Concerns Over Greenwashing in ESG Disclosures

A senior official from the Securities and Exchange Board of India (SEBI) has raised concerns about the prevalence of ‘greenwashing’ in corporate Environment, Social, and Governance (ESG) disclosures.

Examples of Greenwashing

• In the manufacturing sector, a company claimed that its operations had no significant environmental impact. However, the reality was that the company was facing legal action for environmental law violations.
• In the automobile sector, a company claimed the use of recycled input material. Despite this claim, there was no data provided on the amount of recycled or reused plastic used, which is significant for assessing environmental impact.
• In the oil and gas sector, a company made disclosures that did not reflect the true nature of its operations, emphasizing the need for transparency and honesty in ESG reporting.

Mandatory ESG Disclosures

SEBI has made ESG disclosures in annual reports mandatory for certain companies, aiming to ensure transparency and accountability.

Definition of Greenwashing

SEBI defines greenwashing as making false, misleading, unsubstantiated, or incomplete claims about the sustainability of a product, service, or business operation.