ACCC crack down: corporate greenwashing- some examples of what not to do
The Australian Competition & Consumer Commission (ACCC) has released their new Compliance and Enforcement Priorities for 2022-23 with the top listed priority relating to ‘environmental claims and sustainability’. The C-Suite and General Counsel of Australia’s largest companies increasingly need to get across all aspects of sustainability and ensure that there is a robust means by which claims are tested and verified before making them.
What is greenwashing?
Greenwashing is the term coined for the misrepresentation of a product, service, and now corporate claims regarding the extent of its environmental friendliness, sustainability and ethics. Inherently, greenwashing occurs when there is no independent or substantive evidence to back up claims made. The traps are described in detail in a very helpful guide ‘ESG – A guide for General Counsel’ published by Corrs Chambers Westgarth.
How will this be enforced?
The ACCC are increasing its activities, taking a proactive approach to corporate greenwashing claims and has foreshadowed an increase in proceedings being taken against companies seeking to gain an advantage by making green claims that are unsubstantiated or unachievable.
In collaboration with ASIC, the misleading statement prohibitions contained in the Corporations Act 2001 and the Australian Securities and Investments Commission At 2001 will now extend to include corporate misrepresentations of future matters as offences.
This significantly raises liability for businesses in your environmental claims, particularly those businesses releasing net zero targets. Claims can’t have no basis. If your business is unable to demonstrate a reallocation of assets and a credible plan to fulfil these claims, you may fall foul of any number of legislative provisions including section 29 of the Australian Consumer Law, section 12DB of the ASIC Act and section 1041E of the Corporations Act.
What are some examples where this has gone wrong?
There have been several cases where the ACCC has pursued companies for statements and claims misleading consumers regarding the environmental friendliness of their products.
One example saw the ACCC successfully pursue GM Holden for claims that their Saab vehicles were “carbon emissions neutral” across their range, which the Federal Court agreed these claims were false and misleading.[1] This established historical precedent which is now being drawn upon.
A key international case that has emerged more recently is the Royal Dutch Shell decision which saw the Court has ordered a reduction in emissions by 2030 based on an obligation to and duty of care to prevent climate change under Dutch law. In that case Shell could not show that their corporate strategy, plans or financial model were consistent with achieving the global climate change targets, to which they were obliged to comply.
A critical current case in this area for Australia is the ACCR’s action against Santos for its representations that natural gas is a clean fuel and claim that it had a credible net zero emissions plan. The allegations filed are that these claims are misleading.[2] While this case not yet been determined, its outcome will be pivotal for companies considering their own plans for emissions reduction.
The ACCC signalling its prioritisation of the pursuit of false environmental claims is sending a signal to companies that such claims should always be substantiated.
Can you support your claims?
Do your environmental and sustainability claims explain:
– What the target is?
– How you expect to meet your target
– When will you meet your target?
– How you will measure your progress
– Any assumptions or evidence relied upon in setting and measuring the target
What evidence can you provide to support your claim?
The best way to ensure you can demonstrate the validity in your environmental claims is through certification from accredited schemes or third parties.
The International Social and Environmental Accreditation and Labelling Alliance (ISEAL) provides a management framework for the more reliable schemes in place. Apples are not apples in this space. The use of third-party audit process can be used to support claims a company makes, provided that companies are not using compliance to give a ‘halo effect’ over and above the assurance that these schemes provide.
An example of this is FSC Certification. If you sell or use forest products in your business, the FSC certification is a globally recognised scheme tracing forest products from forest to shelf, and incorporating ILO conventions in the process. Can be used to show that you comply with the highest social and environmental standards in the industry and can be used as one of the Timber Legality Frameworks to produce a low risk rating under the Illegal Logging Prohibition Act 2012. In addition, the new requirements in FSC STD 40-004 v3.1 map very closely to the requirements of the Modern Slavery Act 2018.
ASIC also recommends reporting climate-related information under the voluntary Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). In doing so, Companies will be well positioned ahead of the clamping down on greenwashing.
How can Hikari Solutions help you?
With the new crackdown and the impending release of the new Green Financing Guide by the International Sustainability Standards Board, backing up your claims is more important than ever.
With our help, demonstrating the credibility of your claims and obtaining sustainability certification is simple. We can provide you with all the skills and tools necessary to obtain your FSC Certification and how you can use that certification to support environmental claims.
For more information visit our website https://hikarisolutions.com.au/home-5/sustainability-standards/
See ASIC INFO 271 https://asic.gov.au/regulatory-resources/financial-services/how-to-avoid-greenwashing-when-offering-or-promoting-sustainability-related-products/