Greenwashing has become a growing concern for regulators and consumers in Australia, as more businesses make claims about their environmental practices and products. While these claims can help to build a company’s reputation for sustainability and ethical business practices, they can also be misleading and deceptive if not supported by evidence.
The Australian Competition and Consumer Commission (ACCC) has placed a high priority on consumer and fair-trading issues related to environmental claims and sustainability, also known as ‘greenwashing,’ for this year.
ACCC taking proactive action
The Australian Competition and Consumer Commission (ACCC) is actively scrutinising environmental claims in the market through an ‘internet sweep.’
The sweep targets various sectors, such as energy, vehicles, household products, appliances, food and drink packaging, cosmetics, clothing, and footwear, to identify misleading claims.
The ACCC has stated that it will use the sweep data to update guidance for businesses and consumers on environmental claims, and it won’t hesitate to take enforcement action where necessary. This may include investigating breaches of the Australian Consumer Law (ACL) by issuing “substantiation notices” and commencing legal proceedings.
Businesses should be prepared to substantiate and verify their environmental claims to avoid potential legal actions.
What are the current financial penalties of greenwashing?
While the penalties under the ACL for false or misleading sustainability and environmental claims have historically been significant, since November 2022 the penalties have increased substantially.
For corporations, the penalties can now be:
- Greater than $50,000,000
- Three times the benefit obtained if the court could determine it, or
- 30% of the corporation’s adjusted turnover during the breach turnover period for the offence.
Complying with the ACL is important for businesses because it helps to build trust with consumers. By providing accurate and transparent information about the environmental benefits of their products or services, businesses can build a reputation for being trustworthy, environmentally conscious and environmentally responsible. This can lead to increased sales, customer loyalty, and a competitive advantage over businesses that engage in greenwashing.
For individuals, the maximum penalty is $2,500,000.
Therefore, it’s crucial for businesses to ensure that their environmental claims are truthful and transparent, as the consequences of greenwashing can be severe.
Examples of Australian companies found guilty of greenwashing
In the past three years alone, many big-name Australian companies have faced significant consequences for making false or misleading representations and, including pecuniary penalties, the costs of litigation and negative publicity.
Mercer Superannuation Australia Limited – current
Mercer Superannuation (Australia) Limited is facing civil penalty proceedings launched by the Australian Securities and Investments Commission (ASIC) in the Federal Court of Australia for alleged greenwashing conduct.
It is alleged that Mercer made false and misleading statements about the sustainable nature of some of its superannuation investment options. Specifically, Mercer marketed its “Sustainable Plus” investment options as suitable for members committed to sustainability because they excluded investments in carbon-intensive fossil fuels, alcohol production and gambling.
However, ASIC claimed that members who took up the Sustainable Plus options had investments in companies involved in industries Mercer’s website had said were excluded.
The regulator is seeking declarations, pecuniary penalties, injunctions and orders against Mercer. If found guilty, Mercer Superannuation will face new increased penalties.
Coles Supermarkets – May 2020
Coles Supermarkets was fined $2.5 million by the Federal Court for making false or misleading claims about the environmental benefits of its “biodegradable” and “compostable” disposable plates and cutlery. The court found that the claims were likely to mislead consumers into thinking that the products would break down quickly and completely in landfill or compost, when in fact they would not.
Volkswagen – November 2020
The Federal Court of Australia fined Volkswagen $125 million for making false or misleading representations about the compliance of its diesel vehicles with Australian emissions standards. The court found that Volkswagen had engaged in deliberate conduct that was “very serious, involving widespread and systematic breaches over a lengthy period.”
These examples highlight the importance of businesses being transparent and truthful in their environmental claims, and the potential consequences for companies that engage in greenwashing.
The growing concern for greenwashing in Australia has led to proactive action by regulators such as the ACCC, who are taking measures to identify and penalize misleading environmental claims.
The increase in penalties for false or misleading sustainability and environmental claims makes it essential for businesses to ensure the transparency and accuracy of their claims to avoid significant legal and financial consequences. The recent examples of companies facing legal action and penalties for greenwashing demonstrate the importance of truthful environmental claims and the consequences of misleading consumers.
It is vital for businesses to take responsibility and ensure that their environmental claims are supported by evidence to avoid legal action and maintain a positive reputation.
You can learn more about how to avoid greenwashing in our article, Greenwashing: Why Australian businesses must comply with Consumer Law.
