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In the past year we have seen a multitude of legal issues relating to climate change which are relevant for construction clients.
In Australia, they include the following:
ASIC specifically requires climate-related disclosures to be included in a company’s operating and financial review under section 299A(1)(c) of the Corporations Act 2001 (Cth) (Corporations Act) where climate risk is a material issue that affects the company’s achievement of its financial performance.
Construction companies need to be particularly careful when making disclosures and commitments under this regime 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 (Cth).
Potentially misleading disclosures and claims in the environmental or climate change sphere 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.
There are several aspects of a company’s climate reporting obligations which may give rise to allegations of greenwashing, including:
Companies and other businesses involved in unsubstantiated ‘greenwashing’ will contravene section 1041H of the Corporations Act which prohibits conductwhich is misleading or deceptive, or likely to mislead or deceive.
For example,a ‘net zero’ commitment, being in some cases a promise to achieve a certain carbon emissions profile by a certain date, will constitute a representation about a future matter. Section 769C of the Corporations Act provides that, if a person makes a representation about a future matter, and the person “does not have reasonable grounds for making the representation”, then the representation is “taken to be misleading”. Companies must therefore ensure that any net zero commitments are founded upon ‘reasonable grounds’ and are carefully framed. To establish reasonable grounds, there must have existed ‘facts sufficient to induce that state of mind in a reasonable person.’
The prohibitions in these statutes are deliberately drafted in wide terms, and do not require that any person is actually misled or deceived or that the organisation in question intended to mislead or deceive anyone. A likelihood that consumers or other stakeholders will be led into error is enough. This can arise through vague or confusing messaging, a failure to properly disclose the basis on which representations are made where these are relevant, and representations about the future that are not based on reasonable grounds.
Legal challenges to alleged greenwashing have already begun. For example, in August 2021, the Australasian Centre for Corporate Responsibility (ACCR) sued Australian oil and gas company Santos over its claims that it provides clean energy natural gas and has a plan for net zero emissions by 2040. ACCR raised 2 major claims;
This action is not yet determined.
This year we expect that companies will continue be subject to increased and more rigorous scrutiny from regulators and stakeholders . Companies and their directors should take steps to:
It will also be important for construction companies to consider their climate risk in relation to the use of materials, the method and manner of construction and siting of works. Construction companies should consider risks to health and safety because of climate change, for example the risk to workers as a result of extreme weather conditions. It is critical that construction companies consider whether their contractual arrangements are climate resilient and their obligations are responsibilities are achievable and deliverable over the life of the construction project and after completion and handover. This is especially so given that climate change related extreme weather events may lead to extended delays, costs, or force majeure events. This may in turn cause projects to be in breach of project timelines or have to be redesigned and re-negotiated mid-project. We have put together a comprehensive list of the key legal considerations in relation to climate change for the construction sector which can be downloaded here.
At Clyde and Co, we have considerable experience in assembling and managing effective multi-disciplinary teams who can assist clients with the range of issues they face over climate change, including:
If you would like to discuss the issues raised and how this may impact your business please contact Jacinta Studdert; Dean Carrigan; Brooke Moerk or Valencia Govender.
 It is widely accepted that Australian law requires any material exposure to climate change risks be incorporated into the various financial disclosures mandated by the Corporations Act 2001 (Cth), particularly in directors’ reports (s 299 and s 299A(1)), annual financial reports (s 295) and continuous disclosure obligations (s 674).
 See also Guy Abrahams & Kim Abrahams as Trustee for the Guy & Kim Abrahams Family Trust v Commonwealth Bank of Australia No. NSD864/2021 wherein he Federal Court on 4 November 2021, granted authority to shareholders, Guy and Kim Abrahams, to inspect all documents created by Commonwealth Bank of Australia in relation to seven gas and oil projects that the bank played a role in financing pursuant to s247A of the Corporations Act.
 Section 12DA of the ASIC Act 2001 (Cth), and s 18 of the Australian Consumer Law, contain similar prohibitions.
 Section 12BB of the ASIC Act 2001 (Cth) and s 4 of the Australian Consumer Law are similar.