Greenwashing — defined as making false or misleading claims that a product is environmentally friendly, sustainable or ethical — is part of a broader set of Environmental Social Governance (ESG) concerns being prioritised by Australian regulators.
Several high-profile cases — such as the Australasian Centre for Corporate Responsibility’s (ACCR) case against Santos, Greenpeace’s case against Woodside Energy and ASIC’s three notable greenwashing cases in the investment sector — have drawn broader attention to the issue.
The Australian Securities & Investments Commission (ASIC) along with the Australian Competition and Consumer Commission (ACCC) are cracking down on greenwashing, with the practice entering the spotlight as Australia undergoes the biggest changes to financial reporting and disclosure standards in a generation.
New disclosure standards
In September, the House of Representatives voted to pass the Treasury Laws Amendment bill — the last major legislative step to the passage of the new climate reporting requirements into law.
This bill introduces new mandatory climate-related reporting requirements for large- and medium-sized companies, including disclosures on climate-related risks and opportunities, and on greenhouse gas emissions across the value chain, starting as soon as 2025 for the largest companies.
The Australian Accounting Standards Board (AASB) also issued its final Australian Sustainability Reporting Standards (ASRSs) in September, taking ‘climate first’ approach to align with the government commitments to introduce mandatory climate reporting in Australia.
The final standards issued by the AASB are broadly aligned with International Financial Reporting Standards (IFRS®) Sustainability Disclosure Standards.
ASIC has urged businesses to proactively engage with the mandatory climate reporting requirements.
"Large businesses and financial institutions should ensure that they implement appropriate governance arrangements and sustainability record-keeping processes ahead of the mandatory climate reporting requirements taking effect from January 1, 2025," said ASIC Commissioner Kate O’Rourke.
“As more people consider environmental sustainability when making financial decisions, climate disclosure will continue to grow in importance.
“Enhanced climate disclosure will also benefit reporting entities themselves, enabling them to better understand their climate-related risks and opportunities over the short, medium and long term.”
Greenwashing: a strategic priority
Prior to the new legislation, ASIC introduced greenwashing as a strategic priority in 2022, upgrading it to an enforcement priority in 2023. The regulator has since issued several infringement notices and corrective disclosure outcomes.
The main types of conduct that have caused ASIC to intervene can be summarised as:
- Net zero statements and targets, that were either made without a reasonable basis or that were factually incorrect
- The use of terms such as ‘carbon neutral’, ‘clean’ or ‘green’, that weren’t founded on reasonable grounds
- The overstatement or inconsistent application of sustainability-related investment screens, and
- The use of inaccurate labelling or vague terms in sustainability-related funds.
Separately, in December 2023, the ACCC released its guidance for business on how to avoid unintentional greenwashing. It identified eight key principles to avoid greenwashing and provided clarity on the considerations that organisations must understand to support the ever-evolving consumer demand for sustainable products.
Following the release of that guidance, the ACCC commenced greenwashing proceedings in the Federal Court against a manufacturer of kitchen and garbage bags, alleging that the manufacturer engaged in misleading or deceptive conduct by overstating the environmental benefits of the bags in a bid to take advantage of consumer concern about ocean plastic pollution.
Meanwhile, ASIC has taken on three notable greenwashing cases — against Mercer Superannuation, which resulted in an A$11.3 million fine; against Vanguard that resulted in an A$12.9 million fine, and against Active Super in a case that is ongoing.
In the well-publicised greenwashing case against Mercer, in August, the Federal Court declared that the super fund had made representations liable to mislead the public about the future nature and characteristics of its Sustainable Plus Options.
The Court determined that Mercer had made representations about the exclusion of investments in companies involved in or deriving profit from carbon-intensive fossil fuels, alcohol and gambling from its 'Sustainable Plus' investment options that were false.
“The outcome of enforcement proceedings such as the present case should send a clear signal to AFSL holders and other market participants to ensure transparency and accuracy when making any ESG claims, and to exercise diligence in adhering to such claims,” The Court stated.
Following the case, ASIC warned, “We will continue to monitor the market for ESG-related claims that cannot be validated by evidence to ensure the market is fair and transparent”, and that it expects to see a "demonstration" that the industry has listened to the courts, to the regulator, and to calls for improvement in ESG disclosures.
Santos’ net zero plan cobbled together
Perhaps unsurprisingly, greenwashing has also emerged as a problem in the energy sector.
In its groundbreaking greenwashing case against Santos, the ACCR claimed that the energy giant’s plan to reach net zero by 2040 was “little more than a series of speculations” that were “cobbled together in a matter of weeks”.
The ACCR filed the lawsuit against Santos — one of Australia's largest fossil fuel companies with a market cap of more than $21 million — alleging the company engaged in misleading or deceptive conduct over its strategy to reach net zero by 2040.
Santos failed to disclose emissions from hydrogen production or the expected growth in emissions from oil and gas exploration in a 2021 climate change report. It also repeatedly falsely referred to hydrogen produced from gas with carbon capture and storage as “zero emissions”.
The ACCR also took issue with Santos’ use of the term “zero emission hydrogen” along with its decision to hold baseline emissions associated with oil and gas production flat between 2025 and 2040.
The ACCR filed the suit hoping to force Santos to substantiate assumptions that underpin key strategy documents, which it says show Santos “plucked figures out of the air”.
The ACCR is not seeking damages or compensation from the proceedings but is asking that the court declare Santos engaged in misleading conduct.
Santos, however, rejected the claims that it had suggested gas was carbon neutral, saying the company had only proposed it might serve as a “transition fuel” on the way to net zero.
Santos is expected to deliver its closing arguments on December 3, which will mark the first time net zero claims made by a fossil fuel producer in Australia have been tested in court.
Yet this is not the first time a major Australian fossil fuel producer has been accused of greenwashing.
Woodside "treating Australians like mugs"
In late 2023, Greenpeace started proceedings in the Federal Court to decide whether Woodside Energy was greenwashing, alleging that the oil and gas producer had made misleading and deceptive claims about its efforts to reduce emissions.
The environmental activists alleged that Woodside misrepresented emissions reductions from extracting and processing oil and gas because it relied on carbon offsets.
Woodside said that it had cut the climate pollution from extracting and processing its gas and oil by 11% in 2022, yet it had relied heavily on “carbon offsets”, while its actual emissions increased by more than 3%.
Woodside also publicly claimed to have a plan to achieve net zero by 2050. However, it failed to mention its target doesn’t apply to Scope 3 emissions — when the oil and gas it produces is burnt — which make up over 90% of the company’s carbon pollution.
Greenpeace claimed, “Woodside is treating the Australian public and its shareholders like mugs. Net zero is entirely incompatible with continued investment in fossil fuels.”
Greenpeace is now preparing to return to the Federal Court for the next stage in its legal case against Woodside.