How a carbon claim turned into an alleged greenwashing game

The firm had found that hundreds of thousands of households and small businesses paid extra amounts for AGL’s “carbon neutral” gas and electricity.

Just last year, Slater and Gordon Lawyers investigated a second class action against NSW Police over alleged unlawful strip searches conducted in public places, following a $93,000 court victory for a woman strip-searched at Splendour in the Grass.

The firm also has ongoing class action investigations into a2 Milk, AMP, Ansell, ANZ, G8 Education, James Hardie, Web Travel, and more.

Regarding AGL Energy, the class action by Slater and Gordon alleges customers paid a premium believing that AGL’s “carbon neutral” products would offset emissions linked to their energy use, despite the fact the carbon credits AGL used to assist those claims did not genuinely deliver that outcome.

Ultimately, Slater and Gordon’s class action alleges that AGL’s claims were misleading and deceptive within the meaning of Australian Consumer Law, which amounts to a type of greenwashing.

Further, the firm alleged that the energy giant was selling products that did not provide the promised climate benefit and supplying products that were not fit for the purpose for which customers brought them.

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AGL has sold the products for around $1.50 add-on per week since July 2020.

This comes as BigLaw firm leaders identified greenwashing and consumer class actions as key areas of expected legal activity in Australia for FY2026-27, following increasing regulatory scrutiny of misleading environmental claims.

Applicants, such as Michael Ihle, have noted that the incentive to pay an additional sum of money was supposed to provide further benefits.

“I paid extra because I wanted to offset the fossil-fuel emissions from my energy use,” said Ihle, who is a lead applicant in the case.

“I believed AGL’s ‘carbon neutral’ product would deliver that benefit. If it didn’t, customers deserve clear answers and fair compensation,” Ihle said.

The investigation is the first class action brought by Slater and Gordon’s new climate and environment practice.

Legal counsel of the practice, Cassandra Evans, noted that customers paid extra, as they thought they were making a meaningful environmental impact.

“Living costs are already high. Families and small businesses squeezed budgets to pay extra because they believed they were reducing the climate impact of their energy use,” Evans said.

“The case comes down to some simple questions: Does this product do what it says on the tin? Did the people, or the planet, get what was promised?”

“People spend their time and hard-earned money researching and choosing products and services that reflect their values and preferences.”

“They rely on labels and claims to make informed decisions; environmental claims must be clear and accurate. The products should match the promise.”

Regulatory shifts to address such issues are already underway, with the Australian government announcing it would scrap the “Climate Active” program and move away from the term “carbon neutral”, due to concerns over the credibility of claims relying heavily on carbon offsets.

This comes after a greenwashing lawsuit against Energy Australia surfaced concerns that the program allowed companies to make potentially misleading carbon-neutral claims through offsets rather than directly reducing their emissions.

Evans said that the outcome highlighted why AGL’s claims required a close examination.

“We say AGL should be held to the same standard. If this case succeeds, we expect strong scrutiny of ‘carbon neutral’ claims and for misleading products to be removed from the market,” she said.

In a public statement, AGL acknowledged to investors that it had been served with the investigation.

“AGL Energy Limited has been served with class action proceedings filed in the Federal Court of Australia,” it said.

“The proceedings allege that AGL engaged in misleading or deceptive conduct and breached consumer guarantees under the Australian Consumer Law in relation to AGL’s carbon neutral products.

“AGL takes its compliance obligations seriously and intends to vigorously defend the proceedings.”