Regulating Greenwashing through ESG Disclosure Laws: Strengthening Corporate Accountability for Sustainable Development

This Blog is Written by Vaibhav Sharma, 2nd Year, BBA LLB, National Law University Odisha, Cuttack.

(Blog V, Edition VI)

Introduction 

Stakeholder expectations, climate change and environmental degradation have made corporate sustainability a key issue in corporate governance, moving it beyond mere voluntary ethical concern. Businesses are being pressured more and more to report on their financial results but also on their environmental and social effects.Investors, regulators, consumers and civil society are increasingly calling on companies to report on their financial results and environmental and social impact. This transformation has resulted in the rise of ‘Environmental, Social and Governance' (ESG) principles as a universal standard to assess responsible business practices. ESG information is now impacting investment choices, corporate image, regulatory reporting and long-term business resilience. However, alongside the growing importance of ESG reporting, there has been a parallel escalation of greenwashing, a phenomenon in which companies overhype, misrepresent, or selectively report their sustainability initiatives while downplaying their negative environmental impacts. Greenwashing erodes customer and investor trust in sustainability reporting, skews the competitive landscape, leads to confusion in both consumer and investor decisions and has a negative impact on global sustainable development initiatives. Without proper regulation, sustainability reporting might end up being marketed as a product instead of a tool to hold companies accountable.  Greenwashing is a special challenge in the age of the United Nations Sustainable Development Goals (SDGs), part of the 2030 Agenda for Sustainable Development. Transparent corporate governance, responsible business practices and effective legal regulation is essential to the achievement of SDG 12 (Responsible Consumption and Production), SDG 13 (Climate Action) and SDG 16 (Peace, Justice and Strong Institutions) of the 17 goals in particular. Corporations have a significant impact on the environment, labour standards, technological innovation and resource management today. Laws and regulations therefore need to guarantee that corporate sustainability pledges are meaningful, quantifiable and actionable. The Government of India has been gradually integrating sustainability into the corporate regulatory framework with the enactment of the Companies Act, 2013, which mandates that 25% of the profit after tax of any company with net worth exceeding Rs. 50 crores must be spent on CSR, and the Securities and Exchange Board of India (SEBI) making the Business Responsibility and Sustainability Reporting (BRSR) framework applicable to listed companies. These initiatives represent important developments towards integrating ESG principles into corporate governance. However, there are concerns about whether the existing level of disclosure is sufficient, methods of verification, enforcement, and remedies for misleading sustainability claims. This is a development that several jurisdictions around the world have taken up with more comprehensive ESG reporting requirements. The European Union's Corporate Sustainability Reporting Directive (CSRD), the European Sustainability Reporting Standards (ESRS), and the International Sustainability Standards Board (ISSB) framework reflect a trend towards greater harmonisation in sustainability reporting, and the introduction of mandatory assurance requirements. The developments offer valuable comparative analysis to assess the regulatory framework in India, and areas that need to be improved. In this paper, the authors propose that the use of greenwashing should not be regarded simply as a matter of deceptive advertising or the protection of consumers, but as a serious matter of corporate governance, which undermines the confidence of investors, market integrity, and sustainable development. The paper examines whether the current law adequately prevents and incentivizes corporate accountability in the context of greenwashing by a doctrinal and comparative analysis of the legal landscape regarding ESG disclosures in India and internationally. It also suggests changes to the disclosure and reporting requirements, regulatory enforcement practices, independent verification, and corporate governance that would help strengthen disclosure, increase regulatory enforcement, enhance independent verification, and make corporate governance more consistent with sustainable development goals. 

Understanding ESG and Greenwashing

The concept of Environmental, Social, and Governance (ESG) has become one of the most influential paradigms in today's corporate governance. While the standard business model would assess companies based on their financial returns, ESG takes into account that long-term corporate value is inextricably tied to environmental stewardship, social responsibility, and good corporate governance. There is growing interest among investors, regulators, consumers and financial institutions in the performance of companies using ESG metrics, as a trend towards sustainable and responsible business behaviour. The environmental factor of ESG is related to a company's impacts on natural resources and ecological systems. It includes the topics of greenhouse gas emissions, climate change mitigation, bio-diversity protection and management, waste management, water management, pollution control, and renewable energy transition. The social component assesses the social interactions between corporations and employees, consumers, suppliers and local communities. It covers labour rights, workplace diversity, occupational health and safety, human rights due diligence, consumer welfare and community engagement. The governance part deals with the internal structure and the decision-making process of the company, such as the independence of the board of directors, the remuneration of the executives, the rights of the shareholders, transparency, anti-corruption, risk management and compliance with regulations. Together, these three pillars offer a holistic approach to understanding the sustainability value proposition of a corporation, and its ability to deliver value to multiple stakeholders, not just shareholders. While ESG and Corporate Social Responsibility (CSR) are often seen as synonymous, the two are quite distinct both in terms of intent and legal consequences. Traditionally, CSR is a voluntary philanthropic activity by businesses in the name of social welfare, which is separate from the regular business activities. ESG, on the other hand, stands for a tangible governance framework that incorporates sustainability into strategic planning and risk management within the company. ESG disclosures are gaining traction, and are becoming more compulsory by regulatory bodies and directly affecting investment decisions, lending practices, credit ratings, and market valuation, unlike CSR. India's move from a voluntary CSR under Section 135 of the Companies Act, 2013 to a mandatory sustainability reporting framework by SEBI, the Business Responsibility and Sustainability Reporting (BRSR) is a good example of this shift from voluntary to mandatory CSR. Corporations have obtained strong incentives to appear environmentally responsible, because of the increasing importance of ESG reporting as a measure of corporate reputation and investment appeal. This has led companies to engage in an increasing amount of "greenwashing", or when companies make false, exaggerated, or unsubstantiated claims about the environmental sustainability of their products, services, or business operations. Greenwashing can include outright lies, only disclosing positive information, omitting negative environmental effects, vague statements about sustainability, or claiming to be certified as sustainable when this is not the case, or presenting a future target as an actual accomplishment. This practice misinforms investors, degrades market competition and undermines the integrity of ESG reporting systems, and distorts consumer choice. Greenwashing has legal implications that are much broader than misleading ads. Greenwashing is an information asymmetric within corporate governance between the corporation and the stakeholders. ESG disclosures are a growing trend among investors to consider long-term financial risks, climate resilience and governance quality. If disclosures on sustainability are false or deceptive, investment decisions get skewed, and capital gets misallocated to companies that do not operate in a way that's sustainable. Greenwashing is no longer confined to the field of consumer protection law, but exists in the realm of securities regulation, corporate disclosure and fiduciary accountability. The trend of regulators around the world taking the issue of greenwashing seriously is reflected in recent developments. The Volkswagen Dieselgate scandal is one of the largest cases of environmental deception. The company introduced software into the system of their diesel-powered vehicles that would make them look like they comply with emission regulations, only to be able to release pollutants much higher in actual use. The scandal led to billions of dollars in fines, several regulatory investigations, shareholder lawsuits, and enormous damage to its reputation, showing the potential global financial impact of deceptive environmental claims as corporate governance failures. Likewise, there have been cases of regulatory action against multiple cases of multinational companies making possibly false sustainability statements. Consumer protection authorities raised concerns about the accuracy and substantiation of H&M's sustainability marketing, leading to the retailer being investigated for its environmental claims in the ‘Conscious Choice’ range. Similarly, German asset manager DWS Group, a subsidiary of Deutsche Bank, was the target of investigations by financial regulators in the United States and Germany regarding its failure to accurately represent how it incorporates environmental, social and governance principles into its investment process. The cases show that greenwashing is not limited to manufacturing but is now a phenomenon that is spreading to financial institutions, investment funds, consumer markets and multinationals in various sectors. The success of greenwashing is a clear impediment to the United Nations Sustainable Development Goals. The lack of transparency in disclosures on sustainability is in direct conflict with SDG 12, responsible consumption and production, by not allowing consumers or investors to make informed choices. These undermine SDG 13 by allowing companies to avoid meaningful climate related accountability while making public environmental sustainability pledges. In addition, weak enforcement mechanisms undermine SDG 16, which places a high priority on transparent institutions, accountability and the rule of law. Therefore, there is a clear need for a comprehensive and robust legal framework for ESG disclosures that goes beyond investor and consumer protection to ensure that corporate sustainability plays a meaningful role in sustainable development and is not a marketing ploy. Therefore, the conceptual framework to consider the scope of ESG and greenwashing is offered by the corporate governance perspective.For this reason, the corporate governance perspective is used to analyse whether current law has a sufficient scope in regulating sustainability disclosures and preventing misleading environmental claims. The next section, therefore, examines the changing landscape of ESG regulation in India and its efficacy as a means to ensure corporate accountability.

The Indian Legal Framework Governing ESG Disclosures and Greenwashing

Over the last decade, India has seen a gradual shift towards embedding sustainability in the law and regulation, thereby making sustainability a part of the corporate governance framework. Environmental and social responsibility long considered a voluntary corporate issue, is now being increasingly acknowledged as an integral part of corporate accountability, as determined by legislation and regulation. This change is in line with India's efforts to realize its Sustainable Development Goals (SDGs), its obligations under the Paris Agreement and its alignment of domestic corporate governance frameworks to the international ESG standards. Despite the progress, the Indian regulatory landscape dealing with greenwashing is still fragmented lacking any overall legislation to ban misleading sustainability disclosures.

A. Companies Act, 2013 and Corporate Sustainability

Companies Act, 2013 is one of the biggest steps towards introducing the concept of responsible business in corporate governance. It is one of the most innovative provisions in the bill, as it introduces the concept of Corporate Social Responsibility (CSR) under Section 135, which is the first time that the concept of CSR has been statutorily mandated for a major economy like India for companies that meet certain criteria. Companies with a prescribed turnover, net worth or net profit are required to form a CSR Committee, to prepare a CSR policy and to allocate a minimum of two per cent of the average net profits for the previous three years to activities as specified in Schedule VII of the Act. While CSR is not about disclosing environmental, social and economic impacts, it is the legislative acknowledgement that businesses have responsibilities other than shareholders' wealth maximisation. Schedule VII explicitly specifies that activities related with environmental sustainability, ecological conservation, protection of natural resources, rural development, gender equality, and promotion of education are allowed as CSR activities. Therefore, the ESG governance has been built on the normative groundwork provided by the Companies Act. Additionally, the Board of Directors are required to draft a report to the Board entitled Board's Report, which shall include material information in respect of the affairs of the company, risk management policies, conservation of energy, technology absorption, foreign exchange earnings and other matters specified in the Companies Act. These provisions are good for transparency, but do not contain explicit rules on how to ensure that sustainability statements of companies are accurate and verifiable. This means that companies can report on specific environmental successes without giving a comprehensive overview of their sustainability efforts. The Companies Act, therefore, only indirectly supports the ESG governance by encouraging transparency and responsible business practices, but does not provide a detailed legal framework to identify and punish greenwashing.

B. Business Responsibility, Sustainability Reporting (BRSR)

The Securities and Exchange Board of India (SEBI) had put in place the Business Responsibility Report (BRR) for the top listed companies in 2012, acknowledging the need for more transparency on sustainability disclosures. Later, by its circular dated 10 May 2021, SEBI has incorporated the Business Responsibility and Sustainability Report (BRSR) in place of the erstwhile Business Responsibility Report (BRR). The top 1,000 listed entities (by market capitalisation) had been mandated to submit BRSR in their annual reports since the financial year 2022–23. The BRSR framework is India's most robust ESG disclosure framework. It is based on the National Guidelines on Responsible Business Conduct (NGRBC) and mandates quantitative and qualitative disclosures related to companies' environmental performance, the welfare of employees, human rights, consumer protection, ethics and governance, and community development. The framework requires comprehensive reporting on GHG emissions, energy consumption, water management, waste management, occupational health & safety, gender diversity, supply chain sustainability, grievance redressal processes, and responsible business practices. BRSR also brings more standardization and comparability of sustainability information, compared with previous reporting systems. Investors can thus better assess ESG risks and make comparisons between companies in different sectors. Further, SEBI has recently issued BRSR Core, which specifies a small list of limited ESG indicators to be independently assured by companies listed on the exchanges with a large shareholding base. This will be a crucial movement from voluntary sustainability reporting to verifiable reporting with external assurance mechanisms. The BRSR framework still has a number of shortcomings, however. But for the moment it covers only the top listed companies, excluding thousands of medium-sized listed companies and private corporations. Secondly, numerous disclosures still heavily depend on self-reporting by companies, which is almost certain to result in selective reporting or concealing of negative environmental data. Third, the independent assurance requirements are still limited to some of the BRSR Core indicators, with a large number of qualitative sustainability assertions that are not fully assured. BRSR therefore is a valuable step in enhancing transparency but won't solve the greenwashing problem.

C. SEBI's Regulatory Response to Greenwashing

In recent times, SEBI has come to recognise that misleading ESG disclosures can lead to the misallocation of securities markets by impacting investor decision-making. With the rise of sustainable investing in India, misinformation regarding ESG can impact share prices, investment choices, and corporate valuations. To tackle this concern, SEBI has tightened the disclosure requirements in LODR Regulations and several circulars pertaining to sustainability disclosure. Listed entities must comply with material disclosure requirements to disclose truthfully and in good time; directors are subject to fiduciary duties on truthful corporate reporting. If misinformation in a sustainability disclosure is relevant to investment decisions, it could result in the application of the securities laws on securities fraud and/or unfair trade practices. Further, SEBI has prescribed guidelines on ESG Rating Providers (ERPs) to enhance transparency and credibility of ESG assessments. These guidelines set out criteria for who can provide ESG ratings, measures to protect against conflicts of interest, disclosure requirements, and governance measures. SEBI aims to make ESG rating more reliable, thereby bridging information asymmetry in the capital market and boost investor confidence in sustainability related information.

D. Regulatory Gaps

While India has made significant strides, the system of regulation for ESG still has a number of crucial challenges. Current disclosure systems focus on disclosure than substantive accountability. While companies are encouraged to publish sustainability data, there are relatively few mechanisms for the regulators to independently verify the accuracy of detailed environmental claims. As such, despite significant progress in the Indian law to incorporate sustainability in corporate governance, it is largely disclosure-driven. To tackle greenwashing, action must go beyond the current level of disclosure to more robust verification processes, independent audits, transparent statutory frameworks and appropriate enforcement action which can make sustainability reporting more than a reputational game.

Comparative Analysis of Global ESG Disclosure Regimes

Given the rapid growth of sustainable finance, and the development of in-depth legal frameworks on Environmental, Social and Governance (ESG) disclosures globally, such frameworks are of growing importance. While the goals of the regulations remain consistent — to ensure transparency, accountability of companies, and better investment choices — the approaches vary widely in their breadth of scope, enforcement, disclosure requirements, and assurance requirements. This comparative review offers some insights for the review of the Business Responsibility and Sustainability Reporting (BRSR) regime in India and how it can be strengthened to address the problem of greenwashing.

A. EU: Legal Ecosystems

The EU has become the world leader in sustainability regulation with one of the most extensive and legally-binding ESG disclosure frameworks. While the EU's first voluntary reporting was permissible, it has gradually moved towards mandatory sustainability reporting with the passage of the Corporate Sustainability Reporting Directive (CSRD) into force since January 2023. The Directive significantly widens the scope of companies that must report on sustainability-related information, not just listed companies, but also large private companies and some non-EU companies active in the European market. One of the key aspects of the CSRD is the double materiality principle. In this way, companies must not only report on the impact of environmental, social and governance (ESG) issues on their financial results, but also on the impact of their business activities on society and the environment. This approach is based on the idea that corporations are not only sources of sustainability risks, but also are the object of them, expanding the conventional scope of corporate reporting from investors to corporations. The CSRD is complemented by European Sustainability Reporting Standards (ESRS) which set out detailed reporting requirements on climate change, biodiversity, pollution, workforce, human rights, governance structures and business ethics. The Directive also introduces external assurance on sustainability reporting, which will make it more difficult to make misleading claims and increase the confidence of stakeholders in sustainability reporting. Also, the European Union (EU) has implemented the Corporate Sustainability Due Diligence Directive (CSDDD) to mandate large corporations to identify, prevent, mitigate and disclose adverse human rights and environmental effects across their operations and value chains. Unlike disclosure regulation, the CSDDD requires substantive due diligence, going beyond reporting to corporate activity. By making this integrated approach, there is a significant limitation in the possibility of greenwashing because companies have to show actual compliance instead of just publishing a sustainability statement.

B. United States: Materiality-Based ESG Regulation

The U.S. has a more unique method of regulating ESG. American securities regulation does not require companies to prepare a comprehensive sustainability report, but rather is centered around material information that is relevant to investors. The U.S. Securities and Exchange Commission (SEC) has increasingly been acknowledging that climate-related financial risks are material information that must be disclosed under federal securities laws. The SEC also rolled out climate-related disclosure rules for certain public companies in 2024, and these rules will be implemented, but have been facing judicial and political challenges. At the same time, U.S. regulators have stepped up their scrutiny of misguided ESG disclosures. The SEC has levied hefty fines on investment advisers and financial firms for misleading investors about how much weight they placed on ESG when making investment recommendations. One such case involved enforcement action against DWS Investment Management Americas for material misrepresentations about the processes it used to integrate environmental, social, and governance considerations into its investment processes, which led to substantial financial penalties.

C. United Kingdom: Integrating Climate Governance into Corporate Reporting

The United Kingdom has embraced a mixed model of mandatory climate-related financial disclosure and a principles-based corporate governance framework. The Task Force on Climate-related Financial Disclosures (TCFD) recommends disclosure of climate-related risks for large companies and financial institutions. The disclosures include governance-related disclosures, risk management, strategic planning and climate-related financial impacts disclosures.

D. Comparative Assessment of India's ESG Framework

The BRSR framework for India is a step in the right direction towards sustainable reporting and has made India one of the front runners in having the world's first mandatory ESG reporting system. However, certain differences exist between Indian regulatory framework and the model followed by the European Union (EU), the United Kingdom (UK) and the United States (US). The first is that India's disclosure requirements currently only apply to the top 1,000 listed companies, while in the EU it applies to a much wider range of companies. As a result, there is a big portion of Indian businesses that is not required to report under ESG. Secondly, BRSR does not take the European approach of double materiality, although it calls for detailed disclosure in line with the National Guidelines on Responsible Business Conduct. Indian revelations mostly highlight corporate performance and fail to put the corporation under a broader microscope to assess its impact on society and environment. Thirdly, the assurance requirements of India's BRSR Core are relatively modest. While the new mandatory reporting of specific ESG indicators is a positive step, many of the qualitative sustainability disclosures remain self-reported. The European Union, by contrast prescribes independent external assurance of sustainability reports, which makes it much harder to engage in greenwashing. Lastly, India does not currently have a specific statutory ban on greenwashing, that is, the Financial Conduct Authority (FCA) of UK does not have a dedicated statutory ban on greenwashing. Thus, there is a need for regulatory action against misleading sustainability claims in the general securities laws, consumer protection law, advertising law, or anti-fraud provisions. This disjointed system of enforcement causes uncertainty in the law, and reduces the effectiveness of current laws as a deterrent. Comparative analysis thus shows that over the last decade, the ESG regulatory landscape has progressed significantly in India but still needs to be enhanced to ensure its standards keep pace with the change in the best practices across the globe. The inclusion of wider reporting requirements, an improvement of assurance frameworks, the consideration of double materiality and the introduction of a clear definition of greenwashing would greatly improve the credibility of the Indian sustainability reporting framework and improve corporate accountability.

Challenges in Regulating Greenwashing and Policy Recommendations

The practice of Environmental, Social and Governance (ESG) reporting has been institutionalised over time, which has undoubtedly made companies more transparent and helped to foster responsible business practices. But the burgeoning disclosure of sustainability has also revealed substantial regulatory gaps that leave room for greenwashing to continue. Although some jurisdictions have required disclosure frameworks, there are no consistent standards, enforcement mechanisms or verification procedures to support the credibility of ESG disclosures. These gaps need to be overcome by shifting the focus from disclosure to accountability, independent verification and effective enforcement.

A. Uniform Legal Definition of Greenwashing is Missing

The lack of a common definition of greenwashing is one of the major difficulties in its regulation. While regulators, international organisations, and scholars agree that greenwashing involves the spread of misleading environmental information, there are wide variations in the definition and implications of the term across different jurisdictions. Some legal systems have specific laws targeting deceptive advertising, and other legal systems consider misleading sustainability disclosures to be a securities regulation or consumer protection law violation. There is no statutory definition of greenwashing in India at this time. Greenwashing is not defined nor prohibited by the Companies Act, 2013, the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. As a result, general provisions concerning fraudulent disclosures, unfair trade practices, or misguided ads are all that enforcement agencies have to address. This is achieving a non-sustainable level of fragmentation of the regulation, which causes uncertainty about the legal level of claims relating to sustainability and makes regulation difficult to implement. Likewise, without statutory recognition, it is hard for investors and consumers to prevail against corporations who overstate or selectively disclose environmental performance. Greenwashing should be addressed not just through consumer protection, but as a corporate governance and securities regulation issue, as ESG disclosures are increasingly playing a part in investment decisions.The legal treatment of greenwashing should go beyond consumer protection and be seen as a corporate governance and securities regulation issue, as ESG disclosures are becoming a more prominent factor in investment decisions.

B. Self-Report Sustainability Information

The second challenge comes from the amount of self-reported ESG information. While the Business Responsibility and Sustainability Reporting (BRSR) framework specifies detailed disclosure requirements, the majority of the information reported is still from the reporting companies themselves. Lacks of thorough independent verification gives corporations leeway to report on sustainability performance and threats. One of the most prevalent examples of green washing is selective disclosure. A company can highlight specific environmental projects without disclosing details on emissions from its carbon-heavy operations, supply chain or its breaches of the workers' rights or environmental lawsuits. Such reporting provides an incomplete view of corporate sustainability and can lead to substantial misrepresentation of investors who make investment decisions based on ESG information.

C. SEBI's introduction of the BRSR

Core and mandatory assurance for selected indicators is an important reform, however, there are limited ESG indicators that are currently subject to external assurance. There is a need for a wider assurance framework for material sustainability disclosures to significantly improve the credibility of ESG reporting. The lack of consistency among ESG Rating Methodologies.The incompleteness of ESG Rating Methodologies. One of the other major issues is the inconsistent nature of the ESG ratings agencies. ESG ratings also differ from traditional financial ratings in the sense that they frequently use different methodologies, criteria, indicators, and weighting systems. Thus, two different ESG ratings can be issued by different agencies, even if they are based on the same publicly accessible data, for the same corporation. This mismatch can cause confusion for investors and negatively impact trust in sustainable finance initiatives. Academic research shows how various ESG measurement approaches can lead to rating divergence rather than actual differences in corporate sustainability performance. This can lead different investors to invest in a company using different environmental data and criteria. While SEBI has enacted regulations that set out the standards for ESG Rating Providers (ERPs), further standardisation is needed to enhance comparability, transparency and methodological consistency.

D. Weak Enforcement and Limited Regulatory Capacity

Credible enforcement, as well as disclosure requirements, is needed to facilitate effective regulation based on ESG. As sustainability claims grow more complex, regulatory bodies need to have the technical expertise, institutional capacity and investigative capacity to do so. The scientific methods, GHG accounting, biodiversity assessments, lifecycle emissions analysis and due diligence of supply chains are among the complex scientific disclosures associated with climate-related reporting. The traditional financial regulators may not have all the disciplines needed to independently check this information. Enforcement agencies have therefore been forced to rely mainly on the information provided in the companies reports or by external consultants, and are unable to identify advanced examples of greenwashing. Moreover, there are relatively few cases of enforcement action concerning misleading ESG disclosures in India. Securities laws generally allow regulators to act against misinformation in securities disclosures, but there are not many reported instances involving greenwashing. This limited enforcement diminishes the deterrent value of disclosure requirements and could lead to "compliance face" rather than substantive change in sustainability.

E. Policy Recommendations

A multi-dimensional approach is needed to combat greenwashing, involving legislative reform, strengthening of institutions and harmonisation at the international level. Firstly, Parliament needs to establish a statutory definition of greenwashing that would be used in corporate, securities, consumer protection and environmental law. A clear legal definition would eliminate the confusion and ambiguity in regulations and promote uniformity in regulatory enforcement. Secondly, the scope of mandatory ESG reporting should be gradually extended to the bottom of the listed companies, in India. Environmentally and socially heavy industries, financial institutions and large unlisted companies should also be required to provide regular sustainability reporting, as they have a substantial impact. Thirdly, all material disclosures on sustainability should be done under independent assurance and not only selected BRSR Core indicators. Accredited assurance services from third-party providers would greatly enhance the reliability and credibility of ESG reporting. Fourthly, India should adopt the concept of double materiality as in EU's CSRD. Businesses should make transparent their relationship between sustainability risks and their financial results, as well as their contribution to society, climate, biodiversity and human rights. This would be more closely in line with the goals of sustainable development in the context of corporate reporting. Fifth, SEBI should create specific ESG supervisory units with specialists across fields of environmental science, climate policy, and corporate governance and sustainable finance. ESG reporting is a highly technical issue and is requiring interdisciplinary regulatory capacity for effective monitoring and enforcement. Together, these changes would make ESG disclosures more than just a paperwork exercise – they would become powerful instruments of corporate responsibility. More significantly, they would help solidify a legal framework that can help fight against greenwashing and extend the drive towards responsible corporate governance and the SDGs in India.

Conclusion

ESG (Environmental, Social, and Governance) has become a key factor that has revolutionized the relationship between corporate governance, financial regulation and sustainable development. ESG reporting is becoming a key element of corporate accountability and is more than a voluntary governance initiative, as it is now relied upon by investors, regulators, consumers, and civil society to assess corporate performance. But as greenwashing increases, the effectiveness of these reports is beginning to be questioned as companies can sell a green image without taking the corresponding sustainable business action. This, therefore, creates a pressing legal and policy challenge for all jurisdictions aiming to meet the United Nations Sustainable Development Goals (SDGs) by controlling greenwashing. This paper has suggested that the issue of greenwashing is not an issue of misled advertising or consumers' protection. Instead, it is a serious deficiency of corporate governance that has consequences for investor trust, market efficiency and public trust in sustainability reporting. Inaccurate ESG reporting misleads investors, undermines responsible investment and saps the effectiveness of regulatory efforts to promote sustainable business practices. Legal control of greenwashing should thus be embedded in the overall context of corporate governance, securities law and sustainable finance. The analysis shows that India has come a long way by integrating sustainability into its corporate regulatory framework through the Companies Act, 2013, the National Guidelines on Responsible Business Conduct (NGRBC), and the framework of Business Responsibility and Sustainability Reporting (BRSR) by SEBI. These efforts have helped to increase transparency in companies and promoted the adoption of environmental and social aspects in listed companies' governance approaches. Yet, India's current regulatory framework is largely disclosure-driven and continues to rely heavily on self-reported sustainability reporting. A lack of a statutory definition of greenwashing, inadequate assurance, weak regulatory enforcement, and variable approaches to ESG assessment point continue to expose opportunities for greenwashing. Comparability of the E.U., the U.S. and the U.K. also shows that mandatory legal disclosure requirements, independent assurance, specialised regulatory oversight and credible enforcement are essential for good regulation of ESG. This is shown by the European Union's implementation of the concept of double materiality and of mandatory external assurance, the United Kingdom anti-greenwashing provisions, and the active securities enforcement in the United States. These international developments offer India useful insights to enhance its developing ESG framework. India needs a more holistic approach to legislation to address greenwashing by adding a specific prohibition on greenwashing into the Act, mandating disclosure of environmental, social and governance metrics for all listed companies and not just the top 100, increasing independent assurance, harmonising ESG rating methodologies and establishing regulatory expertise in SEBI. This increased alignment with internationally accepted sustainability reporting frameworks, such as the International Sustainability Standards Board (ISSB) guidelines, would also enhance the comparability and strengthen the investor trust in the Indian capital markets. These reforms would ensure that the reporting on ESG becomes effective governance and not a reputation management exercise. Finally, the effectiveness of ESG regulation will require not just more but more credible, more accurate and more accountable sustainability disclosure. Legal frameworks need to shift from disclosure-based to governance-based systems that can ensure that corporate claims of sustainability are substantiated and that there are tangible repercussions for those who misrepresent. ESG disclosures are only going to play a meaningful role in advancing Sustainable Development Goal 12 (Responsible Consumption and Production), Sustainable Development Goal 13 (Climate Action), and Sustainable Development Goal 16 (Peace, Justice and Strong Institutions) through strong legal regulation. Effective greenwashing regulation is therefore not only a compliance issue for companies, but a key precondition in establishing sustainable markets, responsible businesses and a resilient legal system that will help to guide development towards equity and environmental sustainability.

(Write to the author at vaibhavsharma2562@gmail.com.)