Greenwashing enforcement reaches new heights

Clean up green claims or risk facing regulatory scrutiny 5 min read

The Australian Competition and Consumer Commission (the ACCC) has recently launched two separate proceedings in the Federal Court over alleged greenwashing. This continues the trend of increased regulatory scrutiny of environmental claims and enforcement action in this area, by both the Australian Securities and Investments Commission (ASIC) and the ACCC.

In this Insight, we break down the litigation and its vital lessons, including the practical steps businesses can take to navigate this intense focus on environmental and sustainability claims.

Key takeaways 

• Before making environmental claims, review the environmental credentials of the product or service as a whole. Be realistic in your assessment.
• Ask yourself if you have sufficient data or other evidence to support your claims. If you are aware of data or documents that contradict or cast doubt on them, look at whether there is further testing that can be undertaken, or reliable scientific evidence available to support your claim, before proceeding.
• Consider whether you have sufficiently qualified the claim, particularly if it is dependent on overcoming technical, economic or other external barriers. Qualifications should generally be incorporated into the headline claim, and not be buried in small print or explanatory text.

ASIC gets the ball rolling with action against Mercer Super and Vanguard 

ASIC was the first mover in greenwashing enforcement, by commencing action against Mercer Super and Vanguard. In both cases, it focused on misleading representations regarding the environmental credentials of investment options they promoted.

Mercer Super was targeted for marketing materials suggesting its Sustainable Plus investment options were suitable for members who were deeply committed to sustainability, because they excluded investments in companies involved in carbon-intensive fossil fuels such as thermal coal. ASIC found that Mercer had overstated the environmental benefits of these options, leading investors to believe they were contributing positively to the environment when, in fact, the underlying investments did not support such claims—several of the companies screened into the investment option were involved in the sale or extraction of carbon-intensive fossil fuels.

Mercer admitted to the conduct and, on 2 August 2024, the Federal Court ordered $11.3 million in penalties for misleading conduct.

Similarly, Vanguard recently faced ASIC proceedings, on the basis that the environmental, social and governance criteria for its Vanguard Ethically Conscious Global Aggregate Bond Index Fund indicated it screened out bond issuers with significant business activities in certain industries (eg fossil fuels) when that was not always the case.

On 25 September 2024, the Federal Court found that Vanguard had engaged in misleading conduct and it was ordered to pay a $12.9 million penalty for making the misleading claims.

Clorox asked to correct its claims in ACCC greenwashing case 

Since including consumer and fair-trading issues relating to environmental claims and sustainability as a compliance and enforcement priority in 2022, the ACCC has progressively intensified its actions in this area.

In 2022, the regulator conducted internet sweeps and issued warnings to business. In late 2023, it published guidance for businesses on making environmental claims. By April 2024, the ACCC had ramped up its enforcement efforts by commencing greenwashing proceedings against Clorox Australia Pty Ltd regarding its '50% ocean plastic' claims.

At issue in these proceedings was Clorox's representation that kitchen tidy bags and garbage bags in its 'GLAD to be GREEN' range were made of 50% recycled plastic waste collected from the ocean or sea. In reality, the products contained recycled plastic collected from communities up to 50 kilometres from the shoreline.

This case provides a helpful reminder to businesses to ensure that headline environmental claims are accurate, and that explanatory text or disclaimers cannot be relied upon to counteract the overall impression conveyed by a headline claim. In this case, the front of the product's packaging included the text '50% Ocean Plastic Recycled…'. The phrase 'ocean bound plastic' appeared in smaller front on the side of each product's packaging, and this text was later added to the front of updated designs. The back of the packaging also included two qualifying statements:

• 'These bags are made from 50% ocean recycled plastic … Recycling ocean bound plastic reduces plastic pollution before it enters the ocean, helping to reduce pollution in waterways, save marine life and put an end to irresponsible waste'; and
• 'Made using 50% ocean bound plastic that is collected from communities with no formal waste management system within 50 km of the shoreline.'

Both parties in these proceedings agreed that the inclusion of the additional explanatory text, whether on the side or front of the packaging, failed to counteract the misleading representation. This included because the headline '50% Ocean Plastic' claim appeared in a larger font and a more prominent position than any explanatory text.

Clorox was ordered to pay $8.25 million in penalties, implement a consumer law compliance program, publish a corrective notice and pay $200,000 of the ACCC's costs.  

ACCC scrutiny of environmental and sustainability claims reaches new levels 

The ACCC's crackdown on misleading environmental and sustainability claims has reached new heights with two further cases it has recently filed, highlighting its growing commitment to tackling greenwashing. With fresh lawsuits launched against Australian Gas Networks (AGN) and Edgewell Personal Care Australia (Edgewell Australia), businesses have been sent an unmistakable message: clean up your green claims or risk facing regulatory scrutiny.

Banana Boat's 'reef friendly' claims called into question

In July, the ACCC commenced proceedings against Edgewell Australia and its parent company, Edgewell Personal Care Company (Edgewell PCC) (together, Edgewell), accusing them of greenwashing. The ACCC alleges that Edgewell misled consumers in breach of sections 18, 29(1)(a), 29(1)(g) and 33 of the Australian Consumer Law by making certain 'reef friendly' claims in advertising and marketing materials relating to two of their sunscreen brands: Banana Boat and Hawaiian Tropic.

Relevantly, Edgewell claimed that its sunscreen products were 'reef friendly', as they did not contain certain chemical ingredients that had been banned by the Hawaiian Government for causing damage to reefs. However, according to the ACCC, these claims ignored the reality that other ingredients in the products could harm or pose risks to reefs.

The ACCC's Concise Statement notes that:

• In May 2018, Hawaii banned the sale of sunscreens containing two chemicals, oxybenzone and octinoxate (the chemicals), on the basis that they cause serious harm to reefs.
• Internally, Edgewell defined 'reef friendly' as sunscreens manufactured without the chemicals and by reference to the Hawaii ban.
• In or around 2020, Edgewell PCC removed 'reef friendly' claims from its US marketing, following the Hawaiian Senate considering further bans on sunscreen ingredients.
• Despite the above, the reef friendly claim continued to be made in Australia as late as December 2024.

The ACCC’s case against Edgewell offers valuable insights into the practical steps businesses can take to navigate confidently the regulator’s sharp focus on environmental and sustainability claims—and avoid its ire.

The ACCC alleges Edgewell made three misleading representations, namely:

• the products do not cause harm, or give rise to a risk of harm, to reefs (either at all, or because they do not contain the chemicals) (no harm representations);
• Edgewell had a reasonable basis for making the no harm representations (reasonable basis representations); and/or
• there was a reliable scientific basis for making the no harm representations (scientific basis representations).

The ACCC alleges that the no harm representations were apt to mislead, as the products contained ingredients that cause harm, or risk causing harm, to reefs, including coral and marine life.

In arguing that Edgewell did not have a reasonable basis for making the no harm representations, the ACCC has alleged that they:

• were aware of scientific studies indicating that their products' ingredients were known to adversely affect reefs, or that there was a risk of such harm—and, on the flip side, Edgewell was not aware of scientific literature that established their products' ingredients did not adversely affect reefs or risk such harm;
• did not take steps to adequately satisfy themselves that their products' ingredients did not adversely affect reefs or risk such harm; and
• did not conduct or commission any testing in relation to the impact their products' ingredients would have on reefs.

Finally, in arguing that Edgewell did not have a reliable scientific basis for making the no harm representations, the ACCC has alleged that the prevailing scientific literature during the relevant period did not establish that the relevant products' ingredients wouldn't harm reefs or risk such harm.

The ACCC is seeking declarations, pecuniary penalties, injunctions, a corrective notice, a compliance program and costs.

This case highlights the importance of businesses ensuring they have credible evidence to support their environmental claims, and the risks of overstating the environmental credentials of their goods or services.

The ACCC takes issue with Australian Gas Company's green gas claims

The ACCC has commenced proceedings against AGN, claiming that the company made false or misleading representations to consumers in its 'Love Gas' TV and digital advertising campaign.

AGN operates gas transmission and distribution pipelines, and distributes natural gas to consumers and businesses in Australia. The ACCC commenced its investigation after receiving complaints about the ads from consumers and the Australian Conservation Foundation.

The ACCC is alleging that AGN's advertising claims that the gas it distributes through its network would be renewable 'within a generation' were false and misleading, because AGN did not have reasonable grounds for making this claim.

Importantly, the ACCC alleges that the ads did not contain any qualifications, fine print or disclaimers. The regulator's view is that AGN knew that the future of renewable gas was uncertain but overstated the likelihood of it overcoming significant technical and economic barriers to distribute renewable gas to households within a generation.

This case demonstrates that the ACCC will closely scrutinise green claims it considers are uncertain and are presented to consumers without sufficient disclaimers or qualifications.  

What's next?

The above pattern of litigation again makes it clear that regulatory attention to greenwashing hasn't diminished and may well increase, and it is essential that businesses learn and effectively apply its lessons.

If you would like to discuss the issues raised in this Insight or require assistance, please contact any of the people below.