Greenwashing, according to the government, is a tactic used by some companies to exaggerate or fabricate environmental claims. Firms often use vague terms such as ‘natural’, ‘sustainable’ or ‘eco-friendly’ without proof, misleading consumers and undermining real sustainability efforts.
The CCPA on October 15 introduced guidelines that restricted the use of such terms in advertisements unless backed by scientific evidence or third-party certification, aiming to promote transparency.
Paritosh Chauhan, partner at Lakshmikumaran and Sridharan, said some of the law firm’s clients had sought guidance on whether their marketing strategies were compliant with the guidelines and, if not, then what were the legal contours as defined by the guidelines within which their products could be marketed.
“Some clients have sought advice on penalties that may be imposed under the CPA, especially during the interim period, while they transition to branding and marketing policies that are compliant with the guidelines,” said Chauhan.
The primary challenge is the burden of proof, for providing verifiable evidence for any environmental claims when companies use terms such as ‘eco-friendly’ or ‘carbon-neutral,’ which can no longer be used as mere buzzwords.
Discover the stories of your interest
On the upside, the guidelines seek to reduce misleading ads and build consumer trust.“Companies that have adopted biodegradable or compostable materials are unsure if they need to secure third-party certifications to support their claims,” said Anisha Patnaik, founder of law firm LexStart Partners. “Similarly, those using recycled materials are seeking advice on how to communicate the benefits without overstating their environmental impact.”
The guidelines require companies to make material information easily accessible, via packaging, QR codes or URLs. Startups are seeking advice on how to implement these disclosures and the extent of material information required to be disclosed.
Jyotsna Jayaram, partner at law firm Trilegal. said this might require some reworking of advertisements or product packaging. It will also need to be considered how compliance is to be ensured for audio-visual advertisements, she said.
“The guideline prohibits greenwashing but allows puffery, which typically means making statements that are evident exaggerations and are unlikely to be understood by a customer as literal claims,” said Jayaram. “There is a very thin line between unsubstantiated claims and puffery and this needs to be assessed based on principles laid down over several years in case laws.”
However, lawyers are also of the view that those who are compliant and already have their house in order, will benefit from the guidelines, not only from the consumer’s trust point of view but also from the investors’ point of view.
“Investors focused on sustainability will assess the authenticity of environmental claims,” said Karun Mehta, partner, Khaitan & Co. “Startups that demonstrate transparency around their technology, traceability and product offerings will have a competitive edge in attracting investment.”