Greenwashing, also known as green sheen, refers to the practice where companies overstate, exaggerate, or fabricate their environmental initiatives or sustainability performance in an effort to project a more environmentally responsible public image than warranted. As environmental, social, and governance (“ESG”) considerations continue to gain prominence and influence investment decisions, it is increasingly essential for foreign investors operating in China or aiming to expand into the China market to understand the evolving ESG regulatory environment. Particular attention should be given to anti-greenwashing provisions and the legal consequences of making deceptive environmental claims under China's regulatory framework.

As outlined in our previous article, ESG in China - Opportunities and Challenges for Foreign Investors, while China has yet to enact a specialized or stand-alone law specifically targeting greenwashing, several existing legal instruments have been employed to regulate such practices.  These include the Advertising Law (《广告法》), Anti-Unfair Competition Law (《反不正当竞争法》), Trademark Law (《商标法》), Law on the Protection of Rights and Interests of Consumers (《消费者权益保护法》),  among others. Each of these laws provides a different lens through which green claims are scrutinized and enforced.

Advertising Law and Anti-Unfair Competition Law

Environmental representations made in advertisements are governed by stringent provisions under the Advertising Law and the Anti-Unfair Competition Law. The Advertising Law mandates that advertisements shall not contain false, misleading or deceptive content. Specifically, representations regarding attributes of a product, such as its function, origin, use, quality, ingredients, price, producer, or duration of effectiveness, must be truthful, precise, and easy to understand. Similarly, service-related claims must also be clear and verifiable. The Anti-Unfair Competition Law complements these provisions by prohibiting businesses from deceptively exaggerating or misrepresenting the performance, functions, quality, sales information, customer reviews, certifications, or awards of their products or services. Any substantiated instances of false or inflated representations  may be classified as acts of unfair competition, exposing companies to administrative penalties or reputational harm. 

Violations of the aforementioned laws may lead to a variety of administrative penalties imposed by the Administration for Market Regulation (“AMR”), the primary regulatory authority responsible for overseeing advertising and regulating unfair competition in China. Such penalties may include orders to cease the unlawful conduct, removal of advertisements, confiscation of illegal gains, and monetary fines.  Specifically, under the Advertising Law, publishing false or misleading advertisements can result in fines of up to RMB 2 million or ten times the advertising costs incurred. Under the Anti-Unfair Competition Law, businesses found engaging in misleading promotions or false advertising may be fined between RMB 200,000 and RMB 2 million. Beyond administrative penalties, companies may also face civil liabilities if consumers or competitors suffer losses due to the misleading conduct. Severe or repeated offenses could even lead to the revocation of business licenses.

In practice, vague or unverifiable green marketing claims, such as labeling a product or service as “eco-friendly”, “green”, or “sustainable” without providing substantiated evidence, frequently trigger regulatory investigations for violation of advertising and unfair competition laws. Furthermore, the use of fabricated scientific research, manipulated data, or misleading statistics in advertisements further elevates the risk of being penalized for false advertising.

Regulatory authorities, particularly local branches of the AMR, are increasingly vigilant in investigating and penalizing greenwashing practices. For instance, in 2021, a well-known home appliance manufacturer was fined approximately RMB 2 million for falsely advertising its curtains as having air purification properties without clarifying or disclosing such effects were achieved only under strictly controlled laboratory conditions. The omission was deemed misleading and in violation of Articles 4 and 28 of the Advertising Law, as it could significantly influence consumer purchasing decisions. Similarly, in 2024, a company in Xiamen faced administrative penalties for promoting its products as the “first choice for environmentalists” without providing supporting data or documentation. Such conduct was deemed a breach of Article 8 of the Anti-Unfair Competition Law, which prohibits deceptive and misleading commercial promotions.

Trademark Law

Green Trademarks and Branding

The Trademark Law can also serve as a gatekeeper against greenwashing, especially when it comes to “green trademarks” or environmentally themed branding. Although the Trademark Law does not contain explicit provisions for “green” trademarks, Article 10(7) prohibits the registration of marks that are deceptive or likely to mislead consumers about a product’s features or place of origin.

In recent years, the China National Intellectual Property Administration (“CNIPA”) has adopted a more cautious stance in reviewing trademark applications involving ESG-related or socially beneficial terms.  Applications containing generic terms like “green”, “eco”, or “environmental” often face rejection due to lack of distinctiveness. Based on our analysis of the CNIPA’s publicly available data, most approvals of such marks have historically been granted to government-affiliated or state-supported entities, likely under less stringent review standards than those applied today.  

For example, CNIPA has previously rejected trademark applications for terms like “Zero Additive” and “Zero Sucrose” under Class 29 (which covers processed foodstuffs of animal and plant origin) on the grounds that such terms could mislead consumers about the characteristics or origin of the products, thereby constituting violation of Article 10(7) of the Trademark Law.

Third-Party Endorsements

Given the challenges associated with registering green trademarks, one viable alternative for companies is to leverage third-party environmental certification marks. These marks are issued by accredited certification bodies and serve to enhance consumer trust by validating that a product meets specific sustainability or environmental standards. For example, in the food industry, commonly used certification marks in China include the “GREENFOOD” label issued by the Green Food Development Center and the green production materials mark from the China Green Food Association. 

However, unauthorized use of these marks constitutes a legal infringement, including violation of the aforementioned Advertising Law and the Anti-Unfair Competition Law. For instance, in 2024, a company was penalized for violating the Anti-Unfair Competition Law by displaying the “Chinese Environmental Labelling” mark on its products without obtaining proper authorization from the Ministry of Ecology and Environment. As a result, the local AMR ordered the company to pay fines and confiscated any unlawful gains.

Furthermore, it is also critical to note that even the legitimate use of green certification marks does not shield companies from liabilities if their advertising practices mislead consumers in any other manner. Therefore, businesses must ensure strict compliance with the certifying body’s requirements when using green certification marks, such as maintaining validity of the certification, limiting mark usage only in approved contexts, and avoiding exaggeration or misrepresentation of the certification’s scope or overstating the certification’s significance.

Consumer Rights Protection Laws

One notable recent development in China’s legal landscape regarding greenwashing comes from the Regulations on the Protection of Consumer Rights and Interests, which came into effect in July 2024. These regulations provide a more direct legal basis to combat greenwashing practices.  Specifically, Article 9 of the Regulations stipulates that business operators must provide consumers with accurate, comprehensive, and intelligible information about their goods and services. In addition, the business operators must not engage in false or misleading publicity, deceiving or misleading consumers by fabricating certifications, qualifications, or honors; or falsifying commodity or service transaction information or business data, etc. These regulations are helpful in empowering consumers to make informed purchasing decisions and hold companies accountable for exaggerated or deceptive environmental claims.

The enforcement mechanisms under the laws regarding consumer protection often overlap with those of the Advertising Law and Anti-Unfair Competition Law. For example, as shown in the home appliance company case discussed above, the misleading omission of material information not only violated advertising regulations but also infringed upon consumers’ right to truthful information and fair decision-making. One key consideration for regulatory authorities in such decisions was the significant impact of the misleading claim on consumers’ purchasing behavior.  These overlapping legal mechanisms demonstrate that companies engaging in greenwashing may face multi-pronged legal consequences and regulatory scrutiny across multiple fronts at the same time.

Concluding Remarks

In China’s rapidly evolving legal and regulatory landscape, particularly regarding ESG matters, companies must exercise great caution when making environmental or sustainability-related claims, especially those containing broad terms like “green”, “eco-friendly”, or “sustainable”.  While China has yet to introduce a unified law explicitly targeting greenwashing, existing legal instruments already provide robust tools for enforcement. Companies should ensure that all green claims are specific, measurable, verifiable, and substantiated by reliable data.

Companies operating in highly regulated or environmentally impactful sectors, such as energy, industrial manufacturing, automotive, and financial services, where green claims may attract enhanced regulatory oversight, should prioritize sector-specific compliance. It is therefore especially crucial for such companies to understand and align with sector-specific standards and technical specifications when promoting environmental credentials.