Greenwashing: a ‘green’ collar crime?

Soumen Mohanty
AQUILAW, Kolkata
soumen.mohanty@aquilaw.com

Syed Kishwar
AQUILAW, Kolkata
syed.kishwar@aquilaw.com

Introduction

The past ten years have seen climate-conscious consumerism fundamentally transform the way businesses market themselves to the world. Sustainability is no longer a fringe benefit; it is a core business asset. The issue, of course, is that not all of the corporations that declare an asset as their own have the processes of supply under their control so as to be able to publish their sustainability record. Greenwashing is as old as marketing itself, but in the era when the performance of environmental, social and governance (ESG) is under intense examination by consumers, investors and regulators alike, the practice has gained a new magnitude and a new set of implications.

Greenwashing in Latin America: an emerging regulatory landscape

Greenwashing is a falsification, exaggeration or unproven statement about the environmental nature of a product, service or business. If there is one region in which the stakes of greenwashing are particularly high, it is Latin America. The oil and gas, mining, agribusiness and commodity export industries in Latin America are the largest in the region and are the ones most susceptible to greenwashing.

Brazil has the most developed framework among the Latin American countries. Its Consumer Protection Code (Law No 8,078/1990) prohibits misleading advertising and, crucially, provides for criminal penalties, such as imprisonment for three months to one year, plus a fine, for entities that sponsor or produce deceptive advertisements.[1] Brazil’s National Council of Advertising Self-Regulation (Conselho Nacional de Autorregulamentação Publicitária or CONAR) has maintained a sustainability-specific category since 2011, adjudicating at least 96 sustainability-related complaints in the intervening years. Oil and gas companies, including Petrobras, Shell Brasil and Ipiranga, are among the most frequently cited respondents.[2] But CONAR decisions are neither criminal in nature nor consistent, and the gap between what companies say and what they do remains striking. Petrobras, the subject of multiple greenwashing complaints, is simultaneously planning a 15 per cent expansion of its fossil fuel production in environmentally sensitive offshore areas, as it advances its net zero commitments.[3]

Chile, on the other hand, has made the boldest recent moves. A 2023 reform to the Chilean Penal Code introduced environmental offences for the first time, extended criminal liability to state companies and made ecocide activities that knowingly cause significant environmental harm a criminal offence.[4] A dedicated greenwashing bill is now also being considered, one that departs from the standard misleading advertising framing and instead proposes fines equal to twice the economic benefit derived from the impugned communications and prohibits companies convicted of environmental damage from advertising their business in relation to sustainability matters.[5] Colombia’s Parliament is still debating Senate Bill 173 of 2024 - Chamber Bill 490 of 2025, which would strengthen the regulations against greenwashing.[6] Peru’s National Institute for the Defence of Competition and the Protection of Intellectual Property (Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual or INDECOPI) has already established administrative sanctions for making misleading environmental claims.[7] Mexico’s Office of the Federal Prosecutor for the Consume (Procuraduría Federal del Consumidor or PROFECO) possesses broad powers to investigate false advertising, including environmental misrepresentation.[8]

Argentina is the most conspicuous gap within this region. Its Penal Code, drafted in 1921 and which has not been substantially reformed since, contains no direct provision on environmental offences. If a corporation misrepresents its environmental performance to investors and consumers, there are currently no powers within Argentine criminal law to deal with it.[9]

The situation in the region is also complicated by the Escazú Agreement, which came into force in 2021 and binds its parties, currently 24 states, to ensuring access to information, the right to participate and access to justice in regard to environmental affairs.[10]

Greenwashing directly undermines these rights as it is an act of making false and misleading environmental claims. However, no party to the Agreement has used this as a basis for building legal frameworks to address greenwashing. Across the region, the structural problem is the same - greenwashing is treated as a consumer protection or advertising issue, not as a crime. The deterrent and punitive force of criminal law is entirely absent.

Is greenwashing a white-collar crime: global perspectives

The concept of white-collar crime, as understood today, covers non-violent offences committed for financial gain through deception by persons whose professional or occupational status gives them both the means and the opportunity to commit them. Fraud and cheating are its twin pillars.

Since the decision issued by the United Kingdom’s House of Lords in Derry v Peek,[11] fraud has been defined in English law as a false representation made with knowledge, or without the belief that it is true, or recklessly as to whether it is true, with motive being irrelevant once the fraud is established. The French law adopts a more or less similar approach: escroquerie in the Penal Code is defined as a situation in which an individual employs a false identity, a false quality or fraudulent manoeuvres to make another person part with property or agree to an obligation to the disadvantage of that person or a third party.[12] Swedish law has the same bedraigeri: inducing someone to act or refrain from acting by deception, such that the accused gains.[13]

The similarity in all of these definitions is that they all involve a four-fold structure: misrepresentation or deception; induced reliance; harm to the person who relied on the same; and unjust enrichment for the person who deceived. Greenwashing fits perfectly into this structure. The misrepresentation is the false environmental claim. The induced dependence is the buying or the capital investment made by the consumer or the investor. The damage is the economic loss and the perversion of economic choice and, on a systemic scale, the destruction of real sustainability markets. The reputational and commercial benefit that the company gains at the expense of competitors who do not make false claims in regard to their qualifications is the unjust enrichment. Thus, there is no principled basis for treating greenwashing as anything other than a white-collar crime.

The way forward

Across Latin America, enforcement against greenwashing rests with designated consumer protection/regulatory authorities like the CONAR, PROFECO and INDECOPI etc. These authorities, however, lack the rigours of criminal enforcement, and their powers are limited to fines and/or ordering the removal of the misleading claims. Unfortunately, administrative fines tied to advertising revenues do not adequately reflect what is actually at stake. Civil penalties, even substantial ones, simply do not carry the reputational and personal consequences that criminal liability does. What is required, throughout the region, is a special legislative framework that recognises greenwashing as a distinct offence and imposes fines that are proportional to the monetary benefits received by the perpetrator/wrongdoer and the social damage caused as a result. Such a measure would not constitute a departure from established legal principles, but would rather give effect to their necessary evolution in regard to addressing environmental misrepresentation.