Any company is considered as a separate being form its owners and has its own legal existence as laid down in Salomon v A. Salomon^[2], but even then, it is managed extensively by its Board of Directors (BoD) along with its management. In India, Section 166 of The Companies Act, 2013^[3] (hereinafter referred to as Act) elaborates the duties of the directors and to be specific, sub-section (2)^[4] states that this duty is also towards the environment. But directors are humans and catering to their own greed and short-term benefit have ignored this duty over time. In India, there has been no such instance where a director is sued for breach of this duty and only the corporations are sued for such environmental violations and that too not under the Companies Act. As there is no individual liability, environment is being ignored and fake eco-friendly image of corporations is being portrayed. The similar situation existed in multiple jurisdictions until January 2019, when UK amended their legislation relating to corporations^[5] and making environmental matters a part of the strategic report and keeping the company's website updated. Though this isn't a big step, but this legislation scheme will push the directors to take environment into consideration, particularly where there may be financial sways on the company.^[6]

Oil companies have been known to deteriorate the environment from their various mining and extraction purposes. The usage of greenwashing is very common in this industry. After the 2010 oil spill in Gulf of Mexico, Royal Dutch Shell came out with an aggressive advertisement strategy documenting the preservation programme they are running for the wildlife affected by the disaster. But oil companies being green is like a vegan lion. It's not just the oil companies anymore, the fashion industry is sharing the stage with them. In 2015, fashion industry emitted more greenhouse gases than the combined emission of maritime shipping and international flights.^[7] The fast fashion^[8] companies like Zara, H&M have a special clothing line dedicated to environment sustainability. They allow you to exchange old clothes for some discount on new clothes, that are later recycled. But their Annual Financial Repots beg to differ. In 2018, Inditex (parent company for Zara) claimed that their 88% of the waste is either recycled or reused^[9], but after few hundred pages they exclude the waste generated from their factories^[10] and at another page they also excluded their stores^[11]. This means that there is almost nothing that is being recycled and they are burying the key pieces of information in the huge stack of pages of their reports. They are advertising to recycle in order to sell more while the reality is, no recycling or reusing is taking place.

Sports apparel is even worst for the environment this because the features that are present can't be observed in any naturally produced fabric. So, these companies utilise the artificially produced fabrics like polyester, nylon and viscose. The boss of Patagonia, a sports apparel company, talks about the issues with the industry, in using sustainable materials with tons of chemical processing.^[12] Adidas in its Annual Financial Report of 2019 was so desperate to seem like they are green that they used the word 'sustainable' like a million times. In it they bragged about their partnership with Parsley Ocean Plastic but failed to give real information, they claimed to make millions of shoes and jerseys that contained plastics collected from this partnership,^[13] while they could have just used it to make aglets and tags. Another claim was to replace virgin polyester with recycled one by 2024^[14] but again the difficulty rises as it is not possible to produce products only with recycled plastic as it loses its strength in the process and the claim of using 50% at current stage could be right as there is a mixture of artificial fabrics used in their manufacturing and by making such claims, they are diverting the attention of consumers from seeing the harsh truth. Their involvement in groups like Zero Discharge of Hazardous Chemicals ^[15] seems to be working for them as now they are taking in use fabrics like viscose. But wait, the production of viscose requires trees from ancient forests coupled with gallons of water used in the process. So yeah, Adidas may have reduced their chemical discharge but that doesn't make them eco-friendly. Now the companies and the lobbyists use all this to wash their bad side and be green.

The Volkswagen Emission Scandal, which first came to light in August of 2015 in USA, led to opening of floodgate for litigation all around the world. This resulted to a freefall in the share prices and the company's reputation was on the verge of collapsing. Due to this rising pressure, the CEO Martin Winterkorn resigned in September 2015. After investigations began, the same results were found around the world. Thought there were emails exchanged between Winterkorn and the management agreeing to this, he denied having any knowledge in his deposition by US authorities.^[16] There was nothing to point the liability over him and other directors as either there is no law in that regard and even if there is, then in that company and shareholders are put above the interest of the environment. Thus, the company was just charged with cheating on the emission results. In USA, Volkswagen was fined for $4.7 billion for environmental violation^[17] and to give buyback option to all 475000 customers ranging from $12475-$44176^[18], while when the car was launched it starting price was $38000 ranging all the way up to $76000. In Australia it was $125 million^[19], INR 500 crore in India, £90 million in UK but all this was a small fraction of what they made. The Securities and Exchange Commission of USA^[20] indicted Winterkorn for fraud in 2019 following which Germany did to same and filled case against him and four other executives^[21], thus becoming the closest any country came to levy individual liability.

Every industry in the world is washing their products to seem like green and the worst part is that Greenwashing is not even a crime. At most it is considered as advertising puffery. But this crime is no less than money laundering. Like Greenwashing, money was laundered for a long time but its wasn't considered a crime till 1986. Al Capone is known across the globe and was earning almost $1.4 billion (in today's terms) yearly but when prosecuted could only be charged for a mere fraction of this money i.e., for the crime of tax evasion as money laundering wasn't a crime back then.^[22] The dynamic nature of law made it possible to provide protection against such crime which wasn't always considered a crime. The situation of Greenwashing seems similar as corporations are harming the environment, making fake claims, and cheating the consumers and for all this when, and if, charged get away with bare minimalist penalties when compared to the profits they have earned from all this.

Moreover, greenwashing is not merely about the environmental violation, its bigger than that as it also includes cheating with the investors and stakeholders, defrauding of consumers, conspiracy to commit crime and manipulation of share prices (or in extreme situations may result in insider trading). In India, different crimes are defined separately like Wrongful Restraint and Extortion and when committed as a part of one act gives rise to a whole new offence like Robbery. A similar approach must be adopted when it comes to greenwashing, rather than charging the accused with individual offences, they must be charged under the umbrella of greenwashing as an offence.

In a nutshell, preserving the environment is very crucial and corporations are using greenwashing as safe harbour to deceive the society. This in turn give rise to may more offences. The current situation demands for immediate legislative action to from laws. Just like the appointment of independent directors on the BoD to keep a check on the arbitrary decision making by other directors, appointment of an environmental director to become the voice of the environment and prioritising environment while decision making could prove to be beneficial. Another important development could be giving the environment same importance as a stakeholder as others and treating it at par with the shareholders as section 166 (2) of the Act includes environment however it has no effect in the practical world. Providing a further explanation to this effect or adding a new sub-section in totality for director's duty towards environment would make them balance out the interests of shareholder with that of environment while deciding. Imposing restrictions while giving corporations incentives (like tax rebates) to be eco-friendly and adopt low-carbon emission activities would make directors access the long-term benefits and take a step further in preserving the environment and fulfilling their ESR duty.

The author is a student at Jindal Global Law School. Views are personal.

[1] Michelle Diffenderfer and Keri-Ann C. Baker, Greenwashing: What Your Client Should Know to Avoid Costly Litigation and Consumer Backlash, 25 Natural Resources and Environment 21, 21 (2011).