In 2022, companies will wake up to the risks of greenwashing

Two recent landmark cases are putting Australian companies on notice that net zero emission commitments, made by companies, must be credible and substantiated.

As the climate emergency heightens Australian corporates are yielding to pressure to make climate related disclosures and statements.

Companies, however, will need to be careful when making disclosures and commitments as they can give rise to liability risks where such commitments are considered misleading or deceptive under the Australian Consumer Law; Corporations Act and ASIC Act 2001.

Potentially misleading disclosures and claims in the environmental or climate change context could be seen as ‘greenwashing’, a term which involves making an unsubstantiated or misleading claim about the environmental status of a business or the environmental benefits of a product, service, technology or company practice.

In November 2021 courts in Australia granted a shareholder access to the Commonwealth Bank of Australia’s internal documentation to check if the bank complied with its own climate change policy in lending to oil and gas projects.

A further “test case” currently lodged in the Federal Court is the Australasian Centre for Corporate Responsibility’s (ACCR) challenge over Santos’ claims in its 2020 Annual Report that natural gas is a “clean fuel” and that Santos has a credible pathway to net zero emissions by 2040.

Actions like these and the increasing scrutiny of regulators, shareholders and activists on companies’ net zero commitments and green credentials, mean that it is critical that all statements made by companies, including in annual financial reports, director’s reports, marketing/advertising materials and disclosure documents are accurate and can be substantiated with materials and actions.

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