34  Greenwashing and the Integrity of ESG Claims

ImportantLearning Objectives

You will be able to:

  1. Define greenwashing and distinguish it from ordinary marketing and from honest aspiration.
  2. Identify the recurring forms a misleading environmental or social claim takes.
  3. Explain the legal exposure a claim creates under Indian consumer, securities and disclosure law.
  4. Describe the substantiation a claim requires before it is made.
  5. Evaluate a set of claims, determine which can be defended, and recommend what should be said instead.

34.1 Introduction

Module V closes where its subject becomes a question of honesty. Chapters 29 to 33 described obligations, disclosures, risks and programmes. This chapter asks what a firm may truthfully say about them.

Greenwashing is the practice of conveying a misleading impression about the environmental or social characteristics of a company, a product or an investment (Anne T. Lawrence & James Weber, 2020). Two features of that definition matter. The test is the impression conveyed, not the literal accuracy of each statement, which connects directly to Chapter 9’s treatment of the half-truth. And the misleading may be unintentional, arising from enthusiasm, from a marketing team working without data, or from a claim that was true when written and has not been revisited.

The subject has moved from reputation to law. A claim about a product engages consumer protection; a claim to investors engages securities regulation; a claim in a sustainability report engages disclosure obligations. A manager who treats environmental marketing as ordinary puffery is working from an outdated understanding of the exposure.

flowchart TD
    A["<b>A claim is proposed</b>"] --> B{"Is it specific enough<br>to be tested?"}
    B -->|"No"| X["<b>Do not make it</b><br>vague claims cannot be<br>defended, only withdrawn"]
    B -->|"Yes"| C{"Is the substantiation<br>held now, in writing?"}
    C -->|"No"| X
    C -->|"Yes"| D{"Does it cover the whole<br>product or only a part?"}
    D -->|"Part"| E["<b>State the scope</b><br>on the face of the claim"]
    D -->|"Whole"| F{"Would the audience<br>understand it as we do?"}
    E --> F
    F -->|"No"| X
    F -->|"Yes"| G["<b>Make it, and diarise<br>the review</b>"]
    style G fill:#e8f5e9,stroke:#388E3C
    style X fill:#ffebee,stroke:#C62828

34.2 The Recurring Forms

Misleading claims take a small number of shapes. Naming them is most of the work of recognising them.

NoteHow Claims Mislead
Form What it looks like
The hidden trade-off A product is promoted on one attribute while a larger impact goes unmentioned, such as recyclable packaging on a product whose use phase dominates its footprint
No proof A claim is made with no substantiation available to the buyer or to anyone else
Vagueness Terms such as eco-friendly, green, natural, sustainable, or conscious, which have no defined meaning and therefore cannot be false
Irrelevance A true claim about something that does not distinguish the product, such as freedom from a substance already banned
Lesser of two evils A claim positioning the product favourably within a category whose existence is the problem
Selective boundary A claim covering one site, one product line or one scope, presented as if it covered the firm
The distant commitment A target dated far beyond the tenure of anyone announcing it, with no interim milestone
Offset dependence A neutrality claim resting on credits, where the underlying emissions have not fallen, as Chapter 33 described
Aspiration as achievement Language describing an intention in the present tense, so that a plan reads as a state
Imagery and inference No claim is stated; leaves, green packaging and natural imagery convey one that the firm has not made and cannot be held to

The last form is the hardest to govern, because no sentence can be pointed to. The test remains the impression conveyed, and a regulator or a court assesses what an ordinary consumer would take from the whole presentation rather than from the words alone.

WarningCommon Misconception: If Every Statement Is True, the Claim Is Safe

This is the position that produces most greenwashing findings, and it repeats an error from Chapter 9 in a new setting.

The applicable standards ask whether the overall impression is misleading. A statement can be individually accurate, verifiable and defensible, and still combine with placement, imagery, omission and emphasis to leave a false impression, which is exactly what consumer protection law addresses through the concept of unfair trade practice and misleading advertisement.

Three specific traps follow. Omission creates the impression: stating recycled content without stating the share, or reporting improved intensity while absolute emissions rose. Prominence creates it: a claim on the front of a pack and its qualification in small type on the back. And framing creates it: describing a reduction from a base year chosen because it was unusually high.

The safe formulation is not a lawyer’s disclaimer. It is a claim stated with its own scope attached in the same breath: what proportion, of what, measured how, compared to what, and by when.

34.4 Substantiation

A defensible claim requires evidence held before the claim is made, not assembled after a notice arrives.

NoteWhat Substantiation Requires
Element The question it answers
The specific proposition What exactly is being asserted, stated in a form capable of being true or false
The scope Which product, which site, which scope of emissions, which portion of the value chain
The measurement basis How it was measured, over what period, using which standard or method
The comparison Compared to what: a prior year, an industry average, an alternative product, and whether that comparator is fair
The evidence The document, test report, calculation or assurance statement, held on file and identified
The owner and the review date Who is responsible for the claim’s continuing accuracy and when it will next be checked
TipPractitioner Insight: The Claim Register

The practical control is a single register, owned by one person, containing every environmental and social claim the company makes anywhere: on packs, on the website, in advertising, in investor presentations, in tender responses, and in the sustainability report.

Each entry carries the claim as worded, where it appears, the substantiation reference, the person accountable, and the review date. The register is reviewed quarterly and every claim is either reconfirmed, amended or withdrawn.

Three failures the register catches are otherwise almost impossible to catch. Claims that were true when made and have since ceased to be, because a supplier changed or a site was added. Claims made in one channel that contradict a disclosure in another, which is how an investor presentation ends up inconsistent with an assured report. And claims nobody remembers making, which is the usual state of a website older than three years.

The register also produces a useful discipline in the other direction. A claim that cannot be entered because no one will own it or no substantiation exists does not go out, and that decision is taken before publication rather than after a regulator asks.

34.5 What Honest Communication Looks Like

Avoiding greenwashing is not a counsel of silence. Firms doing real work should say so, and the difference between a defensible claim and a vulnerable one is usually structural rather than substantive.

Vulnerable Defensible
Our products are eco-friendly This bottle contains 40 per cent post-consumer recycled plastic, verified by [certification], as at March 2026
We are committed to sustainability We have reduced Scope 1 and 2 emissions 18 per cent against a 2022 baseline and target 42 per cent by 2030
Carbon neutral product Emissions from this product’s manufacture are 1.2 kg per unit, reduced from 1.9 kg in 2022; the remaining emissions are offset through [named removal project]
We support our farmer suppliers We paid 4,200 registered farmers an average of 11 per cent above the mandi price and settled within seven days
Green manufacturing Our Hosur plant runs on 62 per cent renewable electricity under a captive arrangement; our other three plants remain on grid supply

The pattern in the right-hand column is consistent: a number, a scope, a basis, a comparator and a date. It is less exciting and it survives scrutiny, and it is also more persuasive to the audiences that matter, since a corporate buyer or a lender can act on the second column and can do nothing with the first.

34.6 Case Studies

34.6.1 Case Study 1: The Recyclable Bottle

The following situation is constructed rather than reported.

A beverage company redesigns its bottle so that it is technically recyclable and promotes the change prominently with a leaf motif and the words designed for a greener planet. The bottle is recyclable in facilities that exist in four cities and not in the markets where most of the product is sold. Packaging is roughly seven per cent of the product’s footprint; refrigeration in retail and the sugar supply chain dominate the rest. The company’s total packaging volume increased that year.

Discussion questions

  1. Identify every form of misleading claim present, using the table in this chapter.
  2. Nothing stated is false. Explain what makes the presentation misleading, in the terms the applicable standards actually use.
  3. Rewrite the claim so that it is defensible, keeping whatever is genuinely true, and say what the company loses and gains.

34.6.2 Case Study 2: The Fund That Was Labelled

The following situation is constructed rather than reported.

An asset manager markets a fund as sustainable, with materials emphasising positive environmental impact. Its selection method excludes three sectors and otherwise selects on conventional financial criteria with an ESG rating filter set at a low threshold. The resulting portfolio has a carbon intensity marginally below the broad index. Retail investors surveyed by the manager believe the fund invests in companies solving environmental problems.

Discussion questions

  1. Which regime does this claim engage, and how does the exposure differ from a product claim?
  2. The manager’s own survey shows a gap between what investors understood and what the fund does. What is the significance of that evidence?
  3. What should the fund be called and how should it be described? State what the manager may honestly claim.

34.6.3 Case Study 3: The Claim That Expired

The following situation is constructed rather than reported.

A textile exporter’s website has stated for four years that all its cotton is sourced from certified sustainable farms. The statement was accurate when written. Two years ago, growth in demand led procurement to add three traders whose supply is not certified, and certified cotton is now roughly sixty per cent of intake. Nobody in marketing was told. A prospective customer’s due diligence questionnaire asks the company to confirm the website statement.

Discussion questions

  1. Is this greenwashing? Consider the definition’s treatment of intention.
  2. What should the company say in response to the questionnaire, and what should it do about the website, in what order?
  3. Which control would have prevented this, and who should have owned it?

34.7 Applying the Chapter

ImportantExercise: A Claims Audit

Return to the textile and apparel group used through Module V. Its marketing, investor and tender materials contain the following claims.

  • A. On the corporate website: “A sustainable textile company.”
  • B. On a product label for a garment line: “Made with organic cotton.” The line uses roughly thirty per cent certified organic fibre blended with conventional cotton.
  • C. In the investor presentation: “Emissions intensity down 14 per cent.” Absolute emissions rose nine per cent over the same period, disclosed only in the BRSR.
  • D. In a tender response to a European brand: “Zero discharge of hazardous chemicals at all facilities.” The dyeing unit operates a treatment plant meeting consent conditions; two environmental notices were received in the last two years.
  • E. On packaging: a green leaf motif, kraft-coloured board, and the phrase “kinder to the planet”, with no accompanying claim.
  • F. In the sustainability report: “We are committed to achieving net zero.” No scope, base year, interim milestone or end date is stated.
  • G. On the website: “We support 5,000 farming families.” The figure dates from a programme that ended two years ago and now covers roughly 1,400.

Working in a group, produce the audit. CO-5 requires evaluation of obligations and assessment of strategic implications, so the deliverable must reach decisions and assess consequences.

  1. Classify each claim by the forms of misleading it involves. Several will involve more than one.
  2. Assess the legal exposure for each, naming the regime engaged, who bears the exposure, and what consequence could follow. Distinguish consumer, securities and disclosure exposure.
  3. Test substantiation. For each claim, state what evidence would be required under the six elements, and whether it plausibly exists.
  4. Decide. For each claim, decide to reconfirm, amend or withdraw. For every amendment, write the replacement wording in full, following the defensible pattern of number, scope, basis, comparator and date.
  5. Handle claim C specifically. Explain what obligation is engaged by presenting intensity to investors while absolutes moved the other way and are disclosed elsewhere, and state what the presentation must contain.
  6. Handle claim E specifically. Explain how a claim with no words is assessed, and what the company should do with the packaging.
  7. Design the register. Set out the claim register for this company: its columns, its owner, its review cadence, and the rule that governs when a claim may be published. Name the function that owns it and to which committee it reports.
  8. Assess strategic implications. State what this claims position would cost the group if a regulator or a major customer examined it, and what it costs to fix. Identify the one claim that most endangers the customer relationships described in earlier chapters.

Present a claims audit table, the rewritten wording for every amended claim, the register design, and a one-page note to the board.

34.8 Summary

NoteChapter Summary

Greenwashing is conveying a misleading impression about environmental or social characteristics (Anne T. Lawrence & James Weber, 2020). The test is the impression conveyed rather than the literal accuracy of each statement, which repeats Chapter 9’s half-truth in a new setting, and the misleading may be entirely unintentional, arising from enthusiasm, from marketing without data, or from a claim that was true when written and never revisited.

Claims mislead in a small number of recognisable forms: the hidden trade-off, absence of proof, vagueness through undefined terms, irrelevance, positioning within a harmful category, selective boundaries, distant commitments without milestones, dependence on offsets where underlying emissions have not fallen, aspiration written as achievement, and imagery that conveys a claim no sentence states. The last is hardest to govern because nothing can be pointed to, and the test remains what an ordinary consumer takes from the whole presentation.

Three regimes apply. Consumer law treats a misleading advertisement as an unfair trade practice, with the Central Consumer Protection Authority able to order discontinuation and corrective advertisement, impose penalties and bar an endorser whose only defence is verification (Government of India, 2019). Securities and disclosure law treats a claim to investors as a disclosure wherever it appears (Securities and Exchange Board of India, 2015). And the reporting framework itself is prescribed and increasingly assured, so an assertion conflicting with assured data in the same document cannot be resolved by presentation (Securities and Exchange Board of India, 2021). Advertising standards additionally require environmental claims to be specific, substantiated and not overstated, with qualifications displayed prominently.

Substantiation must exist before a claim is made and covers six elements: the specific proposition, the scope, the measurement basis, the comparator, the evidence held and identified, and the owner with a review date. The practical control is a single claim register covering every claim in every channel, reviewed quarterly, which catches claims that have silently ceased to be true, claims in one channel contradicting disclosures in another, and claims nobody remembers making.

Honest communication is not silence. The defensible pattern is consistent: a number, a scope, a basis, a comparator and a date. It is less exciting, it survives scrutiny, and it is more useful to the corporate buyers and lenders who can act on the second column and can do nothing with vague assertion.

TipKey Terms

Greenwashing · Impression conveyed · Unintentional misleading · Hidden trade-off · No proof · Vagueness · Irrelevance · Lesser of two evils · Selective boundary · Distant commitment · Offset dependence · Aspiration as achievement · Imagery and inference · Overall impression standard · Omission · Prominence · Framing through base year · Unfair trade practice · Endorser exposure · Claim as disclosure · Conflict with assured data · Substantiation · Scope of the claim · Measurement basis · Comparator fairness · Claim register · Review date · Number, scope, basis, comparator, date

Summary

Concept Description
What Greenwashing Is
Greenwashing Conveying a misleading impression about environmental or social characteristics
Impression conveyed The test applied, which looks past the accuracy of individual statements
Unintentional misleading The common case, arising from enthusiasm, absent data, or a claim never revisited
The Recurring Forms
Hidden trade-off Promoting one attribute while a larger impact goes unmentioned
No proof A claim with no substantiation available to anyone
Vagueness Undefined terms such as green or sustainable, which cannot be false and cannot be defended
Irrelevance A true claim about something that does not distinguish the product
Lesser of two evils Favourable positioning within a category whose existence is the problem
Selective boundary A claim about one site, line or scope presented as covering the firm
Distant commitment A target beyond the tenure of those announcing it, with no interim milestone
Offset dependence A neutrality claim resting on credits while underlying emissions have not fallen
Aspiration as achievement Present-tense language that makes a plan read as a state
Imagery and inference A claim conveyed by leaves, colour and imagery that no sentence states
How Impressions Form
Overall impression standard The standard asking what an ordinary consumer takes from the whole presentation
Omission The trap of creating an impression by what is left out, such as an unstated share
Prominence The trap of a claim on the front and its qualification in small type on the back
Framing through base year The trap of measuring from a baseline chosen because it was unusually high
The Legal Exposure
Unfair trade practice The consumer law characterisation of a misleading environmental advertisement
Corrective advertisement The remedy requiring publication of a correction at the trader's own cost
Endorser exposure The liability of a person lending reputation, defended only by verification of the claim
Claim as disclosure The treatment of any assertion to investors, wherever it appears in company materials
Conflict with assured data The problem no communications team can resolve, when narrative contradicts tested data
Advertising standards The requirement that environmental claims be specific, substantiated and not overstated
Substantiation
Substantiation before publication The rule that evidence must exist before the claim is made, not after a notice arrives
The specific proposition The first element: what is asserted, in a form capable of being true or false
Scope of the claim The second element: which product, site, emissions scope or portion of the value chain
Measurement basis The third element: how it was measured, over what period, on what standard
Comparator fairness The fourth element: what it is compared to, and whether that comparison is fair
Evidence held and identified The fifth element: the document, test report, calculation or assurance statement on file
Honest Communication
Claim register The single control listing every claim in every channel, with owner and substantiation
Review date The sixth element and the discipline that catches claims which quietly ceased to be true
Number, scope, basis, comparator, date The pattern of a defensible claim, less exciting and more useful to buyers and lenders