India's Greenwashing Paradox: Virtue by Vocabulary

Introduction

“100% natural” and “chemical-free” daily household products have reached every Indian’s home. One of the biggest conglomerates in this market is Godrej Consumer Products Ltd. The Advertising Standards Council of India found Godrej's sustainability claims to be misleading because they contained synthetic ingredients. They were responded to with corrective directions and penalties without ensuring oversight. This phenomenon is known as Greenwashing, when environmental or sustainability attributes of a company’s products and practices are misleading or exaggerated to distort stakeholder decision-making. it is greenwashing.

India’s greenwashing is not mere misconduct but an outcome of the existing frameworks. India’s soft law ESG regime creates incentivisation as its foundation, making greenwashing a corporate response. Penalties remained dispersed and limited, usually being minor sanctions or an order to withdraw advertisements. Thus, Sustainability becomes visible only in vocabulary, not in actions. The benefits outweigh the penalties, as they provide investor confidence, reputational capital, and access to sustainability-linked finance. 

Indian regulations have structured ESG compliance as soft law, relying on disclosure obligations, principle-based guidelines and reputational incentives rather than strong, direct sanctions. Incentive-based frameworks are normatively appealing because they create market-led discipline, though they also create strategic opportunities for the market. The deployment of selective disclosure and mere symbolic adherence to sustainability for narrative inflation results in a regulatory paradox of transparency.

This design can be attractive by prima facie value, as it promises flexibility, experimentation, and market-led discipline. However, the same framework leads firms to engage in strategic behaviour. Selective disclosure and narrative building through symbolic adherence lead us to a regulatory paradox: enhanced transparency coexists with persistence of greenwashing.

This created a pivotal question for environmental law in corporate structures. Can the mobilisation of ESG compliance through soft-law instruments shape corporate governance or does their design merely reduce it to mere reputation signalling? This article examines the argument that the ESG soft law regime has created a spiralling greenwashing paradox and proposes a governance obligation through a hybrid enforcement architecture. 

Evolution of ESG Regulation in India: From CSR to BRSR

ESG norms in India operate as a network of standards that address social responsibility, environmental impact, and internal governance arrangements. These methods are used to evaluate long-term value generation and sustainability-related risks. India has opted for a regulatory mechanism rather than legislative codification to address the intersection of sustainability policy and corporate governance.

ESG regulation in India has evolved from a philanthropic endeavour to a disclosure-oriented governance approach. The first step is the introduction of corporate social responsibility under Section 135 of the Companies Act, 2013, which requires the allocation of at least 2% of average net profits to specified social and environmental activities.

Subsequently, the Ministry of Corporate Affairs’ National Guidelines on Responsible Business Conduct, 2019, shifted emphasis to behavioural disclosure.  They were also the foundation for the Securities and Exchange Board of India’s Business Responsibility and Sustainability Reporting framework, introduced in 2021, which was made mandatory for the top listed entities by market capitalisation.

SEBI further strengthened this framework through BRSR Core. This iteration introduced third-party assurances for disclosure obligations. These measures aimed to increase data reliability while preserving the principles-based character of the regime. Collectively, these developments show a trajectory that gradually progresses with disclosure obligations. These developments led to nominal compliance rather than substantial responsibility for achieving the necessary outcomes, creating a lack of accountability and a name-sake sustainability.

Comparative Perspective: From Voluntary Signalling to Enforceable Verifiability

India’s framework must be viewed in light of the recent Global regulatory shift, which treats sustainability claims as matters of consumer protection rather than corporate aspiration. In the European Union, the Corporate Sustainability Reporting Directive mandates sustainability reporting, along with necessary standards and audits, based on the principles of double materiality, thereby creating accountability within corporate structures. 

The proposed Green Claims Directive aims to prohibit baseless environmental claims and to require companies to verify assertions in accordance with scientific standards. The directive dictates a clear norm: sustainability claims are legally cognisable representations. The directive dictates a clear normative position: sustainability claims are legally cognisable representations, not reputational narratives.

US ESG regulations have developed mainly through securities law. The Securities and Exchange Commission’s 2024 climate-related disclosure rules frame climate risks as key information for investors, thereby placing ESG within the logic of market transparency. Although subsequent litigation and retrenchment i.e. West Virginia v. Environmental Protection Agency have relaxed immediate enforceability, the recognition of ESG information is still a key factor in capital markets. This illustrates that even contested disclosure regimes maintain corporate expectations regarding accountability.

The United Kingdom’s framework follows a more enforcement-oriented model. The Competition and Markets Authority’s Green Claims Code, along with enforcement powers under the Digital Markets, Competition and Consumers Act 2024, mandates severe penalties for misleading claims and prioritises deterrence.

These jurisdictions reveal a key facet of ESG frameworks: disclosure must be paired with credible sanctions and institutionalisation for effective implementation. 

Re-Imagining ESG: From Soft Disclosure to Governance Obligation

The key shift we need for framework reimagination as a governance obligation is to treat disclosure as evidence of decision-making rather than narrative building. The Indian framework’s deficiency is its inability to link sustainability disclosures to the processes in which corporate decisions are made. 

The first step should be to rework the elements of directors’ duty of care under section 166 of the Companies Act, 2013. It requires directors to act in good faith and promote the interests of the company and its stakeholders. Interpreting this obligation to include material ESG risks will clarify the context of existing standards and make ESG disclosure part of decision-making rather than just a compliance burden.

The second step would be to require board-level documentation of ESG deliberations. Liability should not be limited to inaccuracy but should also address where ESG risks were identified and assessed. Ensuring the integrity of the ESG disclosure process will embed sustainability into governance.

The third move would be to institutionalise coordination amongst bodies. SEBI should continue to focus on policing disclosure and market integrity; the Ministry of Corporate Affairs should address fiduciary failures where omissions reflect a lack of oversight; and the Central Consumer Protection Authority should continue to address defective sustainability claims affecting consumers. This creates flexibility while reducing accountability gaps.

This regulatory shift will focus on how claims are made, what is claimed, and ensuring decision-making accountability. This would lead the way for ESG regulation to go beyond optics and move towards sustainable legitimacy. 

Conclusion: Governance Beyond Optics

This article has addressed the crux of India’s ESG framework's weakness: not its reliance on soft law, but its operationalisation as a disclosure-centric framework. Transparency without accountability lacks the power to regulate corporate misconduct. Greenwashing is a systematic outcome of ESG disclosures that shapes corporate narratives.

However, this analysis does not aim to abandon principle-based regulations. They have played a valuable role in sensitising boards and investors to non-financial risk. Its promise can only be realised when these obligations are internalised in governance structures.

This essay aims to offer a calibrated path forward, a governance obligation with decision-making accountability. By focusing on the enforcement process and fiduciary standards, we can move beyond mere virtue-by-vocabulary. Without such rework, we have mere sustainable storytelling in our regulatory landscape. With it, we can see the evolution of an instrument of corporate conduct and governance, having the potential to align sustainability, accountability and long-term value creation.

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This blog has been authored by Trayambak Pathak, a student at Dr Ram Manohar Lohiya National Law University, Lucknow.

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