Regulators ASIC and ACCC have put Australian businesses on notice that those caught deceiving consumers or investors through greenwashing are facing potential prosecution. It’s the new battleground of business ethics, David Gilchrist reports.
Among the industries of most concern to regulators are the cosmetic, fashion, footwear, and food and drink sectors that the ACCC Internet sweep of 247 businesses identified in late 2022 as having the highest proportion of doubtful environmental claims or greenwashing.
Consequently, the Australian Competition and Consumer Commission (ACCC) and Australian Securities and Investment Commission (ASIC) have recently prioritised investigations into deceptive environmental claims.
While regulators refuse to discuss investigations or disclose which brands are under investigation, they are likely to focus attention on leading brands like H&M, Zara and Uniqlo in Fashion, and have already investigated environmental claims by Santos, Etihad Airlines, Mercer Superannuation, and others.
ASIC launched its first court action against alleged greenwashing conduct in March, commencing civil penalty proceedings in the Federal Court against Mercer Superannuation (Australia) Limited for allegedly making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.
ASIC Deputy Chair Sarah Court said, ‘This is the first time ASIC has taken an Australian entity to court regarding alleged greenwashing conduct, and it reflects our continuing efforts to ensure sustainability-related claims made by financial institutions are accurate.’
Elsewhere in regulator land, Etihad Airways’ net zero and sustainability claims have been referred to the ACCC for alleged misleading and deceptive conduct in relation to environmental claims in advertisements shown during a soccer match in 2022.
The privately funded not-for-profit Australasian Centre for Corporate Responsibility (ACCR) commenced proceedings in the Federal Court alleging that Santos engaged in misleading or deceptive conduct relating to its “clean energy” claims and its Net Zero plan in its 2020 Annual Report.
The case against Santos was the first court case in the world to challenge the veracity of a company’s net zero emissions target.
Corporations breaching Australian Consumer Law in relation to greenwashing could face penalties set at triple the benefit obtained from the breach and individuals face penalties of $2.5million.
Climate Council Head of Advocacy Dr Jennifer Rayner recently said,
a ban on greenwashing is needed so companies can’t continue “gaslighting” consumer in relation to their climate plans.
Consumers greenwashing concerns
ACCC Deputy Chair Catriona Lowe said, “Consumers are now, more than ever, making purchasing decisions on environmental grounds. Unfortunately, it appears that rather than making legitimate changes to their practices and procedures, some businesses are relying on false or misleading claims. This conduct harms not only consumers, but also those businesses taking genuine steps to implement more sustainable practices.”
Lowe said businesses are obliged to back up environmental claims through reliable scientific reports, transparent supply chain information, reputable third-party certification, or other forms of evidence.
While early investigations have focused on other industries, the fashion industry is not off the hook. It is among those industries recognised an industry potentially with many brands involved in greenwashing.
The Australian Fashion Council says that “H&M, Zara and Uniqlo are among the international companies caught greenwashing over the years. These fashion brands have contributed to the massive amounts of textile waste caused by the clothing industry.
International aid and development organisation Baptist World Aid Australia seventh annual Ethical Fashion Report says, “As one of the largest industries in the world, fashion is also one of the most environmentally damaging. Much of this harm sits in the production of raw materials or fibres but also occurs in the way they are used and eventually disposed of, driving the need for companies to invest in sustainable fibres.”
The report said progress has occurred with major brands like H&M, Zara, Uniqlo, and Country Road showing significant progress with brands like Bardot, Windsor Smith, Anaconda and City Beach in the bottom 20% of brands in the Ethical Fashion Guide, showing little or no evidence of climate commitment.
The Ethical Fashion Guide revealing underwear brand Mighty Good Basics tops the list showing excellent results in climate commitment, traceability of raw materials, and use of sustainable fibres.
Courtney Holm, founder of fashion label A.BCH that produces garments that environmental sustainability is key to the design and production welcomes the ACCC and ASIC investigations into greenwashing. However, she said that “If we don’t address the volume of clothes that are being made, produced, sold, not sold, destroyed, and sent to landfill because of an overproduction and overconsumption, then we really aren’t going to address the root cause of the problem.”
Environmental Defenders Office’s Senior Climate Lawyer Zoe Bush worked on the Santos and Etihad cases. She welcomes the current investigations saying cases like these send “a signal to the market that
if you are not doing the right thing, you are running a risk that people will come after you and you will be exposed for that.
David Gilchrist has worked for over two decades as a journalist, documentary filmmaker and author. He has written for a variety of publications including The Independent in London, Australian Geographic, Outthere and The Australian Newspaper, The West Australian, Sydney Morning Herald, The Age, The Canberra Times and The New Zealand Herald.