The growing emphasis on environmental sustainability has prompted organisations to incorporate Environmental, Social, and Governance (ESG) practices into their business models. However, this trend has also given rise to greenwashing—where companies make misleading claims about their sustainability efforts. This practice not only undermines genuine environmental initiatives but also misleads key stakeholders, including consumers, investors, regulators, and policymakers. To check this, regulatory bodies have tightened climate-related regulations, making ESG disclosures mandatory for corporations. This project that analyzes the mandatory sustainability and environmental disclosures by Indian corporations for the financial year 2022-23 was undertaken to recognise this significant shift.
A key objective of the project is to distinguish authentic corporate sustainability efforts from deceptive greenwashing practices. By ensuring that environmental claims align with actual corporate actions, the study aims to safeguard climate change goals, maintain public trust, and support global environmental conservation efforts. The project primarily utilizes Business Responsibility and Sustainability Reports (BRSR) to assess corporate ESG disclosures in India. The team contends that analytical models and AI tools developed in this study can be extended for comparative assessments in the EU and US markets.
Advanced analytical techniques, including Generative AI, Natural Language Processing (NLP), and System Dynamics Modelling, were deployed by the team to study corporate sustainability reporting. These methodologies were adopted to enable assessment of environmental claims, enhancing transparency and accountability in corporate disclosures. The analysis revealed a high compliance rate with BRSR filings among India’s top 1,000 listed companies, indicating a broad commitment to sustainability. However, discrepancies were found in reporting formats and sectoral variations hinting at likelihood of greenwashing.
The team conducted a detailed evaluation of Principle-based Disclosures, Performance Indicators, and Essential and Leadership Indicators within the BRSR framework to highlight inconsistencies between reported sustainability initiatives and actual corporate practices. Thus, indicating the possibility of misleading claims, reinforcing the need for more robust verification mechanisms. The project employed innovative methodologies, such as Large Language Models for intelligent data extraction, Critical Discourse Analysis to uncover misleading language, and System Dynamics Modelling to enhance detection of greenwashing.
The implications of these findings were significant. For corporations, the study highlights the importance of authentic sustainability reporting and the risks associated with greenwashing, including reputational damage, legal consequences, and financial penalties. Hence, they are encouraged to prioritize transparency and integrate sustainable practices into their core business strategies.
For regulators and policymakers, the findings highlight the need for stricter reporting standards and verification mechanisms. Regulatory frameworks may need revision to introduce more stringent disclosure requirements, ensuring that corporate sustainability reports accurately reflect real-world actions and impacts.
For stakeholders such as investors, consumers, and environmental advocates, the study provides critical insights into assessing the credibility of corporate sustainability claims – the role of advanced analytics in detecting greenwashing encouraging stakeholders to leverage these tools for more informed decision making regarding investments, purchases, and advocacy efforts.
The project contributes to the goal of fostering corporate commitment to environmental sustainability by identifying misleading claims and promoting accountability.