Regulator focus locks onto greenwashing

Recent activity from both the Australian Competition and Consumer Commission (ACCC) and Australian Securities and Investments Commission (ASIC) demonstrate a strong effort to set a clear expectation that businesses must not engage in greenwashing conduct.

Both the ACCC and ASIC have earmarked sustainability related issues, including greenwashing, as a current enforcement priority. The regulators have wasted no time in putting these policies into effect, utilising a range of enforcement measures from infringement notices, to enforceable undertakings and in some instances, legal proceedings.

This article outlines some of the key developments, which set a clear expectation for businesses in relation to greenwashing.

The ACCC carried out an internet sweep in October 2022, examining eight different categories of common consumer products for environmental and sustainability claims that could be misleading to an ordinary consumer (see our summary of the internet sweep and its results here).

In December 2023, the ACCC then published a guide titled “Making environmental claims: a guide for business” (the ACCC Guide) which sets out eight principles to guide businesses in mitigating the risk of making a greenwashing claim:

1. Make accurate and truthful claims
2. Have evidence to backup claims
3. Don’t omit or hide important information
4. Explain conditions and qualifications
5. Avoid broad or unqualified claims
6. Use clear and easy to understand language
7. Visual elements shouldn’t give the wrong impression
8. Be direct and open about your sustainability transition

The ACCC Guide sets out useful examples and information about how businesses should apply these eight principles.

Following the internet sweep and publication of the ACCC Guide, the ACCC has now started to utilise enforcement methods against businesses who are engaging in greenwashing.

Aside from education measures such as the ACCC Guide, the ACCC has a range of enforcement methods available to it, including:

MOO Premium Foods

In November 2023, MOO Premium Foods entered into an enforceable undertaking with the ACCC in relation to statements on its yoghurt products and marketing materials that the packaging was made from “100% ocean plastic”, which the ACCC says gave the impression it was made from plastics directly collected from the ocean. In reality, the packaging was made from abandoned plastic waste that was collected within 50km of the shoreline in regions with inexistent or inefficient waste management. Relevantly, the packaging did have a smaller disclaimer that the plastic was “100% ocean bound plastic”, but the ACCC’s view was that the overall impression given to consumers was still misleading.

GLAD Bags (Clorox Australia Pty Ltd)

In April 2024, the ACCC commenced its first legal proceedings in relation to greenwashing against Clorox Australia Pty Ltd, the manufacturer of GLAD-branded kitchen and garbage bags. The ACCC alleges that the manufacturer has made false or misleading claims in relation to ocean plastics. The headline imagery and statements on the packaging referred to “50% Ocean Plastic Recycled Bags”, and “Made using 50% Ocean Plastic*”, which was later changed to refer to “Ocean Bound Plastic”, when in fact the material used is alleged by the ACCC to have been made from plastic that was collected from communities in Indonesia up to 50 kilometres from a shoreline. The bags did have a more detailed disclaimer on the back of the packaging, however, the ACCC’s focus again appears to be on the overall impression given to consumers.

As previously summarised by us, ASIC has also identified sustainability claims as an area of focus and has issued an information sheet in relation to avoiding greenwashing when offering or promoting sustainability-related products. We also covered the initial infringement notices issued in relation to greenwashing, and ASIC’s legal proceedings against Mercer Superannuation (Australia) Limited (Mercer Superannuation) in relation to greenwashing claims. These proceedings are ongoing.

Now, a further four infringement notices have been issued and a clear theme in these notices is either misleading statements about certain types of investments being excluded from a portfolio (e.g. gambling, fossil fuels), or claims about the transition to carbon neutral which do not have sufficient substantiation.

The following judgments have been handed down in recent months by the Federal Court in relation to greenwashing:

• in March 2024, the Court held, largely by agreement, that Vanguard Investments Australia had made false or misleading representations that the fund had screened for certain investments in its ESG investment opportunity, but in fact, that screening was significantly limited or did not occur; and
• in June 2024, the Court held that Active Super had engaged in misleading conduct, in circumstances where it had invested in various securities that it had claimed were eliminated or restricted by ESG investment screens.

The past few years have seen a shift from regulators warning about greenwashing conduct, to now relying on their enforcement powers to take action where businesses are not abiding by the law.

Greenwashing, as demonstrated by the judgments above, is a breach of existing laws that prohibit businesses from engaging in misleading and deceptive conduct.

Businesses should ensure they are familiar with the guidance published by the ACCC and ASIC, including any employees in the business who may be responsible for publishing statements such as social media, formal disclosures, or marketing.

The enforcement actions being taken by the regulators indicates that any leniency in relation to greenwashing is gone, and businesses must ensure their claims are accurate and truthful.

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.