Greenwashing rules could spark class action against firms by consumers who are increasingly aware: Experts

A class action is a legal mechanism that allows a group of people with a common grievance to file a single case against a party rather than separate lawsuits. It can be used for such things as reversing illegal activities, stopping harmful decisions or demanding compensation for damages.

“There will be a gradual rise in class action lawsuits as an effective way for consumers to tackle greenwashing," said Shruti Khanijow, partner at Shardul Amarchand Mangaldas.

Also Read: India tightens the screws on greenwashing claims

Khanijow said these guidelines set clear rules for companies on environmental claims and mandate that they substantiate their statements. With increasing consumer awareness, it will become easier to hold companies accountable. 

Greenwashing is a marketing strategy in which companies falsely claim or exaggerate environmental benefits of their products or services. They often use vague terms like “natural," “eco-friendly," or “green" without credible evidence to support these claims. 

Greenwashing not only misleads consumers but also undermines authentic environmental initiatives, damaging consumer trust and distracting from genuinely sustainable products.

To combat misleading environmental claims by companies, the Central Consumer Protection Authority issued new guidelines on 15 October. These guidelines regulate deceptive environmental claims in advertisements and promote transparency. They specifically ban vague terms like “eco-friendly" and “sustainable" unless supported by reliable scientific evidence or third-party certification. 

Also Read | Greenwashing: Govt unveils new guidelines to rein in misleading ‘eco-friendly’ ads

Additionally, companies must provide clear information about the environmental aspects of their products, including manufacturing and packaging practices.

The Guidelines for Prevention and Regulation of Greenwashing or Misleading Environmental Claims 2024 apply to environmental claims by manufacturers, service providers and traders whose goods, products, or services are advertised.

Ramya Suresh, partner at Saraf and Partners noted that the new rules provide “specific grounds for recourse against manufacturers or advertisers through either individual complaints or class actions." 

Suresh said class action suits in India have significantly increased over the past decade, paralleling trends in the US and Europe, and are expected to grow with these new guidelines.

Debi Goenka from the Conservation Action Trust, pointed to the likelihood of spreading consumers action, including class action suits. “If I sue a packaged water manufacturer over microplastics, it could inspire others to seek similar damages and lead to a class action," he explained.

Most recently, discussions on class actions have grown over Ola Electric Ltd. The Central Consumer Protection Authority (CCPA) issued a show-cause notice to Ola Electrics after receiving nearly 10,000 complaints regarding delayed deliveries, faulty products and misleading advertisements. 

The outcomes of such cases could set a precedent for class action litigation in India, depending on the final decisions made, legal experts earlier told Mint.

Experts highlight that the Consumer Protection Act, 2019, provides the most suitable forum for addressing consumer grievances impacting consumers as a “class." 

Also Read | Greenwashing: Proof needed for claims, say draft norms

Karun Mehta, partner at Khaitan & Co., explained that “class actions are a potent legal option to hold companies accountable, as public attention around such claims can harm a company’s reputation. Additionally, cases brought before consumer commissions or civil courts entail a public notice in a national newspaper, further impacting a company’s image."

Alternative legal remedies are also available for consumers misled by greenwashing. They can file complaints directly under the Consumer Protection Act, report issues to the CCPA, raise sector-specific complaints with regulatory bodies in industries such as energy, food and chemicals, or approach the National Green Tribunal if environmental harm has occurred.

However, Shruti Khanijow of Shardul Amarchand Mangaldas cautioned that the effectiveness of the guidelines relies heavily on enforcement by authorities, and it remains to be seen how rigorously companies will be monitored for compliance. 

'Public vigilance to play a pivotal role'

“Public vigilance will play a pivotal role in holding violators accountable. If enforced rigorously, these guidelines will indeed compel companies to ensure that environmental claims are accurate, transparent, and scientifically substantiated."

Nawneet Vibhaw, partner at JSA Advocates & Solicitors, noted that while the new guidelines on greenwashing are no more than guidelines, the Consumer Protection Act of 1986, updated in 2019, protects consumers from false claims. 

He believes these rules will encourage companies to honour their environmental promises.

Some experts argue that the term “class action" requires a clearer definition to strengthen its effectiveness. “The Consumer Protection Act, 2019, doesn’t explicitly use the term ‘class action’—this is drawn from American law. However, representative actions under the Act serve a similar purpose, allowing one or more consumers to file complaints on behalf of all with a common interest," noted Gathi Prakash, partner at Cyril Amarchand Mangaldas.