ReGen Strategic
Following the filing of ASIC’s first civil penalty proceeding in the Federal Court against a superannuation fund for allegedly making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options, greenwashing risks are front and centre for many organisations.
ASIC’s historic filing coupled with greenwashing being an ongoing key enforcement priority for both ASIC and ACCC serves as a stark reminder to boards and executives that “green” claims about decarbonisation, GHG emission targets and product specifications will be facing increasing scrutiny throughout 2023 and beyond.
The ACCC’s Greenwashing by Businesses in Australia report reinforces this key enforcement priority and presents the findings of its internet sweep of environmental claims. The report outlines the eight sectors the ACCC focused its efforts on when assessing 247 different businesses and brands. The report concludes that the sweep identified several high level concerns with further analysis planned that may lead to enforcement, compliance and education activities where necessary. Where more significant concerns were raised, infringement notices or legal proceedings may be actioned.
Since October 2022, ASIC has issued over $150,000 in greenwashing infringement notices with the latest being issued to another superannuation fund in April 2023. Through ACCC and ASIC’s greenwashing action, it has become apparent that greenwashing allegations will not be exclusively made against formal company disclosures. Many of the infringement notices targeted greenwashing i.e. misleading or deceptive statements within ASX disclosures, website claims and investor presentations.
Further to this, social media statements or strategic communication are a key area where greenwashing vulnerabilities lie as quite often, comprehensive information is condensed into viewer friendly information which may inadvertently omit key pieces of information or result in misleading statements. In fact. the April 2023 infringement notice related to a greenwashing Facebook post which overstated the positive environmental impact of the fund with concerns it presented misleading information to investors and potential investors.
While it seems that the Australian Federal Government is following in the footsteps of the UK by committing to standardised, internationally‑aligned requirements for disclosure of climate‑related financial risks and opportunities in Australia, the question remains, will Australia also adopt commitments to protect consumers from greenwashing?
In March 2023, the European Union unveiled the proposed ‘Directive on Green Claims’, a new set of rules requiring companies to substantiate and verify their environmental claims and labels, aimed at protecting consumers from greenwashing.
The newly proposed rules highlight the necessity for credible, reliable and verifiable information for consumers following the identification of greenwashing claims.
The new rules propose minimum requirements for businesses to substantiate, communicate and verify their green claims. Companies will be required to ensure the reliability of their voluntary environmental claims, which will need to be independently verified and proven with scientific evidence.
Time will tell whether Australia will follow a similar path as the EU, however it is clear that greenwashing presents as a significant risk for many organisations, not just those targeted in ACCC’s internet sweep. This reinforces the need for company directors to be sustainability and ESG literate and to be able to demonstrate that any environmental claims or sustainability commitments are credible and informed by scientific evidence and a strategic approach.