Greenwashing litigation has mixed impact, says expert

On Thursday, the Australian Competition and Consumer Commission (ACCC) launched legal action against gas distributor Australian Gas Networks Limited after it allegedly made misleading claims that it would distribute renewable gas to households within a generation.

Bek Markey-Towler, the national rapporteur for Australia in corporate climate litigation at the British Institute of International and Comparative Law and a PhD candidate at the Melbourne Law School, said that there had been an uptick in climate litigation proceedings being brought by regulators since the Albanese government came to power just over three years ago.

“From a greenwashing perspective, there’s been a lot happening in Australia quite recently,” Markey-Towler told Accounting Times.

“Since the Albanese government took power in 2022, there’s been an uptick in the momentum of our corporate regulators, ASIC, APRA and the ACCC.”

The news follows a series of high-profile proceedings being brought against major Australian companies in recent years, with Lawyers Weekly having explored, nearly two years ago, the legal implications of greenwashing and the rise of sustainability practices.

Last month, EnergyAustralia settled a greenwashing case, which followed Active Super being fined $10.5 million in March, having been found guilty of greenwashing by the Federal Court mid-last year.

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Elsewhere, a greenwashing complaint was lodged against Qantas in October, and Mercer Superannuation was forced to pay an $11.3 million penalty last August.

Markey-Towler said the rise in greenwashing litigation could have both positive and negative effects on the momentum towards climate action among corporations.

“Greenwashing interventions, I think they are really important, because we do want investors to rely on transparent and accurate information being put into the marketplace,” she said.

“At the same time, though, we really don’t want the perverse outcome where companies are just too scared to say anything at all, for fear of being hit with a greenwashing suit.”

She emphasised that other climate policies, including sectoral decarbonisation plans, green investment incentives and emissions trading schemes, would also be essential to decarbonising Australia’s economy.

“[Greenwashing litigation] cannot be the only solution, because you might just scare people away from actually doing the right thing,” she said.

Incoming mandatory climate disclosure requirements could temporarily put the brakes on civil climate litigation, Markey-Towler added. Under the new laws, firms would be required to disclose their climate-related risks and opportunities in their financial statements from 1 July 2025.

As the new regulations take hold, ASIC guidance provides that firms would be immune to civil litigation related to their mandatory climate disclosures during a grace period from 1 January 2025 to 31 December 2027.

“In terms of greenwashing litigation led by civil society, I think that’s going to be more difficult, particularly with the new disclosure regulation,” Markey-Towler said.

“But there are other ways that risk can be created for companies. So reputation is really important for companies. That’s what they care a lot about. And so civil society groups can start campaigns, they can write legal letters.”

As government regulations call for stronger climate transparency among large firms, Markey-Towler emphasised the importance of businesses having concrete, honest and realistic strategies to underpin their climate claims to avoid greenwashing litigation risks.

“Are you going to reach [your climate goals] using offsets? How are you planning to reach that goal? So being really clear about how you have reached the targets that you have, what is covered in those targets, and how you’re going to achieve those,” she said.

“I think a lot of it just comes back to being honest and transparent, and also really seeking advice and being guided by our regulators.

“My first tip would be to go to the corporate regulator websites – ASIC and the ACCC – and read what they say about how to avoid greenwashing.”

Markey-Towler added that firms captured by the new mandatory climate disclosure requirements should not wait for the litigation moratorium to run out before putting strong reporting practices in place, as the risk of civil litigation would return from the end of 2027.

“Companies really shouldn’t be waiting to upskill on climate change risks and opportunities because at the end of those three years, if you haven’t internalised how you are doing things, that moratorium will be over,” she said.