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Key themes shaping Australian regulatory enforcement risk in 2024
Key themes shaping Australian regulatory enforcement risk in 2024

Environmental, Social and Governance

Key regulatory and enforcement developments in 2023

Regulators and enforcement agencies maintained an active regulatory and enforcement agenda against 'greenwashing' during 2023, with 'bluewashing' emerging as an area of focus.

In May, ASIC published Report 763, ASIC’s recent greenwashing interventions, outlining its greenwashing interventions, including its first court-based greenwashing enforcement action.1 Since then, ASIC has commenced further proceedings against alleged greenwashing and bluewashing and, in September 2023, the Federal Court awarded a $1.2M penalty against ACBF Funeral Plans for bluewashing practices.2

Greenwashing has been an area of significant focus for the Australian Competition and Consumer Commission (ACCC) over the last year. In March 2023, the ACCC undertook an internet sweep of environmental claims that businesses were making. As a result of that sweep, the ACCC expressed concern that some businesses were making vague or unclear environmental claims, not providing sufficient evidence for those claims, setting environmental goals without clear plans on how they would be achieved and using third-party certifications and symbols in a confusing way. Following this, the ACCC published draft guidance to improve businesses' environmental claims and, in December 2023, the ACCC released its final guidance on environmental claims for businesses.3

Advocacy groups continue to capitalise on these trends by commencing private litigation, running campaigns and referring complaints and information to the regulators.

What are the likely regulatory and enforcement developments in Australia in 2024?

Greenwashing will remain an area of focus for both ASIC and the ACCC in 2024.

In the 'E' space:

  • Now that final ACCC guidance is in place, we expect to see the ACCC commence more investigations and proceedings in relation to greenwashing. In November 2023, the ACCC accepted a court-enforceable undertaking from yoghurt manufacturer, MOO Foods following an investigation into MOO's '100% ocean plastic' representations in its yoghurt packaging, website and social media pages. We expect to see a focus on claims made without sufficient evidence and conditional and qualified claims.
  • The Government continues to consult on environmental law reforms, which include the establishment of the independent EPA, with responsibility for compliance with (and enforcement of) the Environment Protection and Biodiversity Conservation Act 1999 (Cth). Draft legislation is expected in early 2024.
  • July 2024 will mark one year since the reformed Safeguard Mechanism came into effect, imposing, amongst other things, tougher emissions baselines—to be ratcheted down year-on-year—on Australia's highest-emitting industrial facilities. While the full implications remain to be seen, failure to comply with baselines may attract civil penalties from the Clean Energy Regulator (CER), and we are seeing scrutiny from civil society groups and other stakeholders on compliance—including reliance on offsets.
  • The Government's proposed mandatory climate-related financial disclosures regime is set to commence for the first group of reporting entities for their annual reporting periods beginning on or after 1 July 2024. A number of key developments are expected in the first half of 2024, including the release of draft legislation to operationalise the regime, and the completion of the current consultation on the Australian Accounting Standards Board's draft sustainability reporting standards, which set out the core content requirements across governance, strategy and risk management for climate-related reporting.
  • With the release of the final recommendations of the Taskforce on Nature-Related Financial Disclosures, the publication of an Australian legal opinion on nature-related risks and directors' duties,4 and the passage of the Nature Repair Bill 2023 (Cth), biodiversity and nature-related risks is an increasing focus. Shareholder activists are already taking action to hold companies accountable in their responses to nature-related risks and opportunities, and we expect regulators to be increasingly interested too.

In the 'S' space:

  • The federal review of the Modern Slavery Act (MSA), released in May 2023, recommends the introduction of mandatory human rights due diligence and a penalty regime, the lowering of the consolidated revenue threshold for reporting to $50 million, and amendments to the mandatory reporting criteria. We expect to see some of the recommendations implemented in 2024.

The Modern Slavery Amendment (Australian Anti-Slavery Commissioner) Bill 2023 (Cth) is expected to pass during 2024. The ASC Bill will amend the MSA to establish the core functions of the Anti-Slavery Commissioner.

For areas of focus in the 'G' space, please refer to the section on Accountability, governance, risk and compliance.

Who are the key regulators and enforcement agencies in relation to this area?

Key regulators and enforcement agencies include:

  • agencies such as ASIC, the ACCC, the Australian Prudential Regulation Authority (APRA) and state and territory EPAs and the forthcoming federal EPA;
  • employment regulators, including the Fair Work Ombudsman and state and territory workplace health and safety regulators;
  • the Attorney-General's Department, which is now responsible for the administration of the Modern Slavery Act; and
  • the Australian Human Rights Commission, and its state and territory counterparts.

What are the key sectors of focus?

To date, the resources and energy sector and financial services providers (particularly the banks and superannuation funds) have been a focus for ASIC. During 2024, we expect this will extend to sectors that have material impacts and dependencies on nature and biodiversity, including the renewables, construction, agriculture and food and beverage sectors. The ACCC identified cosmetic and personal care; textiles, garments, and shoes; and food and beverage sectors as those with the greatest proportion of concerning environmental claims in its March 2023 internet sweep. We expect these sectors to be under scrutiny in 2024.

Footnotes

  1. https://download.asic.gov.au/media/ao0lz0id/rep763-published-10-may-2023.pdf

  2. Australian Securities and Investments Commission v ACBF Funeral Plans Pty Ltd, in the matter of ACBF Funeral Plans Pty Ltd [2023] FCA 1041.

  3. https://www.accc.gov.au/about-us/publications/making-environmental-claims-a-guide-for-business

  4. Sebastian Hartford-Davis and Zoe Bush, Joint memorandum of opinion, Nature-related risks and directors' duties, Pollination in collaboration with the Commonwealth Climate and Law Initiative, 24 October 2023.