Greenwashing Litigation – Sustainability and Misleading Conduct

With growing awareness around climate change and an increasing demand for sustainable products, businesses are changing the way they operate to become more “green”. Many businesses are genuinely taking responsibility for their carbon footprints and are innovating in creative ways to adapt to meet the demand for sustainability. However, the increase in awareness of these issues may lead to some businesses feeling the pressure to appear more sustainable without doing the work to get there, or seeking to capitalise on the demand for sustainable products by marketing their products to appear sustainable, when in reality they are not. This is referred to as “greenwashing”.

Greenwashing can constitute a contravention of the Australian Consumer Law and carry heavy penalties. For example, the Australian Consumer Law prohibits a person from engaging in misleading or deceptive conduct, and from making false or misleading representations about goods or services. More and more companies in Australia and around the world are being held to account for greenwashing, causing a trend in greenwashing litigation.

Recently, the Australasian Centre for Corporate Responsibility (ACCR) filed an application in the Federal Court of Australia against gas and oil giant, Santos, alleging greenwashing in Santos’ 2020 Annual Report. The Report came after Santos’ 2020 annual investor meeting in which 43% of its shareholders pushed for a resolution for Santos to set higher targets in relation to the company’s emissions. In its Annual Report, Santos describes itself as a “clean energy” provider and claims that it will achieve net zero emissions by 2040. The case is yet to be decided.

Another example of potential greenwashing occurs when words like “compostable” or “biodegradable” appear on the packaging of household products. These marketing terms suggest to a consumer that the packaging is eco-friendly. However, when this kind of packaging is placed into the rubbish bin and put into landfill, the conditions are not ideal for composting or biodegrading and can lead to an increase in greenhouse gasses (composting requires aeration, but in landfill the decomposition is anaerobic which releases harmful greenhouse gases and takes far longer to decompose). Some jurisdictions such as California have heavily regulated the use of labels such as “compostable” or “biodegradable” because they are inherently misleading without informing consumers of the conditions and timeframe necessary for the product to decompose or biodegrade.

The Environmental Defenders Office – who are representing the ACCR in the case against Santos – has emphasised the consequences of greenwashing in an article posted on their website: “Misleading information can have a dramatic effect on the market, on investors, and ultimately on the environment. It can leave investors vulnerable to major losses… [M]isleading information about natural gas and the transition towards a lower carbon economy can obstruct an effective and timely response to the climate crisis.”

The Santos case, as well as other recent greenwashing and climate litigation cases, are evidence of the growing awareness of investors and consumers in relation to the impact of business on climate change. It serves as a warning to businesses to take care when making claims to the public and to investors about their products, their manufacturing processes, or their plans to reduce emissions in the future.

It isn’t just consumers and investors holding businesses accountable. ASIC (Australia’s corporate regulator) recently announced that it would be increasing its focus on climate change disclosures from listed companies, and will take enforcement action where necessary. In this regard, businesses should carefully review their marketing strategies and financial reports to ensure they are communicating with consumers and investors in a way which is scientifically sound and not misleading or deceptive.

Written by Luke Wood

Published on 14 January 2022