Context:
The Reserve Bank of India (RBI) will be among 13 international regulators taking part in the Global Financial Innovation Network’s (GFIN) first-ever Greenwashing TechSprint.
Relevance:
GS III: Indian Economy
Dimensions of the Article:
- Greenwashing TechSprint
- What Is Greenwashing?
- About Global Financial Innovation Network (GFIN)
Greenwashing TechSprint:
Organizers:
- The Greenwashing TechSprint is organized by the Global Financial Innovation Network (GFIN).
- GFIN is a consortium of more than 80 international organizations dedicated to supporting financial innovation for the benefit of consumers.
- The Financial Conduct Authority (FCA), a prominent regulatory body in the United Kingdom, currently chairs GFIN.
Objective:
- The TechSprint aims to address the risks of greenwashing in financial services.
- Greenwashing refers to the deceptive practice of presenting a false or misleading impression of environmental friendliness or sustainability.
Duration:
- The TechSprint will begin on 5th June and run for three months.
- It will conclude with a showcase day in September 2023, where the developed tool or solution will be presented.
Purpose:
- The TechSprint seeks to develop an innovative tool or solution that can effectively assist regulators and the market in combatting the risks associated with greenwashing.
- By creating such a tool, the TechSprint aims to promote transparency, integrity, and accountability in the financial services sector regarding environmental and sustainability claims.
What Is Greenwashing?
- Greenwashing is the process of conveying a false impression or misleading information about how a company’s products are environmentally sound.
- Greenwashing involves making an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly or have a greater positive environmental impact than is true.
- In addition, greenwashing may occur when a company attempts to emphasize sustainable aspects of a product to overshadow the company’s involvement in environmentally damaging practices.
- Performed through the use of environmental imagery, misleading labels, and hiding tradeoffs, greenwashing is a play on the term “whitewashing,” which means using false information to intentionally hide wrongdoing, error, or an unpleasant situation in an attempt to make it seem less bad than it is.
Examples of Greenwashing
- A classic example of greenwashing is when Volkswagen admitted to cheating emissions tests by fitting various vehicles with a “defect” device, with software that could detect when it was undergoing an emissions test and altering the performance to reduce the emissions level.
- A plastic package containing a new shower curtain is labeled “recyclable.” It is not clear whether the package or the shower curtain is recyclable. In either case, the label is deceptive if any part of the package or its contents, other than minor components, cannot be recycled.
- A trash bag is labeled “recyclable.” Trash bags are not ordinarily separated from other trash at the landfill or incinerator, so they are highly unlikely to be used again for any purpose. The claim is deceptive because it asserts an environmental benefit where no meaningful benefit exists.
Effects of greenwashing
- There is a growing body of evidence that shows consumer sentiment is slanted toward being green and environmentally sustainable.
- When a company, product or service is caught or discovered to be greenwashing, there is a general sense of distrust that occurs. Consumers will no longer trust the brand or product in question, and might also begin to question other claims.
- Companies engaged in greenwashing – consumers will likely choose other organizations that are more ethical.
- Greenwashing can degrade customer satisfaction, erode brand loyalty and potentially affect repeat purchases.
- On Planet – Ultimately, the biggest effect of greenwashing is existential.
- Each act that an organization or individual doesn’t take with real green initiatives has a potential negative effect on the planet.
- With the effects of climate change continuing to manifest on humanity, there is no time to waste in taking steps to help improve sustainability such that humanity and Earth itself will continue to survive.
About Global Financial Innovation Network (GFIN)
The Global Financial Innovation Network (GFIN) is an international network formed in January 2019 by a group of financial regulators and related organizations. It comprises over 70 organizations dedicated to supporting financial innovation for the benefit of consumers.
Key Features of GFIN:
Facilitating Innovation and Regulatory Interaction:
- GFIN aims to create a more efficient process for innovative firms to engage with regulators.
- It provides a platform for these firms to navigate regulatory requirements when scaling their new ideas across different countries.
Coordination Group:
- The GFIN is overseen by the Coordination Group, which sets the overall direction, strategy, and annual work program of the network.
- The Financial Conduct Authority (FCA) from the United Kingdom currently chairs the Coordination Group.
Membership and Engagement:
- Membership in the Coordination Group lasts for two years, and members meet twice a year to provide ongoing input and engagement in the network’s work-streams.
Members from India:
- The International Financial Services Centres Authority (IFSCA), the Insurance Regulatory and Development Authority of India (IRDAI), the Pension Fund Regulatory & Development Authority (PFRDA), and the Reserve Bank of India (RBI) are the Indian members of the GFIN.
-Source: Economic Times
