Ross Stitt looks at how Australian authorities are stepping up efforts to combat greenwashing

By Ross Stitt* 

Misleading or deceptive conduct for financial gain has been around since commerce began. But recent developments in Australia and elsewhere suggest it’s taken on a decidedly green hue in recent times.

‘Greenwashing’ is becoming the deception of choice for many advertisers. The term refers to the use of false claims of sustainability and eco-friendliness to market goods and services to environmentally conscious consumers.

At the start of the month, the Australian Competition and Consumer Commission (ACCC), a government body tasked with promoting competition and fair trade, released a report entitled ‘Greenwashing by businesses in Australia’. The basis of the report is an ‘internet sweep’ carried out by the ACCC last October ‘to identify industries or sectors which commonly use environmental and sustainability claims, and to assess whether these claims have the potential to mislead consumers’. The ’sweep’ examined the environmental claims of 247 different businesses across eight sectors.

The results were not encouraging.

According to the ACCC, 57% of the businesses reviewed made claims that raised concerns. Specific problems identified were ‘using vague or unclear environmental claims’, ‘not providing sufficient evidence for their claims’, ‘setting environmental goals without clear plans for how these will be achieved’, and ‘using third-party certifications and symbols in a confusing way’.

Businesses recognise that consumers are increasingly basing their purchasing decisions on environmental considerations. However, the ACCC report suggests that some businesses are responding not by changing their behaviour but simply by ‘relying on false or misleading claims’.

ACCC Deputy Chair Catriona Lowe says that the ACCC already has ‘several active investigations underway across the packaging, consumer goods, food manufacturing and medical devices sectors for alleged misleading environmental claims’. The number may grow as the ACCC continues with targeted assessments of businesses identified in its sweep.

This will not be a one-off. As part of its 2022-23 Compliance and Enforcement Priorities, the ACCC is prioritising consumer and fair-trading issues in relation to environmental and sustainability claims.

And the ACCC is not alone in its growing vigilance on greenwashing. The Australian Securities and Investments Commission (ASIC), Australia’s corporate, markets and financial services regulator, is also in on the act.

One of ASIC’s stated goals is ‘to promote confident and informed participation by investors and consumers in the financial system’.

To date, ASIC has ‘issued over $140,000 in infringement notices in response to concerns about alleged greenwashing’. Targets include an energy company for statements about ‘low emissions’ and ‘clean energy’, an investment manager for statements about screening out investments in tobacco companies, and a superannuation trustee for statements about screening out investments in companies causing environmental and social harm.

Hardly serious money. However, several weeks ago ASIC upped the ante significantly when it launched its first court action on alleged greenwashing. It has commenced civil penalty proceedings in the Federal Court against Mercer Superannuation ‘for allegedly making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options’.

According to ASIC, Mercer marketed its Sustainable Plus investment options as suitable for people ‘deeply committed to sustainability’ on the grounds that those options excluded ‘investments in companies involved in carbon intensive fossil fuels’ and ‘companies involved in alcohol production and gambling’.

There’s only one problem. ASIC alleges that investors in the Sustainable Plus options had investments in 15 companies that extract or sell carbon intensive fossil fuels, 15 companies that produce alcohol, and 19 companies involved in gambling. If true, it’s hard to imagine that’s what the investors were expecting.

ASIC is after ‘pecuniary penalties’ and an injunction to stop Mercer making the alleged misleading statements.

Court action is a serious step by ASIC, and ASIC Deputy Chair Sarah Court says that it ‘reflects our continuing efforts to ensure sustainability-related claims made by financial institutions are accurate’.

It’s also a very serious issue for Mercer Superannuation which manages more than $25 billion for its 180,000 members. Mercer is unlikely to say much while the matter is before the courts.

The ESG movement (environmental, social, and corporate governance) is on the rise. That represents an opportunity for many businesses, but they need to get it right. Environmentally and socially conscious consumers will reward those who do. Equally, they will punish those who are perceived as using ESG purely as a marketing tool without any underlying substance.

The reputational damage arising from being caught greenwashing should not be underestimated, especially among younger consumers.

(Of course, ESG is not a one-way street. The US congress recently passed a Republican bill to prevent US pension fund managers using ESG factors as a basis for their investment decisions. The Republican Party is on a crusade against ‘woke capitalism’. Another example of American exceptionalism).

Given some of the statements from ASIC and the ACCC, Australia can expect to see much more anti-greenwashing action in future. And international experience indicates that other government agencies in Australia will become involved.

For example, on 1 March the Advertising Standards Authority (ASA) in the UK banned a Lufthansa poster featuring a picture of a plane superimposed over an image of the earth, and the words ‘Connecting the world. Protecting its future.’

Lufthansa argued that the poster was part of a wider campaign that identified measures being taken by the airline to improve the environmental impact of flying. However, the ASA found that the poster breached a rule against misleading advertising.

In the words of the ASA, there are ‘currently no environmental initiatives or commercially viable technologies in the aviation industry which would substantiate the absolute green claim "Protecting its future."

To quote Kermit the Frog, ‘It’s not easy being green’.

*Ross Stitt is a freelance writer with a PhD in political science. He is a New Zealander based in Sydney. His articles are part of our 'Understanding Australia' series.