Why is it rare for China to have "greenwashing lawsuits"?

"Greenwashing", also known as "greenwashing", refers to exaggerating, fabricating or concealing environmental information about its business activities, services and products, which misleads consumers, investors, the public, regulators and other stakeholders.

According to the nine issues of the China Greenwashing List published by Southern Weekly from 2009 to 2023, the phenomenon of greenwashing in Chinese companies is very prominent. Eighty-five local and multinational companies made the list, covering a wide range of industries such as passenger cars, food, chemical pharmaceuticals, farming, construction and services. Among them, there are companies that have been fined for environmental protection and have not changed their ways, and there are also companies that have a "green" halo but do not live up to their name.

Although there is no shortage of administrative regulatory penalties caused by corporate greenwashing in China, greenwashing lawsuits are rare. Is there a legal basis for filing a greenwashing lawsuit in China? What are the possible obstacles to filing a greenwashing lawsuit in China?

Is there a legal basis for filing a greenwashing lawsuit?

"Greenwashing" legislation mainly involves three aspects of laws and regulations:

First, environmental administrative legislation related to the disclosure of corporate environmental information。Improving the disclosure of corporate environmental information is an important way to combat "greenwashing". China's "Cleaner Production Promotion Law" and "Administrative Measures for the Legal Disclosure of Enterprise Environmental Information" define clean and low-carbon production information and emission information in the production process, the "Notice on Printing and Distributing the Product Catalogue and Related Implementation Rules for Energy Efficiency Labeling" defines the energy consumption and environmental information of products in the consumption link, and the "Catalogue of Green Bond-Backed Projects (2021 Edition)" defines the product catalogue and carbon-related environmental information in the investment link.

In general, the existing legislation has a narrow definition of the scope of corporate environmental information disclosure, which still does not exceed the scope of environmental data during the pollution control period, and the inclusion of information related to low-carbon and sustainable development of enterprises is limited.

In 2024, the newly promulgated Interim Regulations on the Administration of Carbon Emissions Trading have made progress, which allows for "major defects or omissions in the preparation of the annual emission report, tampering with or falsifying data, using false data or other fraudulent acts", and imposing a fine of up to 10 times the illegal income or a fine of up to 2 million yuan, reducing the carbon emission quota for the next year, and even ordering the suspension of production for rectification.

However, this is only for the greenwashing of key emitters in allowance trading. A large number of greenwashing enterprises are not direct emitters participating in quota trading, and there is a lack of clear regulations on their carbon-related environmental information disclosure, resulting in the deterrent and preventive effects of existing laws often not proportional to the benefits brought by greenwashing. In the face of the great temptation of preferential financial policies, enterprises have the internal motivation to greenwash.

Second, greenwashing regulations in the financial sector.Financial institutions and securities regulators have issued a series of industry regulations to strengthen the transparency of corporate carbon-related environmental information disclosure to achieve the goal of anti-greenwashing.

The China Banking and Insurance Regulatory Commission (CBIRC) issued the Guidelines for Green Finance in the Banking and Insurance Industries, the China Securities Regulatory Commission (CSRC) issued the Guidelines for Environmental Information Disclosure of Listed Companies, an industry standard, and the Shanghai Stock Exchange's Action Plan for Carbon Peaking and Carbon Neutrality during the 14th Five-Year Plan Period issued and mentioned "improving the rule system...... The Hong Kong Securities and Futures Commission requires fund products with a focus on ESG and climate change to disclose how ESG is incorporated into investment decisions, and conduct regular annual assessments and disclosures. However, due to the fact that green financial investment, especially ESG investment, is an emerging field, its norms and standards have not yet been unified, the infrastructure is not yet perfect, and it is difficult for existing industry regulations to effectively regulate financial greenwashing, and ESG has even become the hardest hit area of greenwashing.

Third, the relevant economic legislation related to greenwashing and false propaganda.Although there is no legislative system for "greenwashing" in China, at present, China's "Advertising Law", "Consumer Rights Protection Law", "Anti-Unfair Competition Law" and other economic legislation contain relevant provisions, which can indirectly play a role in regulating corporate greenwashing, especially for greenwashing marketing.

Greenwashing marketing may be suspected of illegal acts such as false advertising, consumer fraud, and unfair competition. Among them, the Law on the Protection of Consumer Rights and Interests imposes a fine of up to 10 times the amount of illegal gains for false advertising, while the Anti-Unfair Competition Law stipulates a fine of up to 2 million yuan for false advertising. However, at present, the application of relevant penalties in the field of greenwashing is not ideal, and it is also difficult to file consumer civil public interest litigation in accordance with these legal provisions.

What are the obstacles to the "greenwashing" lawsuit?

At a time when the legislative system is not perfect, can the judiciary play a complementary role in making up for the loopholes in the legal regulation of greenwashing? However, from the perspective of the filing path, there are practical difficulties in initiating public interest civil litigation for greenwashing in China.

First, it is difficult to file a civil public interest lawsuit on the environment.At present, there is a lack of unified standards for the identification of the concept of "greenwashing" and "greenwashing", the lack of legislation on mandatory disclosure of corporate sustainable development information, and the causal relationship between corporate greenwashing and environmental consequences is difficult to establish because corporate greenwashing and data falsification do not directly involve environmental damage or ecological damage, and it is very difficult to prove the environmental damage consequences of corporate greenwashing.

In 2021, China Carbon Energy Investment Technology (Beijing) Co., Ltd. falsified coal sample test reports for enterprises, tampered with carbon emission data, and maliciously reduced carbon emission costs for economic interests when conducting carbon management consulting services, which involved "greenwashing" in a broad sense.

In June 2022, the All-China Environment Federation (ACEF) filed a civil public interest lawsuit against China Carbon Energy Investment Technology (Beijing) Co., Ltd. and other defendants in the Beijing Fourth Intermediate People's Court, which is the first "greenwashing" environmental civil public interest lawsuit involving the falsification of carbon emission data in China. Currently, the case is pending.

Second, there are obstacles to consumer civil public interest litigation.Article 45 of the Law on the Protection of Consumer Rights and Interests stipulates that "if a consumer's lawful rights and interests are harmed due to the use of false advertising or other false publicity methods by a business operator to provide goods or services, he may claim compensation from the business operator". However, according to the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Consumer Public Interest Civil Litigation Cases, the plaintiff is required to adduce "prima facie evidence that the defendant's conduct infringes upon the lawful rights and interests of a large number of unspecified consumers or endangers the personal and property safety of consumers, such as endangering the personal and property safety of consumers".

Consumers being misled by corporate greenwashing mainly infringe on consumers' right to know, which is "legitimate rights and interests damaged by false publicity". In practice, China's consumer civil public interest litigation often revolves around food safety issues, and the number of public interest litigation involving the protection of consumers' right to know is relatively small, and it mainly involves false publicity cases of counterfeit and shoddy products.

It is very difficult to prove that the business operator's conduct is sufficient to mislead consumers to make a wrong decision, and it is difficult to prove that the defendant's greenwashing behavior has caused substantial damage to the rights and interests of consumers.

Third, the Anti-Unfair Competition Law does not fall within the scope of civil public interest litigation.Article 8 of the Anti-Unfair Competition Law stipulates that "business operators shall not make false or misleading commercial promotions about the performance, function, quality, sales status, user evaluation, honors, etc., of their goods, so as to deceive or mislead consumers", and stipulates corresponding penalties in Article 20. In this regard, Article 5 of the Anti-Unfair Competition Law stipulates that "the State shall encourage, support and protect all organizations and individuals to exercise social supervision over acts of unfair competition", but it does not explicitly regard public interest litigation as a remedy. Traditionally, the Anti-Unfair Competition Law directly protects the interests of market competitors, and is not considered to be within the scope of public interest protection, nor does it fall within the scope of current public interest litigation.

In practice, the procuratorate is exploring anti-unfair competition public interest litigation, but at present, it only stays in the field of promoting anti-monopoly and anti-unfair competition of Internet platforms, and mainly takes administrative public interest litigation in the form, and submits procuratorial suggestions and supervision to the relevant administrative organs.

Suggestion: Improve the legal system for the regulation of corporate greenwashing

In the process of improving the legal system for the regulation of corporate greenwashing, it is necessary to clarify the definition, types, standards, procedures, and responsibilities of greenwashing, so as to improve the certainty and operability of the application of greenwashing laws. At present, there are various standards and guidelines for corporate environmental information disclosure in China, and there is an urgent need to issue clearer standards and guidelines for corporate carbon-related environmental information disclosure at the national level.

Strengthen legislation related to "anti-greenwashing".There are two international models of special legislation on "greenwashing": one is the special legislative model. The EU's Green Claims Directive is the world's first legislation specifically targeting "greenwashing", which clearly defines greenwashing. After EU countries incorporate the Green Declaration Directive into law, consumers, investors and the public can directly file greenwashing lawsuits based on it. The U.S. states have also formed a set of legal systems for greenwashing regulation by amending other laws such as consumer protection laws, advertising laws, anti-unfair competition laws, environmental laws, and criminal laws, providing a legal basis for greenwashing lawsuits. The author believes that, in light of the national conditions, China can regulate greenwashing by fine-tuning the existing legislation, increase the administrative punishment in the field of greenwashing, and increase the cost of greenwashing for enterprises.

Strengthen judicial supervision of "anti-greenwashing".At the judicial level, the court system can try to clarify the types and scope of "greenwashing" by publishing a series of guiding cases and typical cases. Under the existing legislative system, the procuratorate, as a qualified subject of environmental public interest litigation, consumer rights protection public interest litigation and climate change public interest litigation, should play an important role in "greenwashing" litigation, give full play to the governance efficiency of the judiciary in safeguarding public welfare, and provide judicial service guarantee for the dual carbon transformation of society.

Strengthen publicity and education on "anti-greenwashing".。An analysis of cases of extraterritorial greenwashing litigation shows that foreign consumers and environmental protection organizations are the main force in filing "greenwashing" lawsuits, while ordinary Chinese consumers and social organizations (environmental protection organizations and consumer associations, etc.) are invisible in the anti-"greenwashing" campaign. The "futuristic" nature of the harm of greenwashing and the "abstract" nature of the crisis of trust make it difficult to realize the importance of greenwashing lawsuits. Therefore, it is necessary to strengthen the communication and education of "greenwashing" law popularization and news and entertainment media, form an overall anti-greenwashing atmosphere in society, and promote enterprises to work hard to implement energy conservation and carbon reduction.

Author's Affiliation:School of Law, Sichuan University