23 March 2023

ACCC and ASIC intensifying crackdown on greenwashing

The ACCC and ASIC have both announced that enforcement of 'greenwashing' claims is a priority for this financial year.
Australia Environment
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Both the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) have publicly announced that enforcement in relation to 'greenwashing' claims is a priority for this financial year.

Consistent with that, the ACCC has recently released its report into the market review it conducted of greenwashing claims. The report is available here.

Given customers are increasingly considering the environmental impact of their purchasing decisions, the ACCC and ASIC are only expected to accelerate their enforcement efforts. Companies making claims about the sustainability of their products, their environmental impact, or their 'green' or 'sustainability' credentials more broadly need to ensure the accuracy and validity of such claims and maintain materials that substantiate those claims.

Failing to do so puts companies at risk of engaging in misleading or deceptive conduct or of making false or misleading representations in breach of the Australian Consumer Law, and triggering a potentially wide range of enforcement actions, including fines and claims for damages.

Sweep of company websites reveals potential greenwashing

The ACCC recently swept 247 company websites across a range of industries, to determine whether those sites made "vague or unclear" environmental claims. The sweep found widespread use of questionable environmental claims, particularly in the cosmetic, clothing and footwear, and food and drink sectors. Overall, 57 percent of those websites surveyed were alleged to contain evidence of greenwashing. For example, the use of broad claims like "environmentally friendly", "green" or "sustainable" without credible evidence were of particular concern to the ACCC.

Following its sweep, the ACCC has indicated that offending businesses will be asked to substantiate their sustainability claims, and if they cannot, may be subject to further enforcement action including fines.

ASIC launches first court proceedings alleging greenwashing

These actions by the ACCC come soon after the commencement of ASIC's first court action against alleged greenwashing conduct, bringing civil penalty proceedings in the Federal Court against Mercer Superannuation (Australia) Limited (as trustees for the Mercer Super Trust). ASIC alleges that Mercer made false and misleading statements and engaged in conduct that could mislead the public, in offering its "Sustainable Plus" superannuation options for members 'who are deeply committed to sustainability', where the investment options did not obviously align with these principles.

Showing its willingness to rigorously pursue its enforcement priorities, ASIC has sought declarations and pecuniary penalties from the Court, and injunctions to prevent Mercer from making greenwashing claims on its website. The regulator also wants Mercer to publicise any adverse findings made by the Court.

How can companies avoid greenwashing?

Businesses who promote the environmental credentials of their goods and services must be confident of the legitimacy of those claims, and must have evidence to substantiate them, should the ACCC or ASIC come knocking. The ACCC and ASIC have various enforcement tools, including the ability to issue substantiation notices, which require the target to present evidence supporting its claims within 21 days. Failure to do so can lead to fines and can be a precursor to more serious enforcement activity for misleading or deceptive conduct, or for making false or misleading representations. To avoid triggering these provisions, businesses whose products are touted as environmentally-friendly should:

  • avoid the use of general, vague or unclear terms, such as "sustainable", "socially responsible", "ethical" or "green";
  • ensure that environmental metrics used to promote a product (for example, an ESG score or green star rating) are independently verified and credible;
  • if a business has a sustainability target such as "net zero by 2050", make available to consumers information and evidence about the timing, strategy and pathway to actually achieving this target; and
  • for investment products, ensure that any investment screening is rigorous and transparency about a fund's holdings is maintained for investors.

It is also worth noting that on top of the increased regulatory activity, there is an increase in activism in this space as well. For instance, Greenpeace Australia Pacific has recently referred Toyota to the ACCC, to investigate whether environmental claims made about Toyota's vehicles business are misleading or deceptive. In particular, Greenpeace alleges that Toyota's plan for net zero emissions by 2050 is contradicted by its production plans to manufacture internal combustion engine cars well into the future.

Making green claims is not inherently unlawful or dangerous. In fact, sound environmental practices can lead to significant commercial or market advantage as well as the obvious benefits for the planet. Companies that invest and innovate are able to promote their activities, but the enforcement landscape has changed in line with community expectations, and so there is no doubt increased care is warranted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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