China

Presently, China does not have specific laws or regulations targeting greenwashing. However, there are requirements for accurate statements in respect of ESG-related claims and reporting under several laws and regulations, and also guidelines for certain listed companies in China.

The Environmental Protection Law and the Measures for the Mandatory Disclosure of Environmental Information by Enterprises provide general requirements on authentic, accurate, and complete annual environmental information disclosure by companies including (i) key pollutant discharging entities; (ii) listed companies and their certain subsidiaries; (iii) bond-issuing enterprises, etc.

The Provisional Regulation on the Administration of Trading of Carbon Emission Permits further requires key carbon emitters to provide an authentic, complete, and accurate emission report on an annual basis.

In April 2024, China issued its Guidance on Self-Regulatory Supervision of Listed Companies - Sustainability Reports (the Guidance) and requires (i) companies in Shanghai Stock Exchange (SSE) 180 Index, SSE STAR Market 50 Index, Shenzhen 100 Index, and ChiNext Index, and (ii) companies listed both domestically and internationally to issue their ESG reports on an annual basis, while other listed companies are recommended to voluntarily disclose the ESG reports. The Guidance requires the information disclosed to be objective and true and should not mislead any investors or other stakeholders. Further, the Securities Law provides that information disclosed by the information disclosure obligor shall be true, accurate, complete, concise, clear, easy to understand, and shall not contain any false records, misleading statements, or material omissions.

Provisions in the Anti-Unfair Competition Law also provides that business operators shall not conduct any false or misleading commercial promotion to defraud or mislead customers. The Advertising Law also provides that advertisements shall not contain any false or misleading content and shall not deceive or mislead consumers.

 

Enforcement actions

As mentioned above, China has no specific laws or regulations about greenwashing. However, companies make inaccurate or false ESG-related statements may lead to potential administrative investigations and the imposition of penalties, or even criminal liabilities under current various laws and regulations mentioned above. For instance:

• Where the subject company fails to disclose environmental information or discloses untrue or inaccurate environmental information, according to the Administrative Measures for the Mandatory Disclosure of Environmental Information by Enterprises, the company may face the following administrative penalties: (i) order to correct; (ii) notice of public criticism; or/and (iii) fine ranging from RMB10,000 to RMB100,000.
• Any key carbon emitter provides false data or materials in its annual emission report may face below administrative penalties: (i) order to rectify; (ii) confiscation of illegal gains; (iii) fine up to ten times of the illegal gains (or RMB2 million); (iv) reduce its next year’s carbon emission allowance; or/and (v) order to suspend production.
• For any company listed before the Shanghai or Shenzhen stock exchange who fails to meet the requirements of the Guidance, the stock exchange can take certain regulatory measures or impose disciplinary sanctions as appropriate. For any false or misleading statements, the Securities Law stipulates potential legal liabilities that range from: (i) order to rectify; (ii) warning; and (iii) fine up to RMB10 million.
• The Anti-Unfair Competition Law prohibits operators from making any false or misleading commercial promotion to defraud or mislead customers. The violation of which may face the following administrative penalties: (i) order to cease illegal activities; (ii) fine up to RMB 2 million; or/and (iii) revocation of business license.
• If the violation is deemed as a false advertisement, the advertise may face (i) order to stop advertising; (ii) fine up to ten times of the advertising fees (or RMB 2 million); or/and (iii) revocation of business licence, etc.
• Potential Criminal Law offences might be triggered in several circumstances, such as failing to disclose important information in accordance with the law that seriously damages the interests of shareholders or other persons (Article 161); or discharging, dumping, or disposing of radioactive waste, waste containing infectious disease pathogens, toxic substances, or other harmful substances that seriously pollute the environment (Article 338).

 

Potential mitigation of greenwashing risks

• Ensure accurate and complete disclosure: conduct ESG targeted review and audit before disclosing and making any ESG-related information and claims, and making sure that any information go to the public is authentic, accurate, and complete with substantiated evidence and data. Avoid any exaggerated or misleading statements.
• Carry out green supply chain assessment: map ESG risks across the supply chain, including suppliers, vendors, subcontractors, and other business partners. Include necessary ESG clauses in the agreements, and partner with industry peers to share best practices and address potential ESG risks. Maintain ongoing assessment and supervision of supply chain partners.