Corporate Greenwashing

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Introduction

In the emerging world of the corporate sector, something that has been added is Corporate Social Responsibility. A duty that these companies owe to society and its resources for its consumption and utilization. And to initiate the same we have the concept of green bond. It's a kind of bond initiated for investment by those investors who are socially critical about the environment, and climate change, and considers that the exploitation and destruction caused during the production, manufacturing, or by the service department is something that needs a check on and should be curbed as much as possible. Due to an increase in conscious investors in the market, green bonds have increased and the idea of green marketing has also received a wider domain.

As we know along with a lot of sustainable approaches comes a lot of negative approaches to achieving the declared goal. There comes the concept of corporate greenwashing. When these companies try to represent them as ambassadors of environment conservation and sustainability. But behind this veil of being an environment enthusiast, they exploit nature for their profits and continue their anti-environmental techniques of production and carrying out their daily marketing tactics. We will be looking forward to the cases of corporate greenwashing both through the lens of international as well as domestic industries. Counting the potential effects that corporate greenwashing poses on the environment and consumers in general. We will be also paying attention to the risks that the GIFT (Gujarat International Fin-tech) City Co. Ltd Project the main center of the economy can have through corporate greenwashing in green investment. And at last, looking at the plausible solutions to approach the problem of corporate greenwashing differently.

Case Analysis

J.P Morgan

In its commitments under ESG goals, it claims to support the low carbon-based economy, with its contribution to green initiatives of $1 trillion over 10 years and $2.5 trillion for climate change and sustainability by the end of 2030. However, as per the Banking on Climate Chaos, Study 2022 pointed towards JP Morgan's crucial and majority of financing towards the fossil fuels projects emerging as the largest financier to fossil fuels. They were financing an LNG-based project by Total Energies which is exploiting the pipelines of the global South. And faced the rage of those who were scared of the climate crisis and fossil fuels expansion. Those who were displaced because of their project's development were facing severe conditions of a cash grab and problems due to displacement in terms of land, and security as promised by the project. Thus we can see the inefficiency of the international bank as the case resulting in corporate greenwashing. On one side we can see their commitments are just opposite to their express acts of finance.

HSBC

HSBC was called out for its misleading advertisements related to assisting their clients to go net zero with a $ 1 trillion investment and plantation of 2.5 million trees which can control over 1.25 million tonnes of carbon over time. Whilst its annual report pointed out that it was still financing its customers who were responsible for emissions of 65.3 million tonnes of carbon dioxide every year and its financing towards thermal coal mining and power production would continue until 2040. Thus, the commitment it had proclaimed doesn't match what its annual report stated for 2021. And covering up the same also shows a long period which doesn't match with its goals that ought to be achieved. It indicates a clear case of greenwashing.

Risks of Corporate Greenwashing for the Banking and finance sector

Greenwashing poses significant risks to the banking and finance sector because they ground their policies or their public image for their investors, their customers being environment enthusiasts, or such corporate socially responsible activities that can increase their economic base. It increases regulatory risks, reputational risks, or other risks on them.

First, if they mislead their investors once with their false pitches related to ESG (Environment, Social, Governance) policies and promises of using their investment in sustainable projects would make them lose their potential investors of the future as well due to poor commitments. Second, to balance and phase out the climate risks and carbon emission problems many financial and banking institutions are asked to volunteer the same and regulate their policies accordingly and devise projects for the same. However, when they do not fulfill their said performances it demeans their reputation on a global level as well as makes them lose their customer base who were aiming to procure their services because of their Corporate Social Responsibilities.

So, overall the banking and financial sector not only loses their reputation in the market and society due to their greenwashing but also a huge base of those people who assists them in their regulation through financial and investment support. It also calls for legal liability on them through their misleading and false practices in their operation.

Plausible Risks in GIFT City: Banking & Finance Sector

Gujarat Fin-tech City is a project which aims at being a world-class business district with all the amenities that an industry requires to flourish its business with optimistic growth and development and maximize its long-term profits. It would ensure the quality of life, through its goals like walking to work, SEZs, integrated development, etc. It has renowned institutions associated with its development board for instance in GIFT's Domestic area it has TCS (Tata Consultancy Services), Union Bank, Canara Bank, etc, GIFT's SEZ IFSC has Bank HSBC, Bank of America, IDBI, Deutsche Bank, etc. As GIFT is first ever greenfield project in India its foundation ensured planning for environment and sustainability which aims at the adherence to statutes like Environment Clearance Conditions, C&D Waste Management Rules,2016, ECBC Guidelines 2017, etc and they also released certain guidelines that all the developers and constructors have to abide by in the pre and post-construction period so that sustainability is ensured at all the stages. All the developers are mandated to follow the green guidelines released by GIFT DCR and get a certificate from an Accredited Green Building Consultant of GIFTCL.

All these guidelines should be essentially met as this district of Fin-tech would involve the residential areas as well as educational institutions and service sectors thus they not only are obligated to the environment but also to their fellow beings. Since it would encompass IT sectors, Residential areas, Retail hubs, Banking and Financial sector, etc under its project there will be a high chance of generation of carbon emissions and it is laying down of an underground pipeline system would cause a lot of land destruction. Thus, who are the development partners of this project have been previously accused of corporate greenwashing so for them using the same tactics to ensure the success of this project wouldn't require much effort. Many banks like Deutsche Bank, HSBC, and JP Morgan which would be set up in the GIFT SEZ IFSC domain have financed such projects and companies who were responsible for increasing carbon emissions and were responsible for other kinds of environmental degradation against the goals and commitments that were set up or proclaimed by them in their CSR reports. To earn high profits. Thus, it risks the current project as well since its foundation is sustainability and if it would fall prey to greenwashing by these financial and banking sectors through their financing and flexible policies for non-environmental friendly projects would undermine the basis of the GIFT City project extensively.

Conclusion

Thus, we need to carefully look at the plausible risks and analyze the problem of greenwashing seriously. First, reading along with the provision under Companies Act,2013 Section 135(1) conditions are required to have a CSR Committee. But extensive efforts should be made for a fair and efficient audit of all the reports prepared by them. Second, there should be a composition of teams that research and analyze the ESG reports of all these corporate companies and provide us with the statistics so that we can keep track of the companies which we are in daily transactions with or customers to their services. And all these whistleblowers would help in keeping these high-profile corporate houses' reputations in check. Thus, proper inspection and auditing of reports and taking stringent actions on the companies at the default of greenwashing can solve a lot of the problems at its premature stage in the GIFT City Project.

Written By: Pakhi Jain , Student at Institute of Law, Nirma University, Ahmedabad, Gujarat.