Sustainability claims and greenwashing in China
- Environmental laws and regulatory framework are continuously improving, and there is strengthened supervision of greenwashing
- Chinese media and non-governmental organizations are increasingly strengthening public opinion monitoring
- Consumers' environmental awareness is increasing, but there is still a need to strengthen publicity and guidance
What are the top 3 developments in your territory concerning green claims and the associated risks of greenwashing?
Environmental issues have been discussed in China for many years, and in recent years there has been a steady increase in government supervision, regulation and corporate recognition of environmental responsibility. The central government has set ecological goals in its "14th Five-Year Plan," aiming to "promote eco-friendly work and lifestyles throughout society." The government has also set the goal of building a beautiful China, urging a rapid transition to green development methods, continued and deepened efforts in pollution prevention and control, enhancement of ecological system diversity, stability, and sustainability, and the initiation of a nationwide campaign to build a beautiful China. With the support, implementation, and promotion of national policies, Chinese enterprises are increasingly concerned about environmental issues. Consumer awareness of green products and participation in carbon reduction initiatives are gradually increasing, and China is gradually forming a new development pattern guided by the goal of achieving modernization with harmonious coexistence between humans and nature in.
Here are three important trends for Chinese companies to keep an eye on in their operations, including institutional development, public opinion monitoring and consumer awareness.
1. Environmental laws and regulatory framework are continuously improving, and there is strengthened supervision of greenwashing
China's regulations related to ecological environment are scattered across various laws and regulations. However, China is actively promoting the compiling of an ecological environment code, which will initially be divided into three parts: a pollution control code which aims to eliminate contradictions and conflicts in current laws and to improve the coherency of the legal standards for pollution control; a natural ecological protection code which integrates and optimizes legislation related to ecological elements protection and protection of specific areas; and a green low-carbon development code which complements and improves legal standards related to green low-carbon development, integrates and develops laws related to low-carbon development, and formulates basic standards, in response to China's dual-carbon goals and the requirements of international conventions on dealing with climate change.
In China, the development of the environmental information disclosure system is gradually taking shape. For example, China's Ministry of Ecology and Environment (“MOE”) formulated the Administrative Measures for Disclosure of Corporate Environmental Information and related reform programs in 2021. Meanwhile, the China Securities Investment Funds Association ("CSIFA") issued the Green Investment Guidelines (Trial) in 2018, along with recommendations for fund managers' self-assessment report frameworks. In 2021, the People's Bank of China ("PBOC"), the National Development and Reform Commission ("NDRC") and the China Securities Regulatory Commission ("CSRC") jointly promulgated the Catalog of Green Supporting Bond Projects. On July 22, 2021, the PBOC issued the Guidelines on Environmental Information Disclosure for Financial Institutions. The China Banking and Insurance Regulatory Commission ("CBIRC") issued on June 1, 2022, the Guidelines on Green Finance for the Banking and Insurance Industry. These guidelines cover "whether there is regular disclosure of the environmental performance of green investment products" and will provide more complete criteria for assessing the compliance of "Green Investment Products".
In 2021, the Ministry of Industry and Information Technology (“MIIT”) issued the 14th Five-Year Plan for Green Development of Industry, which called for promoting the revision of laws and regulations such as the Energy Conservation Law, the Circular Economy Promotion Law, and the Cleaner Production Promotion Law. In 2023, the MOE and the State Administration for Market Regulation (SAMR) issued the Measures for Administration of Voluntary Greenhouse Gas Emission Reduction Trading (Trial), and in 2024, the State Council issued the Interim Regulations on the Administration of Carbon Emission Trading. In addition to national regulations, some cities and provinces with higher levels of economic development are taking the lead in enacting comprehensive ecological protection legislation. In September 2021, Shenzhen took the lead in implementing the Shenzhen Special Economic Zone Ecological Environment Protection Regulations, which incorporates carbon peaking and carbon neutrality into the overall layout of ecological environmental protection, authorizes the Shenzhen municipal government to formulate carbon emission intensity standards for key industries, and extends to construction projects with carbon emission intensities exceeding industry admission negative list standards. In addition, Chongqing was selected in August 2022 as a site for the construction of a pilot zone for green finance reform and innovation, with plans that include improving the disclosure system for information on major environmental risks and exploring the establishment of a mechanism for categorizing and managing negative information. Meanwhile, environmental information disclosure will be linked to green project applications, and inter-departmental linkages will be strengthened to prevent the emergence of greenwashing. In 2023, the Shanghai Municipal Bureau of Ecology and Environment issued the Shanghai Carbon Inclusion Management Measures (Trial), which quantifies and assigns a certain value to carbon-reducing behaviors and promotes the establishment of a green and low-carbon production and living lifestyle by using commercial incentives, policy support, and market transactions.
At present, China does not have a single piece of legislation targeting greenwashing. Illegal greenwashing is currently regulated by laws and regulations in different areas. For example, companies engaging in greenwashing through deceptive advertising can constitute false propaganda, violating the Advertising Law, Anti-Unfair Competition Law, and Consumer Rights Protection Law. Additionally, if a company's products do not meet green certification standards, it will also violate the Product Quality Law, Green Market Certification Management Regulations, and Green Market Certification Implementation Rules.
At the same time, enterprises that not only do not benefit the environment, but also cause pollution, may give rise to corresponding environmental violations and be subject to administrative penalties. For example, the Implementation Plan for Promoting Green Consumption (issued by the NDRC and six other departments on January 18, 2022) stipulates that China will crack down on false labeling of green and low-carbon products, and will include information on relevant administrative penalties and other information in the national credit information sharing platform and the national enterprise credit information publicity system. In addition, according to the Memorandum of Cooperation on Joint Disciplinary Measures for Production and Operation Units and Related Personnel in the Field of Environmental Protection for Defaults issued by the NDRC, the PBoC and the MOE in 2016, various joint disciplinary measures can be taken against defaulters, including prohibiting environmentally defaulted enterprises from participating in government procurement activities, restricting their acquisition of government-provided land, and restricting their issuance of corporate bonds and corporate debentures etc. If a company receives administrative penalties for greenwashing, it will be prevented from engaging in other important business activities.
At the judicial level, the Supreme People's Court has attached importance to cases where listed companies and bond-issuing enterprises, among others, have failed to disclose carbon emission information such as corporate carbon emissions and emission facilities in accordance with the requirements for the management of corporate environmental information disclosure, and has demanded that enterprises be guided to take the initiative to adapt to the requirements of green and low-carbon development, to strengthen their awareness of environmental responsibility, and disclose environmental information in a timely, truthful, accurate and complete manner in accordance with the law.
2. Chinese media and non-governmental organizations are increasingly strengthening public opinion monitoring
The Chinese media is playing a role in environmental monitoring, urging companies to take responsibilities for environmental protection.
In 2009, Southern Weekend began publishing a "China Greenwashing List". Entries on this list are based on 10 criteria, including blatant deception, deliberate concealment and double standards. The list would list the top 10 companies that made commitments about their environmental responsibilities but actually failed to live up to them. The list includes well-known central state-owned companies, such as China National Petroleum Corporation, as well as well-known foreign companies, such as Apple and Adidas. In addition, China Central Television (“CCTV”) in its annual "315" Consumer Rights Protection Day special program, also exposes some typical corporate behaviors that are not environmentally friendly.
Non-governmental organizations such as the Center for the Institute of Public and Environmental Affairs (“IPE”) have also worked with various stakeholders in recent years to promote the public disclosure of corporate carbon information, and have placed the reduction of emissions of the entire value chain and the comprehensive progress under social scrutiny through the publication of the annual report of the Green Supply Chain CITI Index and the annual report of the Supply Chain Climate Action CATI Index.
This increased attention from the media and non-governmental organizations has urged the exposed enterprises to carry out self-examination and rectification, and the public opinion's scrutiny and the desire to safeguard goodwill have also, to a certain extent, prompted well-known enterprises to be more proactive in fulfilling their environmental responsibilities.
3. Consumers' environmental awareness is increasing, but there is still a need to strengthen publicity and guidance
The Measures for the Administration of Green Food Logo stipulates that no unit or individual may use the green food logo without the permission of China Green Food Development Center. In practice, due to insufficient publicity on environmental protection and lack of understanding of the safety of green food, consumers tend to trust the brands and products of big companies, which allows more companies to take advantage of the opportunity to engage in greenwashing. Since the COVID-19 pandemic, the public's awareness of green, clean, low-carbon, and energy-efficient consumption has increased significantly, partly due to China's increased emphasis on public health and the gradual increase in the proportion of people of all ages and industries purchasing green products. However, there is still a long way to go in raising consumer awareness of green products and shopping for them.
The results of the Public Green Consumption Survey conducted by the China Environmental Labeling Product Certification Committee in Shanghai in 2019 showed that only 25% of consumers said they were able to recognize the authenticity of green products, and 58% of consumers were completely confused about green products. According to the Citizen's Ecological and Environmental Behavior Survey Report (2020) released by the Center for Environmental and Economic Policy Research of MOE, as for the factors hindering the public from purchasing green products, the survey report concluded that the inability to identify green products and the lack of guarantee for product quality are the main reasons preventing the public from purchasing them, while the factors of product price and type also influence the public's purchases. More than half of the respondents believe that the main reasons that prevent them from buying green products are "not knowing which products are green and lack of recommendation information" and "market management is not in place and the quality of green products is not guaranteed". Therefore, in order to strengthen the promotion of green products and guide consumers to buy green products, relevant departments can still take more publicity and guidance measures.
