives regulators more direct tools. It defines a misleading ad as one that gives a false impression or leaves out key facts. The Central Consumer Protection Authority (CCPA) is allowed to step in, stop such claims, and fine the companies involved. In 2024, the CCPA released a set of greenwashing guidelines that make things stricter. They say that environmental claims must be backed by solid proof, either through scientific data or third-party checks. Companies can’t just call a product “carbon neutral” or “eco-safe” unless they have something real to support it.
SEBI’s ESG Reporting Framework.
SEBI is one of the main bodies in charge of ESG reporting in India. It handles this mostly through the LODR Regulations and something called the BRSR framework. In 2023, it launched the BRSR Core, which asks companies to share details about their environmental practices. That includes how much energy and water they use, how they deal with waste, and what their emissions look like. To make sure this information can be trusted, SEBI has introduced outside checks. The top 250 listed companies have to do this starting in 2024–25, and the top 1,000 will join by 2026–27.
Even though SEBI has warned companies not to only share positive numbers or make ESG claims that can’t be backed up, there is no actual definition of greenwashing in its rules. There are also no specific penalties under SEBI laws or the LODR regulations that deal with companies who exaggerate or twist their sustainability performance. This leaves a gap in the law that makes it hard to act unless there is a very clear case of wrongdoing.
Advertising Standards Council of India (ASCI).
ASCI[4] is a self-regulatory body that influences how companies advertise their products. In 2024, it updated its rules to include clearer standards for green claims. These updates require that any environmental claims should have proper facts to back it up. ASCI does not have the authority to impose penalties, but companies follow its guidelines because they don’t want to hurt their reputation.
Even with rules like these, India still has a long way to go in tackling greenwashing. One problem is that there isn’t any law that clearly defines what greenwashing actually is. Without that, regulators have to decide things on a case-by-case basis, which leads to confusion. Another issue is that several different authorities are involved, but they don’t really work together in a structured way. The penalties that exist are vague and weren’t really written for ESG-related problems. Also, there’s no proper setup for people to report false claims or get ESG reports checked. All of this makes it easier for companies to say the right things without doing much. To fix this, India needs a proper law that makes the rules clear and gives people a way to hold companies accountable.
Compliance Issues and Gaps
While India has made progress in regulating ESG disclosures, several structural and legal gaps continue to weaken its response to greenwashing. These issues create loopholes in enforcement, reduce investor confidence, and allow companies to misuse sustainability claims without meaningful consequence.
No statutory definition of greenwashing.
There is no formal definition of greenwashing in Indian law. This absence makes it difficult to draw legal distinctions between poor-quality ESG reporting and deliberate misrepresentation. Without a defined standard, enforcement bodies must rely on subjective interpretation, which reduces consistency and weakens deterrence.
Limited applicability of ESG mandates.
SEBI’s ESG framework applies only to the top 1,000 listed companies. Thousands of medium and large unlisted companies, many with significant environmental footprints, are not subject to mandatory ESG reporting or third-party assurance. This leaves a large part of the corporate sector outside the reach of sustainability compliance requirements.
Lack of standardisation in assurance.
Although SEBI has introduced third-party assurance for certain ESG metrics, there is no uniform method or accreditation process for assurance providers. As a result, the quality and credibility of disclosures vary widely. Companies may select verification agencies that offer more favourable assessments, with limited regulatory scrutiny.
Fragmented regulatory authority.
SEBI, the CCPA, and ASCI all exercise oversight over different aspects of ESG disclosures, advertising, and consumer protection. However, there is no coordinated mechanism for information sharing, joint investigations, or integrated enforcement. This fragmentation allows companies to exploit jurisdictional gaps and avoid accountability.
Insufficient penalties for ESG misrepresentation.
Current laws contain general provisions for misleading statements, but they do set ESG-specific penalties that reflect the seriousness or scale of greenwashing. As a result, the commercial benefit of making bold, unverifiable claims often outweighs the legal risk involved.
Lack of judicial precedent.
Indian courts and tribunals have not yet developed any meaningful judicial interpretation of greenwashing. This limits regulatory clarity and makes the scope of lawful ESG claims unclear. The absence of precedent also discourages public interest litigation and weakens investor confidence.
Unregulated voluntary claims.
Many companies make sustainability-related claims in advertising, press releases, investor briefings, or social media, which fall outside formal ESG disclosure requirements. These voluntary representations are not subject to verification or regulatory scrutiny. As a result, companies can present an image of environmental responsibility without being held to enforceable standards.
Together, these gaps weaken the effectiveness of India’s ESG framework. Without legal clarity, proper coverage, and coordinated enforcement, greenwashing will remain a persistent and difficult challenge.
Global Developments and Lessons for India
As India continues to shape its ESG and sustainability disclosure frameworks, regulatory models from other jurisdictions offer valuable guidance. These approaches highlight both the importance and complexity of addressing greenwashing in law and practice.
European Union.
The European Commission introduced the Green Claims Directive to set stricter rules around how companies in the European Union use environmental claims. It said that companies would need to show evidence for any such claim and have it reviewed by an outside body within a set time period. It also aimed to stop the use of general terms like “climate neutral” unless the meaning behind them was clearly explained.
Although the directive was withdrawn in 2025 after resistance from political groups and industry, its structure remains useful for comparison. It showed how having rules, external review, and actual consequences could help make environmental communication more honest. At the same time, the outcome pointed to how difficult it can be to create laws that both protect consumers and allow companies room to adjust.
United States.
In the United States, the Securities and Exchange Commission (SEC) has taken steps to bring climate-related risks and ESG disclosures within the ambit of securities law. The 2022 Climate Disclosure Proposal introduced rules requiring companies to disclose greenhouse gas emissions, climate-related risks, and governance structures related to sustainability.
Although portions of the proposal were later rolled back, the SEC has pursued enforcement actions under existing anti-fraud provisions. In one prominent case, a major asset management firm was fined for marketing certain funds as ESG-compliant without conducting adequate internal due diligence. This shows that regulators can use existing legal tools to address greenwashing even before new ESG-specific laws are enacted.
OECD Guidelines.
The Organisation for Economic Co-operation and Development (OECD) has published extensive guidance on tackling greenwashing, particularly in consumer protection and financial markets. Its 2022 report found that more than 50 percent of environmental product claims lacked proper substantiation. The OECD recommends legal definitions of greenwashing, clear regulatory coordination, and mandatory verification of claims.
The organisation has also criticised ESG rating agencies for inconsistent and non-transparent methodologies. It has urged regulators to ensure that ESG scores used in investment decision-making are based on reliable data and standardised criteria, rather than reputation-based or narrative-driven inputs.
Australia and New Zealand.
Both countries have applied consumer protection law to environmental marketing. Regulators in Australia and New Zealand have issued warning letters and taken enforcement actions against businesses for making unsubstantiated claims such as “100% green” or “carbon neutral,” especially when these claims could not be verified through independent data or were based on selective reporting. These actions show that even without separate ESG legislation, greenwashing can be addressed through existing consumer protection frameworks, provided regulators are proactive.
Key Lessons for India.
- Mandatory verification improves credibility. Requiring scientific evidence and third-party assurance for environmental claims, as proposed in the EU, helps reduce false disclosures and increases trust.
- General laws can be used creatively. The US SEC and Australia’s consumer regulators demonstrate that existing anti-fraud and advertising laws can be adapted to ESG enforcement when specific ESG statutes are not yet in place.
- Definitions and coordination matter. The OECD experience shows that clarity in terminology and collaboration among regulatory agencies are essential to close enforcement gaps and avoid contradictory standards.
- Penalties must be proportional and public. Many international regulators impose fines, public disclosure of violations, and even investor warnings. These consequences act as effective deterrents and improve market discipline.
India can benefit from these global approaches by combining tailored legal reforms with improvements to enforcement strategy, inter-agency collaboration, and assurance mechanisms. In doing so, it can align its ESG regime with international best practices while ensuring that sustainability claims made in the Indian market are both credible and legally accountable.
Recommendations
India’s regulatory response to greenwashing needs to evolve from broad, fragmented measures into a more cohesive and enforceable legal framework. Based on the analysis above, the following reforms are recommended:
Introduce a statutory definition of greenwashing.
SEBI or the Ministry of Corporate Affairs should define greenwashing in law. This definition should cover false, vague, or unverifiable claims relating to environmental impact, whether in formal ESG disclosures or public statements. A clear definition will reduce interpretive ambiguity and provide a benchmark for enforcement and compliance.
Expand mandatory third-party assurance.
While SEBI’s BRSR Core framework introduces third-party assurance for some companies, the requirement should be extended to all listed entities above a specified turnover or environmental risk threshold. The government should also accredit ESG assurance providers and standardise assurance methodologies to ensure consistency and reliability.
Establish ESG-specific penalties.
Amend the SEBI Act and LODR Regulations to include penalties specifically for false or misleading ESG disclosures. These penalties should be proportionate to the market impact of the misrepresentation and include both financial sanctions and possible liability for directors or key managerial personnel responsible for ESG reporting.
Create a central ESG disclosure registry.
SEBI should maintain a public portal that houses verified ESG disclosures, third-party assurance reports, and information on enforcement actions related to greenwashing. Such a portal would improve transparency, aid investor decision-making, and serve as a reference point for verification of claims made across platforms.
Extend whistleblower protections to ESG.
SEBI’s existing whistleblower framework should be expanded to cover ESG fraud. Employees, analysts, and auditors who report greenwashing or related misconduct should be protected from retaliation and incentivised to come forward.
Formalise regulatory coordination.
Establish a formal coordination mechanism among SEBI, CCPA, ASCI, and the Ministry of Corporate Affairs to address ESG issues. A joint task force could standardise definitions, share data, issue joint advisories, and avoid overlapping or conflicting actions.
Align Indian ESG standards with global benchmarks.
India should continue aligning its disclosure frameworks with international standards such as those developed by the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI). This will ensure global comparability and strengthen investor confidence in Indian markets.
Conclusion
ESG has become an important part of how companies are expected to operate. At the same time, greenwashing has turned into a serious concern. It affects not just how much the public trusts what companies say, but also how regulators and investors respond. India has made progress by putting reporting rules in place through SEBI and by including some ESG ideas in laws like the Companies Act and the Consumer Protection Act. Still, the way greenwashing is handled is far from complete.
There is no clear legal meaning for greenwashing yet. The rules for checking ESG data are uneven, and different regulators handle different parts without working together. Because of this, it is easy for companies to make claims that sound good without facing real consequences. Looking at how other countries have approached this shows that strong rules, checks that actually happen, and real consequences can make a big difference.
India now has a chance to make its ESG system stronger. If it brings in better laws and makes sure they are properly applied, it can create a setup that is fair, trustworthy, and effective. This would not only improve company behaviour at home but also show that India is serious about being part of the global effort toward honest and sustainable business.
Reference(S):
[1] Securities and Exchange Board of India, Business Responsibility and Sustainability Reporting by Listed Entities – BRSR Core (Mar. 22, 2023), https://www.sebi.gov.in/legal/circulars/mar-2023/business-responsibility-and-sustainability-reporting-by-listed-entities-brsr-core_68836.html.
[2] The Companies Act, No. 18 of 2013, § 134, § 166, India Code (2013).
[3] The Consumer Protection Act, No. 35 of 2019, §§ 2(28), 21, India Code (2019).
[4] Advertising Standards Council of India, Guidelines for Advertisements Making Environmental/Green Claims (Apr. 2024), https://ascionline.in.
