Cracking down on greenwashing in a country where fossil fuels are officially “carbon neutral”

At the recent COP27 climate conference, amidst a host of other stirring speeches, United Nations Secretary-General António Guterres declared that the sham must end.

“We must have zero tolerance for net-zero greenwashing,” Guterres said, as a new report handed down by a group of experts slammed the way companies – including fossil fuel giants – mislead the public to believe they are doing more to protect the environment than they really are.

Net-zero pledges, the report makes clear, are incompatible with digging up fossil fuel supplies and bulldozing forests. Companies claiming to be net-zero by 2050 also “cannot buy cheap credits that often lack integrity instead of immediately cutting their own emissions,” the report says.

On the home front, in Australia, experts say misleading environmental claims are rife, just as they are around the world. In response, the country’s consumer watchdog, the Australian Competition and Consumer Commission (ACCC) has recently launched a campaign to crack down on greenwashing.

Net-zero pledges are incompatible with digging up fossil fuel supplies and bulldozing forests.

Sweeping the internet to identify misleading or deceptive environmental claims in marketing, the ACCC has the energy sector along with vehicles, food, cosmetics, and clothing in its sights. However, questions are surfacing about how effective the campaign is likely to be.

“The ACCC is hearing growing concerns that some businesses are falsely promoting environmental or green credentials to capitalise on changing consumer preference,” ACCC deputy chair Delia Rickard said in a speech at a sustainability summit in September.

“Where we have concerns, we will be asking businesses to substantiate their claims. The ACCC won’t hesitate to take enforcement action where we see that consumers are being misled or deceived by green claims.”

Introduced in 1974 and previously known as the Trade Practices Act, the Australian Consumer Law has been tried and tested with thousands of cases, making it one of the most litigation-active sections of Australian law, says Professor Michael Adams, a corporate law expert at the University of New England in Armidale.

From a legal perspective, the ACCC has the tools it needs to do the job if existing laws are enforced, Adams says. In 2019, for instance, Volkswagen was fined A$125 million after investigations revealed the car company had been deceiving regulators and customers about the emissions from its diesel cars. The same year, however, the ACCC failed in its case against ‘flushable’ wipes.

From a legal perspective, the ACCC has the tools it needs to do the job if existing laws are enforced.

“Misleading is a test of [whether] a reasonable person [would] be confused by that information; that’s the basic principle,” says Adams. To pin a company for misleading claims is a much lower threshold than deception, yet both require tangible evidence, he explains.

Adams says the ACCC’s campaign against greenwashing – which will target at least 200 company websites in its first phase – won’t stamp out the practice completely, but will likely ramp up over time and should act as a deterrent, prompting companies to review or substantiate their claims.

“That’s where consumers play a major role,” he says. “Consumers should be monitoring and if they feel that a company is not backed up with evidence, they should be challenging them, either directly to the company or to the ACCC.”

That’s easier said than done when claims of companies being ‘carbon-neutral’ are springing up everywhere. In the past year alone, the number of listed companies in Australia making net-zero commitments has doubled. And the language used in corporate climate pledges is inconsistent and often vague, making it difficult for consumers to weed out companies feigning climate action, from those implementing concrete plans to reduce their impact.

“That’s where consumers play a major role… if they feel that a company is not backed up with evidence, they should be challenging them, either directly to the company or to the ACCC.”

Professor Michael Adams

The latter is all too rare. None of the big four oil and gas companies – BP, Chevron, ExxonMobil and Shell – have taken meaningful action in the past two decades despite throwing around ‘green’ and ‘clean energy’ buzzwords. According to Climateworks, Australian companies also consistently lack or vastly underestimate how ambitious near-term targets need to be to slash emissions this decade and keep global heating below critical levels.

What makes Australia so exceptional though, is that fossil fuel companies in this country spruik carbon-neutral petrol and carbon-neutral gas – claims that don’t fly in the Netherlands but which in Australia, are made possible because of a steady supply of carbon offsets and a government-designed carbon-neutral certification scheme.

Polly Hemming, a researcher investigating greenwashing at the Australia Institute, says companies have been put on notice by the ACCC’s campaign, but the regulator has slim chance of rooting out corporate greenwashing.  

“What is really unclear is whether regulators actually have the power to tackle the biggest offenders – especially fossil fuel companies – while the government itself is approving their projects and then certifying the misleading claims they’re making,” says Hemming.

In the past year alone, the number of listed companies in Australia making net-zero commitments has doubled.

“The risk is that we see a flurry of actions against small offenders, while the climate wrecking activities happening right here in Australia, and the unscientific claims being made to underpin them, are ignored.”

A string of investigations, many of which have been spearheaded by Professor Andrew Macintosh, an environmental law and policy expert at the Australian National University, have in recent months exposed a system of carbon offsetting in Australia that allows companies, and products and services, to be certified as carbon neutral when they are not.

Macintosh blew the whistle earlier this year on what he calls ‘environmental fraud’ in the Australian Emissions Reduction Fund, which issues carbon credits for companies to buy. In one analysis he found around 75 percent of carbon offsets are “devoid of integrity” in that they don’t represent any real reductions in emissions. A more recent investigation by Macintosh revealed how a forest regeneration project that earned multimillion-dollar carbon credits resulted in fewer trees.

Hemming’s research shows that using such dodgy offsets, gas and energy companies in Australia are offsetting a tiny slice of their emissions – less than one percent in the case of Ampol. Other companies pass the buck on to customers, asking them to offset the emissions from the petrol they buy, or offset only their office operations and not the emissions that come from burning the fossil fuels they extract and sell.

Other recent studies have found that the widespread use of renewable energy certificates masks corporate inaction. These certificates allow companies to report reductions in emissions from purchasing renewable electricity, but don’t actually spur much extra renewable electricity investment, which “casts serious doubt on the veracity of reported corporate emission trajectories,” the study authors write.

Litigation against greenwashing is increasing but Hemming says the social licence that offsets and net-zero claims give fossil fuel companies, should not be underestimated. “The narrative around these things is incredibly powerful, especially when consumers are unable to tell the difference between those making legitimate claims and those who are not,” she says.

Hollow claims about carbon emissions not only mislead consumers, but it also puts businesses taking legitimate steps to reduce emissions at a competitive disadvantage.

Hollow claims about carbon emissions not only mislead consumers, but it also puts businesses taking legitimate steps to reduce emissions at a competitive disadvantage, which ultimately undermines other efforts to decarbonise, Macintosh says. It also reduces trust and saps the pressure on governments to enforce mandatory emission reduction requirements or incentives, like a carbon price, “because companies claim they are already decarbonising,” he adds.

So long as the incentives driving greenwashing remain strong, far more needs to be done to stamp out the practice, and to overhaul schemes that allows greenwashing to thrive. Macintosh says the ACCC has failed in the past to make significant inroads in tackling corporate greenwashing because of the agency’s broad remit and relatively scarce regulatory resources. Reforming carbon offset schemes is something only the government can do, he adds.

“The big players have to make it unacceptable and be willing to chase out those who engage in the practice,” Macintosh says. “Only through this sort of concerted effort will the game change.”