Gensol fiasco: Green ventures can’t get far if they’re governance greenhorns

However, what has unfolded isn’t a failure of the green economy or its sustainable vision. 

Instead, a probe by India’s securities market regulator revealed misconduct by Gensol’s promoters, with allegations of funds misused for personal luxuries and investors and rating agencies being misled. This is a story of how greed and poor governance can tarnish even the most lofty vision statements. Vision without governance is like a seed without soil: it may sprout, but won’t thrive.

Also Read: Why Blusmart is a textbook case of the challenges of growth—and promoter greed

Green businesses hold enormous potential, but risks like weak governance remain a challenge. The Gensol saga highlights how easily the failings of a few can stain an entire sector. BluSmart may have pioneered clean ride-hailing in India, but the scandal has cast doubts on the credibility of our green space. Green finance isn’t about feel-good funding; it’s about fuelling a shift towards sustainable economic growth. The collapse of a few companies shouldn’t make us question the entire movement. It’s not about the ‘colour’ of the funding, so to speak, but the integrity of those managing it.

As startups grow, the need for checks and balances to hold leaders accountable becomes even more critical. With startups scaling up and commanding significant capital, it is natural—and necessary—for markets and regulators to scrutinize them more closely. Private funding does not excuse lower governance standards. 

On the contrary, the size and systemic influence of these startups demand higher accountability. The story of Gensol and BluSmart illustrates the consequences of overlooking these safeguards. Startups in India often succeed due to the vision and leadership of their founders, but the crucial need for governance must never be overlooked. In this case, the absence of external oversight and transparent decision-making appear to have created an environment ripe for mismanagement and fraud.

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This problem is not unique to green startups; it has plagued many sectors, from technology to finance to aviation. Visionary entrepreneurs with big ideas have often failed to build the necessary systems of accountability to sustain those ideas. A grand vision and a polished public relations campaign may dazzle the world, but behind the illusion of infallibility lies the harsh truth—unchecked power leads to fractured trust and lasting damage. 

The debris of broken trust hurts many unseen stakeholders, while promoters often escape with minimal punishment or remain largely unscathed. In many cases, others hesitate to ask tough questions, simply because of the founders’ larger stature or compelling vision. Expecting boards to be aware of financial mismanagement in promoter-controlled entities, especially when auditors sign off on balance sheets, is a utopian expectation.

Equally worrisome is the failure of the financial system to address red flags in time. Auditors, rating agencies and bankers have all failed to adequately assess risks and monitor the actions of those in charge. They play a vital role in maintaining market trust, but let us down much too often. When intermediaries ignore warning signs or gloss over them in a rush for profits, the damage spreads beyond a single company. If the system hasn’t and doesn’t learn from so many failures, what’s to stop future misdeeds?

Investors, both institutional and retail, also share responsibility for such failures. In an environment of uncertain returns and geopolitical uncertainty, the fear of missing out often drives them to buy into enticing narratives without examining the fundamentals. When red flags are missed throughout the capital chain, it’s unfair to solely blame the promoters. It took the Securities and Exchange Board of India’s decision to ban Gensol’s promoters from the capital market for others to wake up to whiffs of scandal.

Also Read: Company Outsider: As BluSmart stalls, the ride-sharing business in India looks even more suspect

So, should BluSmart survive as a brand? Despite the controversy, there is a case to be made for it. BluSmart carved out a unique space in the green ride-hailing market. In an industry dominated by two giants, Ola and Uber, its services resonated with a growing number of eco-conscious consumers. It offered a high-quality ride experience that set it apart from rivals. 

The shutdown of BluSmart’s services has left a gap in the ride-hailing markets of its cities of operation. Even elsewhere, we need players that can deliver dependable and eco-friendly solutions with consistency. The scandal around its promoter group could possibly leave the brand itself unscathed. BluSmart arguably deserves a second chance, though this may have to be under the ownership of another company that boasts of strong governance standards, transparent leadership and robust business practices.

The real takeaway from this controversy is the urgent need for stronger regulatory safeguards. As green businesses mature in India, they will require independent audits, rigorous post-issuance disclosures and stricter governance mechanisms. Cynicism must not come to bedevil green ventures. In the West, green financial instruments are governed by strict taxonomies and third-party validation. India must adopt similar frameworks to protect investors and preserve the sector’s integrity. That will help these ventures gain a competitive edge.

The author is a corporate advisor and author of ‘Family and Dhanda’.