Blog

Theyjusvini S – Associate

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (‘CSR’) as a concept is centered on the idea that a corporate entity, while being a profit-centric body as its core, is also a social actor that owes a duty to stakeholders beyond shareholders, such as employees, consumers, local communities, and the environment.

India has seen CSR in action long before it was codified in the Companies Act, 2013. Several prominent business families of India had already been practising corporate giving. The judiciary, through landmark environmental and human-rights jurisprudence, further crystallised the idea that corporate entities have obligations to society at large. These obligations were further cemented by the Legislature when the Company Law of India was revamped into the Companies Act, 2013, thereby ultimately culminating in the world’s first statutory CSR mandate.

Attempts had been made prior to 2013 to inculcate CSR by way of incentives under the Income Tax Act. At the time, corporate contributions to social causes were largely voluntary. Indian business groups established trusts, hospitals, and educational institutions, and many donations were incentivised through tax benefits under the Income Tax Act, 1961.

Policy nudges came in the form of guidelines like the Corporate Social Responsibility Voluntary Guidelines (2009) and the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (2011) issued by the Ministry of Corporate Affairs. These documents encouraged companies to integrate sustainability and community concerns into decision-making, but they lacked enforceability.

There had also been multiple judicial decisions such as the Oleum Gas Leak case[1] and the Ganga Pollution case[2] whereby the doctrine of Absolute Liability was established. By way of these decisions the Hon’ble Supreme Court extended the scope of Article 21 of the Constitution of India to include the right to a clean and healthy environment, thereby creating a non-negotiable duty on Corporate entities to protect community health.

Further, in Indian Council for Enviro-Legal Action v. Union of India[3], the Hon’ble Supreme Court firmly established the Polluter Pays principle. The Hon’ble Supreme Court also categorically held that Corporate entities cannot let profits override ecological responsibility in the Sterlite Industries Case[4].

In light of the increasing need to impose social responsibilities on Corporate entities, when the Companies Act, 1956 was revamped and enacted as Companies Act, 2013 (‘Act’), Section 135 of the Act mandated that all Companies having a net worth of Rs.500 Crores, a turnover of Rs.1000 Crores or a net profit of Rs5 Crores, shall spend atleast 2% of the average net profit of the preceding 3 years on activities listed under Schedule VII of the Act. Section 135 was operationalised by way of the Corporate Social Responsibility Rules, 2014.

The enforcement of Section 135 has been somewhat tricky. This is owing to the need to strike a balance between encouraging corporate entities and corporatization, and mandating CSR activities. In an attempt to enforce CSR activities, the Companies (Amendment) Act, 2019 provided for penalties in case of failure to transfer the unspent CSR funds to a separate account. This proved to be a deterrent to several Corporate entities to declare their original turnover and profits. Hence, vie the Companies (Amendment) Act, 2020, the CSR defaults were shifted from criminal prosecution and brought under Civil liabilities, thus appearing to be ‘decriminalised’. However, the CSR Rules Amendment, 2021 once again tightened the norms, and required an Impact Assessment for projects over Rs.1 Crore.

GREENWASHING

Greenwashing is a practice where Companies misrepresent their environmental practices or overstate their sustainability claims in order to appear compliant with the regulations and guidelines notified by the Government from time to time. It is a kind of non-compliance that hides behind detailed reports, advertisements and ESG (Environmental, Social, and Governance) disclosures.

The several forms of Greenwashing may be as follows:

• Absolute claims- Corporate entities may claim 100% sustainable/ eco-friendly practices, while not producing any supporting evidence.
• Symbolic greenwashing – Corporate entities may show flashy ad campaigns without substantive action.
• Comparative claims – Sometimes, entities may compare their sustainable claims with those of their competitors without being able to provide supporting data comparison
• Selective disclosure – Corporate entities may highlight small initiatives while ignoring major harms.
• Decoupling – While Corporate entities promise sustainability but failing to implement it internally.

EFFECTS OF GREENWASHING

Greenwashing may manifest in multiple ways across industries, hiding behind the facade of eco-friendly marketing. It may take the form of an apparel brand claiming that its clothing line is sustainable, eco-friendly and recycled/upcycled. However, investigations often reveal that only a small fraction of the product uses such materials, while the majority is still derived from conventional, resource-intensive processes such as fast fashion manufacturing, which is one of the largest contributors to global textile waste and water pollution.

Similarly, in the food delivery sector, companies often promote commitments to “green” operations, such as switching to eco-friendly packaging or reducing carbon emissions from deliveries. Yet, the execution sometimes tells a different story. For example, the so-called eco-friendly packaging may still be plastic-lined, making it non-biodegradable and unrecyclable, and just as ‘eco-unfriendly’ as it was prior to commencement of the green operations. Furthermore, promises of sustainable delivery models, such as bicycle or electric vehicle deliveries, can come at a hidden cost: workers being pushed into longer hours, unsafe conditions, or inadequate pay, all in the name of reducing emissions. Reports from gig economy watchdog groups have shown that these green pledges sometimes lead to forms of labour exploitation, where sustainability efforts are achieved at the expense of employee well-being.

The adverse effects of greenwashing extend far beyond just consumer deception. They erode public trust, divert attention from genuinely sustainable practices, and allow corporations to continue harmful operations under the guise of responsibility. In the long run, such practices not only harm the environment but can also lead to regulatory backlash, consumer lawsuits, and reputational damage that undermines the very brand image companies seek to build through green claims.

Thus the impact of Greenwashing, especially in an economy like India, may be primarily threefold:

1. Consumer deception – In an era where people are more than ready to pay inflated prices for ‘eco-friendly’ products, such products are often no better than conventional alternatives.
2. Investor harm – ESG investors and mutual funds often base their decisions on misleading/ green-washed sustainability disclosures, thus skewing capital allocation.
3. Policy dilution – greenwashing allows businesses to appear compliant while continuing harmful practices, slowing climate progress.

POST-COVID CSR AND GREENWASHING

Owing to the overlap between CSR and Sustainability Disclosures, CSR and greenwashing often converge in practice. Until the mid-2010s, ‘green concerns’ in India were largely confined to industrial pollution, environmental litigation, or regulatory non-compliance, rather than to hidden and misleading environmental claims. Before CSR and SDG were defined as corporate concepts, sustainability was often achieved through philanthropy, social welfare, or CSR initiatives that had limited connection to core operations of the company itself.

After India ratified the Paris Agreement in 2015, environmental sustainability gained prominence in climate diplomacy and national policy.

Once sustainability disclosures became regulatory mandates, a widening gap between reported claims and on-ground practice began to emerge. While Companies displayed elaborate environmental targets in their public reports, operational audits or third-party investigations revealed little substantive change as compared to the pre-target period.

The COVID-19 pandemic left the whole world reeling in the social and economic after-effects. Nobody escaped unscathed. There was an acceleration in CSR spending towards health and community welfare. As India transitioned into recovery, CSR objectives began overlapping with broader sustainability and ESG claims. This opened the door to greenwashing.

Although CSR is about mandatory contributions, and greenwashing pertains to misleading claims, there’s a broad spectrum where the two intersect:

• CSR reports and sustainability disclosures are fertile grounds for inflated environmental claims.
• Companies may divert CSR spending to projects that look green on paper but lack real impact in order to look complaint while simultaneously cutting corners.
• Investors increasingly rely on CSR/ESG reports, thereby raising the monetary stakes, and in turn, a greater emphasis on accuracy.

Thus, while CSR was designed to institutionalise corporate accountability, it can be misused as a vehicle for green PR.

However, interestingly, not only had the CSR projects undertaken during the pandemic raised public expectations in terms of sustainability practices, but such narratives also became an integral branding strategy for Corporates. This has consequently resulted in greater scrutiny of how genuine the sustainability claims of Corporates are.

REGULATIONS AGAINST GREENWASHING

The importance of CSR initiates, and the need to take action against greenwashing risks has been felt more keenly on a global level and India is no exception. In order to prevent Greenwashing, India has introduced several regulatory frameworks to hold Greenwashing Corporate entities accountable. SEBI’s Business Responsibility and Sustainability Reporting Guidelines (‘BRSR Guidelines’) have been made more stringent. BSR has been made mandatory for the top 1,000 listed firms in India. Similarly, in 2021, the Advertising Standards Counsil of India (‘ASCI’) banned vague claims like 100% green unless such claim can be backed by evidence. Even as recently as 2024, the ASCI had notified Guidelines for Advertisements Making Environmental / Green Claims. As per these guidelines, all green claims advertised by any entity would have to be verifiable and transparent. Further, if any Company were to make an absolute claim, the same would have to be substantiated with credible data. The Consumer Protection Act, 2019 expanded the scope of Consumer Protection Law to cover unfair trade practices involving false eco-labels. Since 2022-23, the Central Pollution Control Board (‘CPCB’) has been proactive in flagging FMCG firms that mis-label plastics as biodegradable, exposing large-scale misrepresentation. In addition, environmental laws, such as the Plastic Waste Management Rues have been amended to require the Companies to provide clarity as to the claim of biodegradability and compostability of plastic.

The most affected industries due to the steps taken are

• FMCG & Packaging – As mentioned above, several FMCG Companies were flagged by the CPCB. Many products failed compostability standards under the Plastic Waste Management Rules, 2016 (amended 2021).
• Energy Sector – Large Indian energy companies promote renewable energy initiatives while simultaneously expanding coal operations. This practice has been termed as transition greenwashing, i.e., overstating commitment to net-zero while retaining carbon-heavy business models.
• Fashion and Retail – Apparel brands in India have been called out by ASCI for advertising “sustainable collections” without evidence of eco-friendly sourcing. In 2023, the ASCI directed several firms to withdraw or modify such claims.
• Finance and ESG Funds – With the surge of ESG-labelled funds, in 2023 SEBI tightened the rules requiring ESG mutual funds to hold a minimum share of assets consistent with their stated theme. This move was a response to concerns that funds were marketing themselves as ‘green’ while investing in carbon-intensive industries.

Examples of specific instances of greenwashing in India are illustrated below:

1. Surf Excel has become a very common household name amongst the detergents used ot wash clothes. A few years back, Hindustan Unilever Ltd, claimed that their product, i.e., Surf Excel was eco-friendly, and was made fully of natural materials. However, upon testing, it was discovered that the detergent was made up of synthetic ingredients, which were also harmful to the environment.
2. Similarly, Voltas Ltd. claimed that their Air Conditioners were more environmentally effect and had a 5-star energy rating. The truth, however, was that not only was the energy efficiency, but also the environmentally efficiency of their Air Conditioners significantly lower than the claimed levels.
3. Similarly, in another instance, Godrej Consumer Products Ltd. claimed its Soaps to be fully biodegradable and 100% natural. However, Godrej was not able to adequately substantiate these claims

SUGGESTIONS TO COMBAT GREENWASHING

• The Regulatory Framework may be strengthened – The Government may create a unified eco-label framework by forming government-backed certification for key sectors like plastics, textiles, and energy. The BRSR Core Audits may also extend beyond just the top 1000 firms, considering the multitude of firms in a country like India. The Penal implications of Greenwashing may also be made more severe, such that the fines are proportionate to the turnover and not just token penalties.
• Enhancement of Corporate Governance – The Board of Directors of Corporate entities may be held accountable, and environmental claims would have to be certified in annual reports. Further, CSR, ESG, and financial statements may be linked  to reduce selective reporting.
• Social awareness – Consumer education plays an important role in battling Greenwashing. The Government can also encourage Independent Sustainability Audits by NGO’s and other civil societies. It is also highly necessary to put in place a framework for Whistleblower Protection.
• Judicial Intervention – Courts can play a vital role in bridging gaps between regulation and enforcement by recognising greenwashing as a violation of Article 21. Courts may also direct companies caught greenwashing to fund genuine sustainability projects.

CONCLUSION

India’s CSR regime remains a pioneering model by providing statutory mandates for corporate contributions to society. Post-COVID, greenwashing has emerged as a threat to genuine sustainability.

The struggle between deceptive corporate practices and Indian law reflects a global tension – how to balance the ambitious climate targets with economic realities. Regulatory responses are promising but fragmented, and are yet to prove effective as a strong deterrent to Companies that practice Greenwashing. Thus, stronger enforcement, consumer awareness & empowerment, and judicial engagement are essential.

In India’s march towards its 2070 net-zero goal, curbing greenwashing will be as important as mandating CSR. Thus, the ultimate test lies not in how much companies say they are doing for the planet, but in how much measurable impact they actually deliver.

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[1] (1987) 1 SCC 395

[2] (1988) 1 SCC 471

[3] (1996) 3 SCC 212

[4] (2013) 4 SCC 575